‘House isn’t supposed to be a cash station machine’
By Denise Linke For The Beacon-News October 7, 2012 7:20PM
The continued high level of foreclosure properties is slowing the comeback of the housing market, according to industry experts.|AP File Photo
Updated: November 9, 2012 6:07AM
The good news about the Fox Valley’s housing market is that homes are selling much faster than they were even a year ago, local Realtors agree. The bad news is that they’re still selling for 20 to 40 percent less than they were five years ago — and it could take decades for home values to reach their 2007 levels again.
“We will get back there someday,” said Ron Ewing, president of the Realtor Association of the Fox Valley. “I just don’t know if it will happen in my lifetime.”
One reason real estate experts think it will take that long to regain peak market value is that most 2007 home values were artificially inflated by the subprime mortgage boom that went bust in early 2008.
“Banks were giving mortgages to anyone who was breathing, and appraisers were just valuing properties at their sale prices to push the sales through as quickly as possible,” Ewing recalled. “That made people over-value their homes, even if their homes weren’t on the market, so the ‘bubble burst’ made them think they lost more equity than they actually did.”
“A lot of people are upset because they think their homes have lost a lot of value,” added Realtor Patti Rambo of Miscella Realty in Geneva. “I tell them, ‘You haven’t lost anything until you sell.’ Even then, they haven’t lost anything unless they sell it for less than they bought it, no matter what it was worth on paper in between.”
While home sales have resurged in the Fox Valley — the inventory of listed properties has shrunk from 23.5 months’ worth to 5.7 months’ worth since December 2010, Ewing reported — nearly three-quarters of the homes that changed hands were foreclosures or “short sale” properties in pre-foreclosure that were listed for less than their outstanding mortgage debt.
Both new homeowners and investors have been snapping up these “bargain” homes, leaving many traditional sellers seeking a full-market sale price out in the cold, Ewing said.
“About 60 percent of home buyers these days plan to live in the homes, and the other 40 percent are investors who want to pick up homes at low prices, hold them until the market improves and rent them in the meantime,” Ewing explained. “Anything under $100,000 sells very quickly, sometimes with multiple offers, but higher-end properties are staying on the books a lot longer.”
Home prices are still inching down in most areas, though a few “micro-markets” are seeing more sales activity and even a little price appreciation.
“I think we’re close to the bottom (of the price drop), but until people believe their jobs are more secure, there’s still pressure to drive prices down,” said Christopher Tenggren, a former president of the Realtor Association of the Fox Valley and a RE/MAX Realtor in St. Charles. “If the economy doesn’t backslide, prices should stabilize by spring.”
After that, Realtors agree that a slow-but-sure recovery will help both buyers and sellers more than another housing bubble.
“I think we all hope to never see skyrocketing home prices again because that means we’re in an artificial market,” Tenggren said. “If we do, I hope the reality check comes sooner so that we don’t see so many people losing their homes.”
Homeowners can help avoid another boom-and-crash cycle by changing how they think about their homes, Rambo added.
“A house isn’t supposed to be a cash station machine that people can just take equity from whenever they want a new car or some other big purchase,” she said. “It’s supposed to be your home, where you live and raise your family. Its investment value should be secondary to that.
“If your home value increases enough to match the cost of living, that’s about what it should do.”