As prices slip, area's home sales may jump

Real estate sales in the Chicago area are still sluggish, but Mike Drews, president-elect of the Mainstreet Organization of Realtors, is starting to see a light at the end of the tunnel.

"According to figures released by the Illinois Association of Realtors, prices throughout the state have dropped," Drews said. "October, 2008 prices were down 8 percent from October, 2007. In November they were down 16 percent over the same month the previous year. In December, that figure was a 32 percent decrease. And the number of transactions statewide in December were down 25 percent over the previous year."

But Mainstreet, which serves more than 13,000 Realtors in 135 communities in the West and South suburbs, keeps track of not only homes closed, but those where the sales are pending. And Drews said that the number of pending sales of single-family homes in December in the suburbs they monitor were up 18 percent over the same month in 2007.

"Our hope is that the inauguration of a new president will increase consumer confidence and stabilize the market," the 30-year veteran of the Chicago area real estate market said.

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

"We don't see the big extremes in prices here that they see on the East and West coasts, so I think that places like Florida will be slower to recover than we will be. I don't expect to see the big jumps in prices there that they saw in the past."

Likewise with isolated pockets in the Chicago market that saw big increases in housing prices, like Naperville and downtown Chicago. Drews does not expect them to see increases of more than 5 percent a year in the foreseeable future.

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

"I just went to a seminar where they were saying that even in Chicago the condominium market is totally saturated right now and until inventory decreases, that will be the case. It is the whole supply and demand thing."

In the suburbs Drews monitors, the same is true. They saw transactions in the condominiums and townhouse market decrease 30 percent in December because they, too, are saturated.

"The problem is that many of the association fees on these places are so high - $180 to $200 per month - that it is cheaper for people to buy a roomier single-family home."

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

"No, they are not. They are sitting on the fence, waiting to see if interest rates come down any further."

Consumer confidence plays even more heavily on the psyche of first-time buyers than it does on other buyers. They are especially worried about whether or not they will have a job a year from now, Drews explained.

What steps need to be taken to help strengthen the Chicago area real estate market?

"I hope that President Obama is able to get the stimulus package he is talking about through Congress in the next few weeks. Housing traditionally is the thing that brings this country out of its recessions."

Drews hopes that the plan that is eventually implemented extends the first-time buyer housing credit of $7,500 to all buyers and changes it from a no-interest loan that must be paid off over 15 years to a credit that does not need to be repaid.

He also wants to see an interest rate buy-down that drops mortgage rates to 4.5 percent and he hopes that some of the Troubled Asset Relief Program (TARP) money helps homeowners who are facing foreclosure.

Drews also voiced support for the recent federal decision to keep FHA mortgage limit at $417,000. The amount of money the FHA could loan to a homeowner was temporarily raised from $365,700 last year as part of the relief package. Rather than let the limit fall back down, legislators recently agreed to extend the increase at the $417,000 level through 2009 to help the market.

"In Arlington Heights, for instance, the average sale price of homes is $425,000. If someone there wants an FHA loan on an average house (under the previous limit), they must be able to come up with a $60,000 down payment and not many people can do that," he explained.

• Mike Drews is a Realtor with Prudential Doss Real Estate in Oswego. In the business since 1979, the Western Illinois University graduate is very knowledgeable about the real estate markets in DuPage, Kane, Kendall and Will counties. Active in numerous realtor associations, Drews is Federal Political Coordinator for the National Association of Realtors to the 14th Congressional District and he is vice chairman of the Professional Standards Committee of the Illinois Association of Realtors.