Laura, I have provided land for builders on the North Shore and have a database of prices paid by developers and home builders. Each town has seen significant development in the last 10 years. The prices that a homebuilder will pay to raze a home and build new have inflated prices and crowded out first time home buyers. Take central Northbrook for example, the stock of 1 story ranch homes on lots that measure 66' x 130-140' in Dist 28 traded as high as $550,000. The market for tear downs creates an artificial floor for homes prices when builders want to build on spec. I advise home buyers to determine what the 2004-2005 prices were for any type of home and use those levels as a benchmark. One principal cause of falling prices in Glenview and Northbrook is withdrawal from the market by spec builders. This should be heralded as great news, but good news doesn't sell newspapers. The October 2006 report for the median price of existing homes, which for the first time, was lower and triggered the Vchip on my TV.
Consider the Glenview Countryside or Manors west of Milwaukee, there are plent of 10,000-12000 sf lots and in the 2004-2006 period, the price for teardown opportunities ran from $280,000-$325,000 to the low to mid $400,000 range, with expectations to sell homes from $1,150,000-$1,350,000. It turns out that so many rookie builders entered the market at the same time, with no real idea of the supply when they came to market with the new product, and created a glut. This supply would sell eventually, but became worse with higher prices for motor fuel, declining consumer confidence, and a crisis in the mortgage markets. Tough darts.
Glencoe sells 28-35 new homes annually. In 2004 developers bought 74 lots and sold 28 new, in 2005 they bought 55 and sold 35, 2006 saw 34 lots and 25 new homes sell. Many Glencoe builders thought they saw better opportunity in Northbrook , compounding liquidity problems. Last year the auctioneers had their best year and this year builders many are in foreclosure.
So, to answer your question about pricing strategy, a careful analysis may call for as much as 20-30% off of list price, . I have data on 1500 new home lot acquisitions in these markets, and 10 years of data for the New Trier feeder towns, and would be happy to help you sort it out. It may have been SunTzu who said " there is a great chaos under heaven and the situation is excellent".