Market gains strength, but inventory low
The real estate market in Kane, McHenry and DeKalb counties is improving at a fast clip, said Lora Mahnke, manager of the Huntley office of Century 21 New Heritage.
"Sales are up and prices are up. In McHenry County, for instance, prices are up 6.3 percent over last year. And the days the average home is on the market is down," she said.
"In some cases, homes that are priced correctly are only on the market a few days or even hours. But if a home is priced too high, it will miss out on a whole group of buyers and that can cause it to sit on the market much longer," she cautioned.
"We are even seeing instances of multiple offers and bidding wars -- and those can cause a home to sell for more than the asking price," Mahnke said. "Much of this is due to the fact that there just isn't much inventory on the market so there aren't a lot of choices out there."
Whether a particular townhouse or condominium is able to take part in the buying boom depends, she said, on whether the complex has been approved for FHA financing, which is available at a much lower interest rate to buyers.
"If there are too many rentals within a complex, the FHA will not offer financing. In addition, the association must make the effort to apply for FHA approval so that potential buyers can apply for that financing," Mahnke said.
If a condo or townhouse association doesn't have it, that complex is at a distinct disadvantage because it can only rely on buyers who can afford to put 20 percent down. Many people who are interested in townhouses and condominiums do not have the financial wherewithal to come up with that large of a lump-sum payment.
All first-time buyers (which is currently defined as those who have not owned a home in the past three years) are eligible, however, to apply for $7,500 in assistance through an Illinois Housing Development Authority (IHDA) program. This money does not need to be repaid as long as the buyer stays in the home five years or more, Mahnke said.
Are first-time buyers taking advantage of today's low interest rates and low prices?
"First-time buyers are actually out there looking and they are buying if we educate them correctly. When they understand the house they can afford this year, they may not be able to afford next year if interest rates go up, they are buying. Most are moving out of their parents' basements and buying close to home or they are moving closer to their jobs."
What changes have you seen in the market over the past year?
"The amount of foreclosures and short sales on the market has fallen again. Banks are no longer holding on to a shadow inventory of homes and releasing them slowly over time. There is really little or no lag time from when the bank gets a home to when they put it on the market.
"But short sales will continue to happen. They won't totally go away because they are often prompted by a job loss or a death or a relocation and all of that continues to happen."
The presence of short sales and foreclosures on the market is no longer having a huge negative effect on traditional sales prices. Appraisers are now able to find enough traditional sales to use as comparable prices when they are judging the worth of a home, Mahnke said.
"And when there is a question, real estate agents often meet the property appraisers to show them the comparable properties that they used to arrive at a price. And if there were multiple offers that drove up the price, they show the underwriters the competing offers, too. That is what happens when there is so much more demand than supply."
What needs to happen for the market to improve further?
"We will never again see price increases like those we saw before the crash. But if we keep interest rates steady for another year and are able to achieve a 2 to 3 percent annual growth rate, that would be ideal.
"We don't want the government to get too involved because that can cause additional problems. But we would like to see taxes decrease in Illinois. Many baby boomers are leaving the state because they can no longer afford the taxes here and I am afraid that the big businesses will start leaving next. If that happens, where will people get jobs? We are in a Catch 22."
Mahnke can be reached at (847) 669-9555. Her office is located at 11802 Main St., Huntley. She and her staff primarily market homes and vacant land within a ten-mile radius of Huntley, including Woodstock, Pingree Grove, Crystal Lake, Lake-in-the-Hills, Elgin and Dundee. However, through referrals, she and her agents have represented buyers and sellers in transactions as far away as Buffalo Grove, Schaumburg and even Chicago.