ILLINOIS, United States

SPRING for home-sellers is like Christmas for retailers — peak season.

In suburban Chicago, it’s paradise to be a homebuyer.

Normally, that might mean a few giveaways. A better brand of siding here. An expanded choice of tile colour there.

But a new car? “Obviously, business has been soft,” says Kim Meier, president of KLM Homebuilders, the company offering a promotion.

The festival of upgrades on new homes — especially in America’s regions that were savaged by the subprime meltdown — is queasy confirmation of just how much the housing market remains the sickest part of the US economy.

At the Millbrook Pointe development in quaint and pristine Wheeling, about 20 miles (30 kilometres) from Chicago, a US$269,000, brick-and-stone townhouse comes with US$25,000 in free upgrades, including wood-burning fireplaces, all-stainless steel kitchens and marbled bathrooms tricked out with double-bowl vanities and whirlpool soaker tubs.

Down the highway at the Patriot Place golf course villas in Bolingbrook, buyers are lavished with lawns sodded to perfection and a year of free insurance that will pay the mortgage if you lose your job.

At the Sunset Ridge estates, the amenity bonanza gets even more surreal: Buy a customisable colonial for as little as US$170,000 and get a brand new, US$17,000 Chevy Cruze. The 2011 model.

For free!

Existing home sales in the US plunged nearly 10 per cent in February to their lowest level in nine years. It was the largest drop since July. Forty per cent of those sales were on distressed properties. And new home sales are on track to come in at just 250,000 this year, the fewest since the early 1960s when there were 120 million fewer people in the United States.

“What is discouraging in many markets is that it appears as if some of the local builders are creating the volume,” says Wayne Yamano, vice-president with John Burns Real Estate Consulting.

Across the US, real estate agents are reporting a rise in traffic at open houses. But they say buyers are reluctant because of the shell shock they suffered after the free-money machine blew up in everyone’s face. The foreclosure epidemic, the plague of employment insecurity, the fear that the US is on a downward slide;

they’re all playing into

byer commitment phobia, brokers say.

There’s also confusion over the conflicting signals. Prices are low, but unemployment is high. Mortgage rates are attractive, but lending standards are strict. Renting is newly chic. “Everybody is now self-loathing about how we’re greedy Americans and we shouldn’t want to own homes,” says Jonathan Miller, CEO of real estate consulting firm Miller Samuel.

The US will certainly have a spring home-buying season this year. But even if sales rise as usual, they won’t pull the zombie housing market out of its stupor. Nationwide, forecasters expect house prices to drop at least five per cent more this year. And no one in housing land is murmuring about anything like price stabilisation until 2012, at least. “We don’t expect a dramatic rebound,” says Paul Ashworth, managing partner at Capital Economics. “We expect stagnation for several more years.”

The housing problems certainly aren’t easing. Foreclosures are expected to peak this year. A third of homeowners owe more than their homes are worth. Normally the number of people with negative equity is five per cent. And strategic defaults, where people simply walk away, are rising.

The buying that is happening isn’t coming from first-time homebuyers. A recent study by Capital Economics found that 60 per cent of sales are to foreigners and investors, most of them paying cash. In fact, in international real estate circles, the US is viewed as the “new emerging market,” says Thomas M Shapiro, president of global real estate investment firm GTIS Partners.

Foreigners are attracted to US real estate because their local currencies are so much stronger than the dollar. Investors are also attracted to the properties because rents are rising. “You don’t get much money from buying Treasurys as safe investments,” Ashworth says. “There is a search for yield that is making residential property look more attractive.”

Real estate is hyper-local. The places hit hardest by the foreclosure epidemic — California, Arizona, Nevada, Utah and Florida — are certainly skewing the statistics for the worse. In places like New York City, Washington, DC, and San Francisco, the real estate market is strengthening and can almost seem exempt from the national malaise. That’s because the job market in those cities — dominated by finance, the federal government and the tech sector, respectively — remains robust compared with the rest of the nation.

“If you have a secure job and the economy around is growing, then it’s a great time to buy,” says Barbara Corcoran, a New York real estate investor and analyst. “That’s not true in too many places, but you can see improvement in certain pockets.”

Adds Tara-Nicholle Nelson, director of consumer education at the online real estate search firm Trulia.com: “It’s like a big spring clearance sale on real estate.”

Todd Leykamp, 29, works in TV production in Los Angeles. He and his girlfriend have been casing the open-house market for six months. They pay US$1,200 a month for their Hollywood rental and can afford to double that payment if they buy a house. But he says they have yet to find The One. “There are just too many factors, and every time you find one you love, there are 10 more out there you haven’t found that you’ll love just as much,” Leykamp says.

Worse news for sellers is that buyers don’t think the housing market has hit bottom yet, according to Truila.com. A recent survey by Trulia and Harris Interactive found that nearly 70 per cent of renters who aspire to being homeowners say they will wait at least two years before buying. And nearly 60 per cent say a housing recovery won’t come until after 2012.

“Many are reluctant to purchase a home even if they have the means because of the uncertainties in the economy,” says Celia Chen, a housing market analyst at Moody’s Analytics.

“It could be 10 to 15 years before (housing is) going to get back to peak levels,” says Zillow.com chief economist Stan Humphries.