What's wrong with the local housing market?

Posted On: January 2008

The effects of a slowdown within the housing market have been felt both locally and nationally within recent months.

Area municipalities have felt the effects of the housing market in the form of a decrease in building permits and an increase in foreclosures.

At one point, according to a 2004 Elburn Herald story, Sugar Grove anticipated 900 building permits for the year 2006. The number of permits never reached that high.

Sugar Grove has currently placed plans to build a new police station and village hall on hold, partially due to the lack of building permits.

The 2007-08 budget was based on 229 building permits, according to recent Elburn Herald reports.

Michels said that Sugar Grove has also put off hiring any new employees at this time, and is looking at cutting back the budget to an amount that makes sense with the decrease in building permits.

The village is operating on a surplus, so the problem is not dire, Michels said.

"It's like a salesman with a good base salary not getting a commission," he said.

Elburn has also undergone a significant drop in permits, according to Village President Jim Willey. In 2006, the building department issued 138, while in 2007 it issued 26 single-family permits and 11 duplexes, he said.

Willey noted that when building permits go down, the village pays less in impact fees for services such as fire protection, libraries and schools, he said.

Village officials tried to forecast for a down year in 2007 in anticipation of the housing slump. Some projects have simply not gotten done, Willey said.

The Jewel complex has also helped improve the base for commercial taxes, Willey said.

Elburn will use the downturn in the market to its advantage Willey said.

"We've been in high growth the last few years," Willey said. "This gives us a chance to catch up."

With the declining housing market, foreclosures have also been up. Illinois ranks 11th in the nation, with 1.5 percent of homes in foreclosure, according to RealtyTrac, Inc., a publisher of foreclosure statistics.

In Maple Park, foreclosures jumped from eight to 16 between January and November of 2007, according to numbers provided by Record Information Services, a data collection company based in Kaneville.

Foreclosures jumped from 19 to 47 in Sugar Grove during the same time period, according to the same information.

"It's certainly a significant increase on a percentage base," Sugar Grove Village Administrator Brent Eichelberger said. "It's not a significant number compared to the households that we have."

Eichelberger said that foreclosures do not really effect the community as much as the individual homeowner. If there was any impact it would be from any bills that might still be owed to the village by the owner, Eichelberger said.

"We may not be able to collect on that," he said. "But there's no real effect on the village at all."

Another danger in a declining housing market is if people start cutting prices to sell their homes, according to Jeff Metcalf, with Record Information Services. That would drive property values down in the surrounding area, he said.

"That's going to effect everybody," Metcalf said.

There are several reasons for an increased number of foreclosures, Metcalf said. It could be job loss or some sort of medical calamity.

There are also many programs for people with less than desirable credit, Metcalf said. If the rates for the mortgage shoot up after an introductory period, some borrowers do not deal with that right, he said.

Home ownership has been at an all-time high, Metcalf said. Foreclosure can spell disaster.

"What happens when they want to get a new loan?" Metcalf said. "The banks aren't going to touch these people."

by Matt Brennan

Posted On: January 2008

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