Gas prices offer another incentive to buy

Gas prices are certainly having an effect on the real estate market.

"We are hearing from more and more prospective buyers that they want to find a house closer to their jobs," said Frank Ramljak, owner and manager/broker of Prudential American Heritage Real Estate, which has offices in Elk Grove Village and Elmwood Park.

"In the past, people were generally willing to move as far out away from the city as they needed to in order to get the size and type of house that they wanted," he said. "But now, because of gas prices, they are no longer willing to move a considerable distance from where they work."

Gas prices are also one the factors scaring people away from spending money, in general, and buying houses, in particular. According to Ramljak, the rising price of groceries and gas, combined with foreclosures, are contributing to the "general psychology that is it tough out there and makes them wonder if it is a good time to buy a home."

But he believes that some day when people look back on this time, they will reflect on how it actually was a very good time to buy a home because there is so much inventory on the market, sellers are willing to negotiate, interest rates are low and tax advantages for home owners remain.

Since the real estate market in this area peaked in late 2005 and early 2006, Ramljak estimates that home prices have fallen between 12 and 15 percent.

But that is not as dire as it sounds, he explains, because prices went up at an exceptionally fast rate between 2001 and 2005. In fact, they rose between 40 and 45 percent during that time.

So even though home prices are down since their peak, Ramljak said they are still 30 to 32 percent higher than they were seven years ago.

How does the Chicago area market differ from the national market?

"When you compare Chicago to places like Florida and Arizona, we are doing well. But prices there rose astronomically. For instance, in 2002 and 2003, prices rose between 25 and 50 percent per year in one area of Florida where I have a friend who sells real estate. I talked to him the other day and their prices now are down between 30 and 35 percent," Ramljak said.

"Any time you get that kind of appreciation, you are going to have a problem. That is not sustainable because people's incomes do not go up that fast," he explained.

The unsustainable increases in those areas were driven by speculators and people buying vacation homes, Ramljak believes. A figure he saw in an industry publication told the tale. In 2005, 40 percent of real estate purchases were made by people buying a second home and investors.

Are first time buyers who have no home to sell taking advantage of this market?

"Unfortunately, I don't see it. There are just lots of buyers sitting on the sidelines now," Ramljak said.

"Buyers are feeling very cautious. In the past a buyer would look at ten homes, on average, and make an offer on one. Now they are looking at 20, 30, 40 homes and may not make an offer on any of them."

What is your advice to prospective buyers?

"This is a great time for you to buy because there is a large selection out there, interest rates are low and sellers are willing to deal," he said. "Just make sure that you choose a loan that you know you can still afford a few years down the road."

What is your advice to sellers?

"If you are a seller, keep in mind that you are selling and buying in the same marketplace so the lower prices really won't hurt you. The house you buy will also have a lower price," Ramljak said.

He suggests that sellers get their own homes sold before they shop for a new home because it will put them in a better bargaining position if they have already sold their home.

Ramljak also said that you can improve your odds of selling your home if you have a presale inspection done on your home and fix whatever the inspector finds lacking, before the home is even listed.

Bad inspection results are the No. 1 reason deals fall apart, he said. And usually, the seller who has lived in the house for a number of years is surprised that there is a crack in the foundation or mold in the attic. Find that out before you show your home to buyers and get the problems corrected.

Ramljak also suggested that you buy new appliances for your kitchen to give it a new, fresh look.

"Make sure your home is priced well and is offering more than other homes near you at the same price level so that yours will be the one people want," he said.

What needs to happen before the Chicago area real estate market can strengthen again?

"We have to work through the short sales and foreclosures because the banks that are holding them just want to get rid of them and it is hard for other sellers to compete with that," Ramljak said.

Other than that, he said, "we just need to get some good news. That would help the market tremendously. It seems like all we hear is bad news."