Great deals to be found in more affluent communities

The real estate market in the Chicago area is improving. That is the good news, according to Mark Pullinger, vice president of media, marketing and technology for Koenig and Strey, GMAC Real Estate.

The bad news is that distressed properties are driving the market and are continuing to hold prices down, he added.

"We are definitely in a recovering market," Pullinger, 52, said. "2009 was a year of struggle because of significant fallout from the near-market crash in 2008. Revenues were down because the sales just weren't there."

"But this year Koenig and Strey's pending business is up 84 percent over this time last year and our closed business is up 54 percent over last year," he said.

"But Koenig and Strey is outperforming the market as a whole," Pullinger cautioned. "The overall market is up 30 percent over last year, which is still very positive."

But there are still some great deals out there, especially at the upper end of the market. For instance, Pullinger said, if you ever wanted to live on the North Shore, now is the time to buy. There are some tremendous bargains in communities like Lake Forest, he said.

Have the federal tax credits, which expire April 30, had an impact on the market?

"The $8,000 tax credit for first-time buyers and the $6,500 tax credit for repeat buyers have had an impact, but not a decisive one. People won't buy a house just because of the tax credit.

"But most of the activity has been at the lower end of the market, with the median sale this year at $250,000. So the first-time buyers have been doing most of the buying. But investors are also out there looking."

How does the Chicago market compare to the national market?

Since Pullinger spent many years in California, handling sales and marketing for three different homebuilders, he is very familiar with that state's market.

"Home prices on both coasts had really been run up. So they had much farther to fall than homes in the Chicago market, which is much more stable. For instance, it is not unusual in California to have a house that is worth $400,000 one year and $200,000 the next," Pullinger said.

That is why 60 percent of the homes now up for sale in California are distressed. So those who can afford to buy are snapping them up right now for up to 30 percent below market prices.

Do you see more movement in any specific sector - i.e. single family, condominium, townhouse?

"While the condominium market has been particularly hard-hit in this recession, sales are more about price than about type of property. The entry-level end of the market has been much stronger than the top end of the market. So I am seeing much more movement in entry-level housing than in move-up housing.

"First-time buyers generally jump in first after a recession, once the prices drop and the interest rates get favorable, because they have nothing to sell."

The rental market is also doing well as people who have lost their homes turn to rental units, Pullinger said.

People who own top-of-the-line homes, on the other hand, have been reluctant to drop their prices too much, according to Pullinger. Unless they have to move, they have simply been taking their homes off the market.

Do you see a difference between the city and suburban markets?

"Sales in Chicago have been much more active than in the suburbs because the city continues to be a very attractive place to live. People enjoy the lifestyle and since the first-time buyers have been driving the market, lots of them want to live in the city.

"Yet, even the more expensive properties in the city have been selling pretty well lately."

What effect has this recession had on the real estate business and its professionals?

There has been definite attrition among real estate agents at all companies. They are on full commission so it is difficult to pay the bills if their sales drop by 30 or 50 percent, Pullinger explained.

"But our top performers have been busier than ever because when things get tough, people naturally turn to the best-known, most experienced agents."

And some agents have chosen to specialize in handling bank-owned foreclosure properties, or REOs. According to Pullinger, unless you really know what you are doing, REOs can be very frustrating. So only those agents who truly understand that end of the market and enjoy it tend to specialize in it.

What steps need to still be taken by the government to strengthen the Chicago area market?

"Job creation is necessary. People won't start shopping for houses until the job market turns around because people buy houses when they know their job is safe.

"I also like the new Obama initiative to help unemployed people stay in their homes. It is important to keep distressed properties off the market so that they don't continue to drive down prices."

What do you foresee in the future?

"We are still in the early days of this recovery and prices are still stabilizing. So sales will probably be slow until people regain some confidence."

But Pullinger still expects 2010 to be a solid year for Koenig and Strey because it is already well ahead of its projections.

"And 2011 will be a solid recovery year."