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According to a housing price forecast created by the University of Illinois’ Regional Economics Application Laboratory, Illinois saw housing sales decline overall between 22 percent and 26 percent during the second quarter of 2008, compared to the same time last year, with median prices expected to trend downward through September at a rate of 5 percent to 6 percent per month.
No matter what side of the real estate industry you’re on or what numbers you pull, there’s no two ways about it; the current residential real estate market is a tough one.
Such statistics lead to the one question on everyone’s mind: When will the rebound come? Short of access to a real estate crystal ball, there’s no answer that’s definitive. But Southwestern Illinois experts agree; it’s going to be later rather than sooner. Still, there appears to be room for a degree of optimism.
“In the short run,” said Greater Gateway Association of Realtors president and chief operating officer Al Suguitan, “the residential market sales will increase gradually. As the housing market recovers, the general economy will adjust. The dollar is gaining strength, oil prices are dropping slowly and I believe the housing market is on the upswing.”
But the degree of any upswing is relative. Part of the problem in the current market is the fact that the unusually high numbers logged two, three and four years ago set an unreasonably high bar. “Everyone wants to use the last several years as the benchmark for everything that happens in the future,” said Suguitan, referring to the “record years” of 2004, 2005 and 2006. “That’s placing pressure on the market to outperform itself.”
Geoffrey Hewings, REAL director and University of Illinois professor, agrees.
“I think, in large part, it’s very evident that the growth in real estate prices and demand provided a significant stimulus for the economy. And when it started to unravel, it was providing the opposite effect. We’re looking at an economy that’s really, really challenged. The focus now is where a couple of years ago real estate was helping to fuel the economy, recovering is dependent upon recovering in the economy as a whole.”
Hewings adds that recovering in the economy as a whole is the sticky part. Other big picture issues - such as fuel costs, job losses and challenges in Illinois’ legislative arena, have a significant impact on the residential real estate market as well. The news isn’t good in all those sectors, he says. According to Hewings, after a long stretch of negative job growth, the state of Illinois continues to struggle in job creation.
“Illinois has yet to recover the peak employment [numbers] of November 2000,” he said. “At the moment, we’re about 60,000 below that peak. If you look at it historically since the Second World War, Illinois has never had a period of more than eight years between peak levels of employment. Our best forecast now is that we might be able to do it in 10 years, or it might be longer.”
While much of the bad news making the rounds these days focuses on the subprime mortgage crisis, according to Suguitan, the impact of that on the local market varies as well. “Various sources report for December 2007 in Madison County that there are 108,000 housing units but only 2,900 of those were [financed with] subprime loans,” said Suguitan. “Foreclosure on subprime is only a small amount of the number of total loans.”
Ultimately, Hewings says, some of what happens in the residential real estate market next is dependent on factors over which those in the industry itself have little or no power to change - a fact that real estate professionals, on the whole, seem to recognize.
Stephanie Tonnies, chief executive officer of the Realtor Association of Southwestern Illinois, says that’s indeed true.
“A lot of it depends on factors that are not within our control, like the job market,” Tonnies said. “We’ve seen unemployment increase slightly in our region. And if we have any more large companies that make cuts, that could be a factor we can’t control in the local market.”
Although the big numbers in general show a downward trend, Suguitan says the statistics can be relatively local in nature.
“The several counties of the Greater Gateway Association of Realtors jurisdiction show only 18 percent fewer sales than in 2007,” said Suguitan. “But that’s not the whole story. Madison County was only 17 percent off the record pace.”
Tonnies has likewise seen some localized improvements.
“In our jurisdiction, median home prices are up in two of four counties,” she said, referring to Monroe and Randolph counties. “This market is very local. I always tell people they might as well ignore the national numbers. You’re not interested in the national average temperature for the day’ you want to know what the temperature is in Belleville. Similarly, home values in one municipality are very different from another municipality.”
Tonnies says the flip side of all this is that it’s a buyer’s market in Southwestern Illinois, through and through.
“Right now is such a great time to buy a home,” she said. “There’s a big selection in all price ranges. Interest rates are at historic lows right now, and for those already in a home, it’s the perfect time to move up.”
Tonnies adds that it’s a particularly good time to become a first-time homebuyer, thanks to the new tax credit provision contained in the federal housing rescue bill that provides a credit up to $7,500 for eligible buyers under certain conditions. (See related story on page 9.)
Realtors are finding ways to work within the market they’ve been given, according to Suguitan and Tonnies. “Realtors are businesspeople and have to react to changes in the marketplace, just like all businesses,” Suguitan said. Tonnies says realtors have to realize that the market is not going to conform to them - rather, that they have to conform to the market. For the most part, she says, they are.
“The most important thing is consumer sentiment, and that’s ebbing very low,” Hewings said. “People have got to feel confident. Are they going to have a job? If they’re uncomfortable with the economy, that’s going to have a very, very dampening effect.”
In the end, however, perspective can make all the difference, according to Suguitan. “The ‘rebound’ is happening,” he said. “Buyers and sellers just need to realize it. The question that has to be asked is, ‘When is the right time to jump into the market…this month, next month or next year?’ If you want to purchase, now is a great time.”
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