Market faring better for new homes in new year

Builders have been hit inordinately hard by the current economic downturn. New homes all over the country were particularly slow to sell throughout 2008.

But things appear to be turning around, according to Jeff Ohm, president of Premier Realty Group Inc. of Vernon Hills.

"I think that we have bottomed out," Ohm said. "We have seen very strong traffic in our sales offices the last two weekends, despite the bad weather."

Ohm's firm specializes in the marketing of upscale residential developments, vacant land and commercial properties throughout Lake County.

"We find the raw land and work with the owner, who is often a farmer, to get the entitlements from the local municipality," Ohm explained. "Then we assist them in selling the property to a group of builders who become the featured builders in upscale communities like the Sanctuary Club in Kildeer. Then we help sell the lots and home and lot packages to homebuyers."

On the commercial end, Ohm and his associates do the same basic thing, working as facilitators between longtime landowners and corporate clients who are looking for a place to build a facility.

How is the real estate market here faring?

"There has been so much doom and gloom talk and yet I recently had two houses in our 62-home Prairie Trails of Long Grove community sell for full price," Ohm said. "We sold one home for Rock Construction for the full asking price of $2,398,000 and another for $1.2 million. So we are foreseeing an upward trend."

Combine that with the strong upswing in people out looking at houses and the recent lowering of interest rates and Ohm said that he is optimistic about the months ahead.

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

"We are faring better here than most other places in the nation other than the Carolinas," Ohm said.

"We deal with lots of corporate relocations and people come in here from other areas of the country expecting deep discounts and they are finding that that is not the case here," he continued.

"Owners here have had to offer some discounts, but it certainly hasn't been in the double digits. Some areas of the country like Las Vegas have seen prices drop by 40 or 50 percent in the last 18 months," Ohm explained.

Do you see more movement in any specific sector, for example single family, condominiums, townhouses?

"People who would have been buying townhouses and condominiums a few years ago because of the price factor are now able to get single-family homes for almost the same price, so single-family homes are definitely selling better than multifamily homes," Ohm said.

"The exception to that rule is within the city of Chicago and in active adult communities where multifamily homes are still popular," he added.

"We are, however, seeing people with very large, 6,000-square-foot homes coming in and asking us to build very high-end custom homes that are much smaller," Ohm said. "People are trying to escape the very high real estate tax bills on those larger homes. In some cases in Lake County we have seen tax bills exceeding $50,000 per year on $2 million homes."

Do you see population movement between the city and the suburbs?

Ohm said that 95 percent of their clients coming from the city are young, double-income couples who have a young child or are about to start a family. Most leave the city looking for bigger yards and better schools.

On the other end of the spectrum, however, he has seen a handful of empty-nester couples leaving the suburbs to move into the city where they can enjoy the amenities of Chicago more conveniently and not have to worry about a yard or shoveling snow.

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

"That has been the biggest surprise for me," Ohm admitted. "We have a townhouse community in Mundelein that we built to cater to first-time buyers and are selling in the $275,000 to $325,000 price range and there has been zero interest.

"I can't understand why they aren't out in droves in this market," he continued. "They don't have the baggage that others have. Nothing to sell.

"I think that they are just terrified to take the plunge in case the market softens further and prices fall lower. But I don't think that will happen. I am real hopeful that we have hit bottom so they should get out there now," Ohm urged.

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

The loan limit for a conventional mortgage in the Chicago area needs to be increased from the current level of $417,000 to $729,750 as it has in other high cost areas of the country, according to Ohm. If that happened, people wanting to buy more expensive homes won't have to pay the higher interest rates due on jumbo loans.

Ohm also advocates a one-time rate subsidy on mortgages.

"Most of the action by the Federal Reserve in terms of lowering the discount rate has not benefited the homebuyer in terms of rate cuts," he explained. "A one-time rate subsidy could really lower the actual interest rate enough to encourage people to make a commitment to buy today versus waiting."

Finally, Ohm suggests that the first-time buyer credit be changed to an actual credit. He said that in its current form it is more of a loan in which repayment is necessary.