How are home prices faring in your neighborhood?

Part of the answer lies in that old real estate mantra: location, location, location.

The fact is, that despite the overwhelming amount of negative news about the housing industry, most of what you hear are national numbers, and even regional news tends to lump Chicago in with the entire Midwest, including hard-hit states like Michigan and Ohio.

To really find out how you and your neighbors are faring, it’s better to keep your numbers local, and better yet, look at micro-markets, that is, housing types and price points within small market areas. For example, in your neighborhood, condos priced under $600,000 might be doing well, while single-family homes or condos over $900,000 might not be moving at all.

Overall, “The Chicago market is not nearly as affected (by the downturn) as the rest of the country,” says David Hanna, president-elect of the Chicago Association of Realtors and a broker owner partner in Prudential Sourceone Realty. “For most of last year, you could see the unit sales falling off, but you were not seeing any price decline.”

Prices finally started nudging downward in the Chicago market in the third quarter of 2007, but then by just a small amount, he said.

SearchChicago-Homes has gathered median prices and average prices for hundreds of locations around Chicago to see what appreciation, if any, has occurred over the past two years, roughly the period of the recent market slide.

What we found is that over a two-year span during which the nation’s housing industry has been in a slow panic, home prices are up in almost 70 percent of Chicago neighborhoods and in 46 percent of the suburbs.

Because data was provided by two different sources, the parameters are somewhat different. Chicago city neighborhood data has price medians for the years 2005 and 2007; suburban numbers are averages from the first quarter of 2006 and the first quarter of 2008.

In the city, leading the list of satisfied sellers those who sold attached homes in Douglas (up 36 percent), the Loop (up 26 percent), Edgewater (up 17 percent), Lincoln Park (up almost 15 percent), and Hyde Park (up 12 percent), among others, and detached sellers in West Ridge, Bridgeport, Logan Square, Lincoln Park and Lincoln Square.

In the ‘burbs, better home prices were garnered for homes in Hinsdale, Burr Ridge, Lincolnshire, Steger, Lake Forest and River Forest, among others. Around the collar cities, prices varied from fair to good. For example:

Joliet - Joliet home prices are in the black: up 7 percent over the past two years, compared to a regional average that is off 2.6 percent. The average sales price of Joliet homes for the past 12 months is $172,626 compared with $161,335 in April of 2006. The city has a nine-month supply, two months less than the regional average.

Naperville - Naperville home sales prices posted a solid 9.77 percent gain over the past two years, despite a national and regional slump in prices. In April 2006, the average sales price was $471,724 and in April, 2008, the average was $517,791. Currently the city has just under an eight-month supply of homes, compared to the regional average of 11.

Elgin - Elgin’s prices are hanging in there, with a 2.32 percent gain over the past two years. In April 2008, the average sales price was $256,475, compared with $250,671 in April, 2006. The dark side for sellers is that there is a 13-month supply of properties, two months more than the regional average.

Aurora - Aurora home sale price averages are all in the black over the two-year period but vary slightly by county. In Kane County, Aurora sales were up a scant .24 percent, from $182,506 to $182,951 and that part of Aurora has a 9.65-month supply, better than the regional average. Sales prices in the Will/Kendall portion of the city are up almost 2 percent, from $286,343 to $291,803, with a healthier 7.48-month supply. Prices in the DuPage portion are up nearly 3 percent, from $312,420 to $321,635, with an even better six-month supply.

Tinley Park/Mokena - Tinley Park home sale prices are up just more than 6 percent over the two-year period, from $285,615 to $302,924. The area has an 8.44-month supply of homes for sale, lower than the regional average of 11 months.

Mokena sale prices averaged near the top of all suburban communities, with a substantial 13 percent gain over the past two years, from $328,474 to $371,100. However, the village has more than a 10-month supply of homes, just under the regional average of 11 months.

Business is poor (or you might say, better for buyers) for attached housing in the city neighborhoods of Portage Park, O’Hare, the Near South Side, Woodlawn, North Center, Irving Park and the Near West Side. In the suburbs, buyers have the advantage in Harvey, North Chicago, Fox Lake, Olympia Fields and Riverdale, among others.

Before you read too much into the data, it’s wort noting that averages, in particular, are prone to factors that will skew the numbers.

“Here’s an interesting one,” says Chip Wagner of the Headrick-Wagner Consulting Group, an appraisal firm in Naperville that keeps extensive data on market variations. “Olympia Fields looks like it went down 17.6 percent in that time. The reason? In the past year, the highest sale was $430,000, yet in the previous 12-month period, there were six sales priced between $500,000 and $825,000. Those homes, that sold between April ‘06 and March ‘07, inflated the average. “

If you look at median data for Olympia Fields, the community’s median went from $270,000 down to $250,000 in that time. Still a 7.4 percent decline, but not nearly as devastating.

Towns and neighborhoods with a lot of new construction activity also will see skewed numbers, he said. Since new construction tends to cost more than resale properties, if there was a lot of new construction two years ago, and not now, you’ll see a price dip.

Still another factor to consider is that many homes priced higher than what the market currently will bear simply will not sell, regardless of the neighborhood or housing type. Because they don’t sell, their prices will not be reflected in the numbers. So even if home prices are up, there may be plenty of anxious sellers sitting for a long time on homes closer to the high-priced end of the bell curve.

For that reason, it’s also informative to look at the length of time on the market, or months of supply, which is determined by looking at how fast homes are selling, and dividing that into the total number of homes available.

Using months’ supply as a factor, you can see that Hinsdale prices are up a healthy 24 percent, but the length of time on the market is more than 16 months. That’s not as slow as Burr Ridge, where home prices also are up a healthy 19 percent but where you find more than a two-year supply.

In contrast, Naperville, is posting an increase in average sales price of a little over 8 percent, and has an eight-month supply, still slower than its 3.55-month supply of first quarter 2006, but much better than the Chicago area average of 11 months.

The market slowdown has been attributed to many factors, chiefly the subprime mortgage crisis and tightening of credit, the anticipated recession, and the bursting of the housing “bubble” of ever-increasing prices.

“The market is kind of stalling now,” Hanna said, suggesting that home sales are hitting the bottom of the slump and waiting to start back up. “In our offices, for a while there was a lot of pushback about settling for a lesser price, but we are seeing sellers adjust their expectations over the last six months.”

There is still some irrational behavior, he says, from buyers who think any lowering of price is a sign of weakness, and from sellers who announce they simply will leave the marketplace and not sell.

Part of the reason for the Midwest’s less drastic market slump, Hanna added, is due to the Midwest mentality.

“We aren’t big risk-takers,” he said. “We were always willing to sacrifice the big upside to protect ourselves from the downside.”