I work with many condo buyers and sellers here in Chicagoland and as I see it this may be the last good chance for sellers for a few years to get out of their condos if they want to trade up to something bigger.  Let me explain.

If you go with the assumption that our market is down 10-20% off the peak in the most desirable Chicago neighborhoods then most of the equity that condo owners that have purchased since 2004 is vanishing or has completely vanished..  

Let's take the example of a Lakeview seller who purchased their condo in early 2005 for $350,000.   Let's say they put $35,000 down and currently have a loan balance of $305,000.     The place might be worth $360,000 now and is likely declining in value off from a peak of $400,000 or more.   If the owner sells now for $360,000 after expenses and mortgage payoff he will net around $30,000.   

Let's say this same seller wants to trade up to a $600,000 single family home in the area.   In order to qualify for any type of mortgage on this property, he will have to come up with at least a $120,000 down payment for the new home.    He will get back $30,000 from the sale and will need to put up another $90,000;  certainly not something most people can do but it could be worse.

Let's say the seller waits and next year both properties have declined by another 10%.  The $600,000 property will be worth $540,000 and the $360,000 condo will be worth $324,000.  After expenses he is going have to bring another $4,000 to the condo closing because the condo equity is gone.  In order to buy the new home, assuming he will still be able to get it with 20% down, he will need to come up with a total of $108,000 for the new home.    This means that another 10% decline in the market will mean he will have to pay $112,000 out of pocket vs. only $90,000 today. 

All of this is also going into a increasing rate market environment which makes that new house less affordable on a monthly basis even with the decline in value. 

There are obviously a lot of variables here but the a large number of condo purchases were made 2004-2006.  My point is if you are waiting for the bottom to trade up, you might get a better deal on your new home.  However, its likely going to require you to bring a lot more cash to closing.