The pundits are all saying that the housing “bottom” is upon us.

They base it on the uptick in sales that are occuring in less than a handful of states- including California, Arizona and Nevada.

In some places in those states, foreclosures have driven prices down below 1989 levels.

Houses in the Phoenix area that once sold for $300,000 are now listed for $50,000 and $70,000 by the bank.

How could there NOT be an uptick in sales?

The problem is- not many sales are occuring of “organic” properties (i.e. those not owned by the bank.)

Houses owned by normal sellers can’t compete with bank prices so those homes sit on the market. Yet, the bank prices are now setting the comps and essentially ARE the market in those areas.

In many other parts of the country where foreclosures, while plentiful, aren’t yet pushing down prices by huge percentages- can we say we’re at the “bottom”?

Chicago Prices Not Cratering

On the north side of Chicago with the exclusive neighborhoods of Lincoln Park and Lakeview, you can hardly tell there is a housing bust at all. Lincoln Park prices on single family homes are down only 2.2%. Lakeview is also holding up fairly well.

Inventory, while growing, hasn’t exploded.

And while there are occasional foreclosures, especially of condos, nothing is selling for $70,000 in these neighborhoods.

Could it be that the “bust” just won’t be as pronounced in some cities and states as it is in, say, California or Arizona?

Chicago was not a complete innocent in the housing boom. It saw its own form of speculation as thousands of new condos were added, including nearly 10,000 in the “new” neighborhood called the South Loop. Many of those buildings are only now nearing completion at a time when condo loans are very difficult to obtain.

Prices Not in Line with Rents or Income

In Chicago, sales prices, despite a slight decline, still don’t appear to be in line with either rents or average incomes. In most cases, it is still far cheaper to rent than to own the same home.

And the $500,000 single family home on the north side is still the norm despite incomes that don’t support that price point.

The Nation Needs a Reality Check on Housing

What’s wrong with affordable housing? I applaud those in Arizona that are now able to buy their first home (instead of renting) for something comparable to the rental prices. This is how it SHOULD be.

It will make us healthier as a nation in the long run.

Of course, we’ll have to go through the pain now.

But why do people think $500,000 home prices are “normal”? They’re not. $500,000 homes used to mean you were quite well off. That wasn’t what you paid for a “starter” home (which is what you now pay in many Chicago north side neighborhoods along the lakefront.)

Until prices come down, nationwide, to something that is equivalent, or under, rental prices, the “bottom” of the housing market is not yet upon us.

Since this is the “housing week”, I thought I’d update everyone on what is going on with this Chicago area foreclosed McMansion that I have talked about three times before.

It’s a 5 bedroom, 3 bath, 3196 square feet, recently built house in Downers Grove, Illinois- a western suburb of Chicago.

It’s been on the market for several years.

The bank took it back last year and has been aggressively cutting the price.

Here’s its price history:

1710 Maple Avenue, Downers Grove:

Originally listed for $979,000 in 2005
Reduced to $712,900 by August 2007
Reduced again to $682,900 in September 2007
Down to $644,000 in November 2007

And now it’s listed at $618,900 with no buyer in sight.

It doesn’t seem like a bad house. It’s on a slightly busy street but is only two houses away from a major park and recreation area.

Here are some more pictures:

It clearly needs work.

But this house is illustrative of what is going out there in the housing market and why we haven’t yet reached “the bottom.” It’s been sitting empty for nearly a year. And even with the price reductions, no one is interested. It’s just adding to the unsold inventory - which is currently at record levels.

It’s likely it will have to go a lot cheaper before it sells.

Is it a symbol of the housing excess or the American dream gone haywire?

I’ll keep you posted on future price reductions or if it sells. Stay tuned.

DuPage County, located west of Chicago, is one of the richest counties in America. The average home price is $330,000. Yet, the stress of adjustable rate mortgages and high debt levels is taking its toll even there.

The Daily Herald, a West Suburban newspaper, has been running a series on foreclosures in DuPage County all week. The statistics are not good:

In DuPage County, the auctions are held at the sheriff’s office in Wheaton twice a week because of the increased number of foreclosures lately, compared to once a week last year.

In the Northwest and West suburbs, 6,662 households received foreclosure notices from January through September. That amount exceeds the full year of 2006, which had 6,428, according to data provided by Kaneville-based Record Information Services.

The judge in charge of foreclosures for the entire county is now seeing over 100 cases a week. She’s trying to save some people from the auction block (most times not successfully.)

Some of the homes on the auction block are being sold to investors. The Daily Herald article says about 25 a day are actually sold but the rest go back to the banks.

When it goes back to the bank, it becomes “bank owned.” And this is where the property can sit and sit for a long time.

I’ve talked about a bank-owned McMansion in Downers Grove, which is in DuPage County, before.

This house has been on the market in some form for nearly two years. It was built in 2003 and is in a so-so location (on a busy road) at 1710 Maple.

The bank recently lowered the price again. The bank has been lowering the price of this property just about every month. It had once been listed for over $900,000 and has been reduced over the years. In October, the bank reduced to $655,000 but they just reduced again to $644,000.

How low will it go? It is anyone’s guess.

Today’s auction schedule in DuPage County includes about 25 homes. They range from small condos to larger homes. There is a home in ritzy Burr Ridge listed at $323,964. I’ve seen $900,000 homes in Burr Ridge also on the auction block in prior auctions. There was also a Hinsdale mansion for $1.5 million.

No one is immune. The subprime areas are getting hit harder, but the rich counties are now also feeling the pain.

Just because you make more money, doesn’t mean you don’t have too much debt. It just means you can hold out a little longer when you get in distress. The Daily Herald article posits that the foreclosure rates in DuPage County are only going to increase in the spring. Sad, but also the new reality.

About a month ago I wrote about two foreclosed McMansions: one in Downers Grove, Illinois (a western suburb of Chicago) and one in Alexandria, Virginia (a suburb of Washington DC.)

Neither one has sold but both have been reduced.

1710 Maple Street, Downers Grove

Originally listed for $979,000 in 2005
Reduced to $712,900 by August 2007
Reduced again to $682,900 in September 2007

5997 Crown Royal Drive, Alexandria

Originally listed in August 2007 for $985,000
Reduced to $945,000

How long will it take these homes to sell? And how low will their prices ultimately go? We’ll see. The bank holding the Downers Grove house is, obviously, more aggressive with pricing right now than the one in Alexandria but the Downers Grove house has also been on the market a much longer time (over two years in total.)