By Kerrie Kennedy

Contributing writer

Have we hit bottom yet? That’s the question on the minds of many a seller, developer, investor and buyer.

Until they know the answer, many would-be players would rather sit on the sidelines and watch the game from a safe distance. Why sell now, if you don’t have to? Why build, if there are no buyers? Why not wait to buy at the very bottom of the market?

Here’s the problem with that scenario: Joe Smith might want to sell his house, even in a down market, if he thinks he can buy his dream house for a song. Despite the fact that he spends his evenings trolling real estate websites for new listings, all he can find are unwanted leftovers from last year, and most of it isn’t priced all that cheaply anyway. He’s hoping prices will come down further. Obviously, he’s not the only buyer with that attitude. Even if Joe finds a home he wants to buy, how’s he going to find a buyer for his home? And even if he gets lucky, that buyer will probably have to sell before he can buy.

It’s a vicious circle that many homeowners find themselves in these days, one that probably won’t be resolved until buyers are convinced that prices are not going to go down any further.

Nationwide, there is a 10-month supply of previously owned homes and a 9-month supply of new homes. Generally, a six-month supply of homes is considered to be a balanced market.

Here in Chicago, it may be some time before we’re able to diminish our supply of inventory, especially when it comes to high-rise units. According to Gail Listner, vice president of Appraisal Research Counselors LTD, Chicago’s downtown market (roughly the area from North Avenue to McCormick Place) will see approximately 6,000 new units delivered this year. Approximately 80 percent of those units, which were marketed in 2005, are already under contract, but there are more large-scale projects in the pipeline.

“We’re projecting ’09 to be another large year for deliveries,” Listner says. “It’s going to be a while before we can work through that inventory.”

That said, Chicago is a lot better off than many other cities right now.

“I just met a real estate agent from Orlando who moved here because she couldn’t make a living in Orlando anymore,” Listner says. “She sold her house at a $100,000 loss and moved to Chicago, where the market is much more stable. We just haven’t seen the extremes that other markets have seen. We’ve had some speculation, but certainly not to the degree that other markets have seen.”

Coldwell Banker real estate agent Chris Pagano agrees.

“When people read about the real estate slowdown, they tend to group every city together,” he says. “But Chicago is not Miami, L.A. or San Francisco. Chicago historically has not had the booms and busts that these cities have had. That’s why it’s not as bad here as in other cities.”

Chicago’s real estate market may be riding out the storm, but just how well depends upon the neighborhood.

“The more established, gentrified areas of the city like Lakeview, Lincoln Park and the Gold Coast are not feeling the effects of this real estate downturn as much as other areas of the city are,” says Patrick Devereux, a Coldwell Banker real estate agent who sells between $20-$30 million in real estate annually. “I just sold a two-bedroom, two-bath top floor penthouse unit on Newport in Lakeview for just under $600,000. That’s just over $450 a square foot.”

Yet even within these “blue chip” neighborhoods, certain property types are moving more quickly than others.

“Condos in Lincoln Park are holding up very well,” Pagano says. “So are single family homes in the Gold Coast. Million-dollar-plus single-family homes in Lincoln Park and Lakeview are softer, because there’s a large glut of them. How well things are going really boils down to certain types of properties in certain neighborhoods.”

Besides neighborhood, buyers are looking for quality construction, top-of-the-line finishes and properties located on prime streets, says Devereux.

“I call it a flight to quality,” he says. “Buyers are looking for special properties that offer something unique, like extra-wide floor plans.”

According to Devereux, most buyers still prefer new construction, as long as the quality is there.

“Buyers today are very savvy, very educated,” Devereux says. “They know which properties are the nice ones and which ones are not.”

“The good properties that are priced well are selling,” says Pagano. “It’s back to basics again—the better properties, better location, better construction—they’re still selling. The B-list properties are not. It’s almost like it was six or seven years ago.”

Devereux says he expects things to pick up this spring, however.

“I’m optimistic,” he says. “I think it’s actually going to be a good spring market. A lot of people have been in this waiting mode for a year or longer, and I think there’s a lot of pent-up demand. Spring is the busiest time of year historically, and I think you’re going to see a lot of new properties (as opposed to last year’s leftovers) come on the market this spring. That creates excitement, and I think we’ll see things pick up quite a bit.”

According to Pagano, the credit crunch has not really been a factor in buyer reticence.

“It really isn’t an issue for qualified buyers,” he says. “Some of the programs have disappeared where you’d see 100-percent financing, but that’s about it. The credit crunch has mostly affected developers who want to build large condo buildings. The banks will not lend money for those projects right now.”

With mortgage rates expected to go down even further, it’s a great time to buy, says Devereux. But many buyers are afraid to pull the trigger.

“There’s still some fear on the market,” he says. “Buyers are still thinking prices will come down. A lot of times, they’ll end up losing out on a good property they want because of that attitude.”

So have we hit bottom yet?

“There’s a chance prices will come down a touch, but I don’t think much further, at least not here in Chicago,” Devereux says. “The bottom line is it’s impossible to time the market and pick the exact bottom. But if you get close, you’re in good shape.”