The housing sector has been the single biggest cause of this recession.  The value of a person’s home collapsed suddenly meaning what they thought it was worth dropped dramatically.  This set off a financial crisis immediately.   Luckily the Peoria area didn’t have as quite the catastrophic collapse as we saw on the coasts and other regions of the country.

We have conservative lending practices and our lenders were cautious when they evaluated the value of homes in this region and our banks only loaned to people who could pay it back.  We didn’t have a big predatory lending issue here.

Our housing sales numbers in the region are down about 10%, but the state of Illinois is down 27%.  There is good news for homeowners too, prices in our region are staying stable.  So your home’s value isn’t dropping like it is in other areas.

There is no doubt we are in a recession.  This is a global issue and it is causing serious problems for everyone, but it is a little better here than many other regions.  Keep in mind we are not measuring against where we stood last year, but rather against the rest of the nation at this point in time.

We talked to Bradley University Economist, Dr. Joshua Lewer; Pat McCarthy, Peoria Area Association of Realtors and Heartland Partnership CEO, Jim McConoughey to get their thoughts on the housing and real estate situation in our region.  

Jm McConoughey, CEO The Heartland Partnership, on housing:

Pat McCarthy, Peoria Area Association of Realtors, on housing:

“The Economic Situation:  A National Overview and Local Update”
Pat McCarthy, President of PAAR, says when it comes to the real estate market in this region, “Peoria has been very very lucky.”   He says while the state was down 24% in home sales, the Peoria area was less than half that, just over 11% down.  Even though the numbers for the Peoria region were down we were still one of top areas in the state and the nation!  McCarthy believes this is because our market is affordable.  The average sale price for a home in this region is $139,000.  McCarthy also says while we are seeing layoffs and business cutbacks “The business economy is stronger here than other areas.”

The Peoria area has plenty of homes on the market right now with an average of 2,200 which McCarthy says is pretty normal.  He says December and January are typically slower times of year but we’re holding steady.
 
There are some misconceptions he would like to clear up, like first time homeowners can’t get a loan.  McCarthy says “That’s not true.  First time buyers can get a loan! It used to be a little too easy to get a loan but now you just have a little bit of money down and have good credit.  Banks are aggressive and we have super low rates right now maybe the lowest in 50 years.  We’ve seen 30 year mortgages around 5% so it’s a great time to buy."

He says banks are still lending and there are also great incentives out there right now like a $7500 Tax credit for first time buyers through June.  McCarthy says the National Association of Realtors is working on getting the repayment option on that credit waived!  
Some advice from him is for sellers to be sharper.  He says homes have to be ready to go and they have to be priced properly.  

Dr. Joshua J. Lewer: An Overview of Housing and Real Estate
“Housing is still the best investment, without question.” Stan Sieron, Illinois Association of Realtors President.
While housing improves the quality of life for a family and high housing rates provide social capital for a community, the concept that housing is an “investment” should be reconsidered.  Robert Shiller’s famous S&P/Case-Shiller housing index has shown that the real average housing values in the United States have not changed much since 1890, see (http://www.econ.yale.edu/~shiller/data/Fig2-1.xls).  In short, the market does not reward people with a significant positive rate of return just for simply living in their houses.

We also know that the collapse in the speculative bubble in the national housing market was the trigger for this “Great Recession” we are now in.  The credit crunch, toxic assets (i.e. mortgage-backed securities), and the lack of liquidity in our financial institutions have their roots in this industry.  According to Shiller, national housing values peaked in May of 2006 (after doubling in the prior seven years), and have since continued their steady decline back to normal levels.

It is important to note, however, that many areas in the United States did not see a housing bubble and have not seen as strong of credit crunch.  Peoria is among those communities.  It has not been until recently that our area has begun to feel the negative impacts from the downturn.  Essentially, we caught the cold that others had first.

How has the Peoria area housing market faired since the downturn?  The answer is: we have had mixed results.  According to the Peoria Area Association of Realtors (http://www.paarealtors.com/), our area has observed a 12% decline in new listings from a year ago, but the median sales price of homes has actually increased by 1% from a year ago.  Not bad!

While there are some in the Peoria area who for some reason detest the slogan “It’s Better Here”, perhaps these figures will show them that in at least one sector: “It’s More Stable Here” holds true.  And that is something worth noting.