Old real estate market not a factor today

When real estate broker Jen Conte returned from her honeymoon in September, 2007, she remembers noticing a change in the market.

It was a marked difference, she recalled. Home sales were slowing. Houses were sitting on the market longer; and the prices being offered for homes were stalling.

Even though most people remember the following September (2008) as the time when Wall Street came to a crashing halt, the recession in residential real estate began at least a full year earlier, according to Conte, co-owner of RE/MAX Professionals Select in Naperville and Plainfield.

“But things are improving. Every year since 2008 the market has gotten progressively better because, believe it or not, people have gotten used to it as it is now,” Conte said. “They are used to all of the foreclosures and short sales out there and they are either willing to look at them or they aren't.”

And residential real estate pricing in the DuPage, Kane and Will County areas, at least, has stabilized over the last year, Conte said. There haven't been any more dramatic falls. So, potential buyers are feeling more comfortable.

What are you seeing in the overall real estate market?

“We have all felt the impact of the falling residential real estate market, but if you don't have to move, then it doesn't really affect you. It is mainly those who are experiencing a change in their life like the loss of a job, divorce or illness who have to move and may need to do a short sale.”

Those who purchased a home in 2002 or later or refinanced a home to take equity out of it in the last eight years are the ones who are more likely to be in danger of owing more than the house will bring in a sale, Conte said.

“It is all about the equity you have in your house.” In fact, Conte saw one seller recently bring $27,000 to closing just so he could sell his home and move on.

“And the house rental market is getting very hot because once people sell or lose their house, they need to have somewhere to live and most people with children would like to avoid moving into an apartment.”

How does the Chicago area market differ from what you are hearing about the national market?

Conte said you get the extremes of the market on the two coasts and in places like Las Vegas and Detroit where the recession has been particularly cruel. This region is in the middle of the pack when it comes to real estate pain and pleasure.

What part are distressed properties (foreclosures and short sales) playing in our current market?

“My dad and partner, Rich Conte, is pretty much only handling foreclosures now. He manages the properties and markets them. From talking to him, I don't see the backlog of foreclosures clearing anytime soon even though we are getting much quicker decisions from the banks.”

Of the roughly 170 properties Rich Conte is now managing, only about 50 are on the market. So there is a long way to go to clear these problem properties out of the system.

Are first-time buyers stepping into the market and taking advantage of the low prices?

“I have seen more first-time buyers in the last year than ever before. But the problem is that since they have never purchased a home before, they don't realize how good the prices really are. So they think they can go in and offer a seller half the asking price and that just isn't going to work.”

A challenge for Realtors is to get these buyers to take a step back and realize they are going to live in the house awhile, not just a year commitment like with an apartment rental, and they need to think about establishing ties to the property so they can view the home as a long-term investment.

That said, most of Conte's sales this year have involved homes under $300,000 and most of the buyers have been first-time buyers without a house to sell.

“I've also had some single clients with one-bedroom condominiums who were willing to lose some money on their condo so that they could take advantage of a great deal on a single-family house.”

What role is property location playing in this market?

“Location is always important in every market.”

The rule of thumb in the Chicago market has always been that the further east you go, the higher the prices climb, she said. So the difference between comparable homes in Naperville and Yorkville, for instance, can be as much as $200,000.

Places like Yorkville and Oswego are also hamstrung by competition from new homebuilders, which drives down prices. The fact that prices in closer-in communities like Naperville have become more affordable is also allowing more people to buy in those communities rather than looking farther west.

What things still need to happen for the residential real estate market here to become strong again?

“I would like to see the government offer tax credits to all homebuyers again.”

Conte would also like to see more regulation of the banks to make them push through foreclosures more quickly and to give credit to deserving people who have been paying their loans on time.

“Financing has a big impact on the market and we have a situation where people with credit scores between 650 and 750 who are keeping up with their payments cannot even refinance their homes. They want to free up some of their spending and pay down some of their loan, which would help all of us. But the banks aren't allowing it.”

Conte is also adamant that the income tax deduction for mortgage interest should be preserved.