Digital Access

Digital Access
Access from all your digital devices and receive breaking news and updates from around the area.

Home Delivery

Home Delivery
Local news, sports, opinion and more. The Bureau County Republican is published Wednesday and Saturday mornings.

Text Alerts

Text Alerts
Stay connected to us wherever you are! With bcralerts, get breaking news updates along with other area information sent to you as a text message to your wireless device or by e-mail.

Email Newsletters

Email Newsletters
Keep up with what's going on in your community by reading the bcrbriefs. This easy to read synopsis of today's news will be emailed directly to you Tuesday through Saturday at no charge. Sign up today!

What is happening to real estate?

Local appraiser gives his views on local markets

SPRING VALLEY — What is the state of residential, commercial, industrial and agricultural real estate markets in the Illinois Valley area in 2012, some five years after the market crashed in 2007?

Michael Crowley Sr., owner of Real Estate Consultants in Spring Valley, recently spoke about the local real estate markets in 2012, at a breakfast seminar sponsored by the Illinois Valley Area Chamber of Commerce.

Crowley said despite the effects of the 2007 market crash still felt in this country five years later, he feels the real estate market is still one of the strengths of the American economy. He is optimistic it will improve in the future, but the real question in Crowley’s mind is the rate and pace of that recovery.

“The overall economy affects real estate, and real estate affects the overall economy,” he said.

Currently, appraisals for commercial, residential and industrial properties are on the low side, he said. Appraisals reflect the market today, not what it will do in the future.

“My clients, whether they be banks or individuals, aren’t happy with our current appraisals,” he added. “We are like umpires who call a play, not one of the buyers or sellers which are the players in the market.”

Crowley told people attending the IVAC breakfast seminar that those people involved in the real estate business, whether they be brokers, bankers or appraisers, have always kind of felt the real estate market was one of the few “pure markets” left in the economy, in that the primary driver of price/value was the supply-demand equation.

“However, when we look at how we got here in 2012, and when we look at some of the causes of the current situation, we find that other factors have invaded our ‘pure marketplace,’” he said.

“The depressed state of the residential market, which began five years ago, appears to finally show some signs of life, albeit very sluggish life,” he said. “Price/value levels in the local Illinois Valley housing market have, for the most part, began to show modest increases. However, just as it took us five years to get here, it will take some time to get back to where we were in 2007.”

Crowley doesn’t feel the commercial real estate market has reached its bottom yet.

“In more common circumstances, ... any other time than now, we were better able to measure the market based on the sales activity. In the current circumstances, the very limited numbers of sales of CRE (commercial real estate) makes this measurement process much more difficult.

“However, if we begin to see an increase in sales activity, it will be an indication that the market has bottomed out, and that, like the residential market, we are on our way to a gradual recovery,” he added.

The local activity in the industrial real estate market is almost non-existent, stated Crowley.

“In the past few yeas, we have had almost no sales of industrial properties in the Illinois Valley market, with the possible exception of some sales between related parties/corporations,” he said. “So when we try to develop a value opinion for industrial properties in our area, we are forced to rely upon sales data from outside the local market, with adjustments for geographic differences.”

Agricultural real estate is the only bright spot in the local area, Crowley reported.

“According to the Chicago Federal Reserve Bank, farmland prices in our district have increased by 17 percent over the past year. The only cloud on the horizon of farmland prices/value levels is the obvious connection of land value to commodity prices. With current commodity levels of corn and soybeans, farmland prices appear to be somewhat justifiable.”

All of this information is subject to adjustment after the presidential election on Nov. 6.

“But one thing that I have learned over the years is that the things we fear most seldom materialize, and the things we hope for most seldom occur,” he said, referring to opinions on both sides of the aisle on what will happen in this country on who is elected to be the next president.

“I have abiding confidence on the underlying strength of the American economy, and I have a reasonable expectation that the economy will improve,” he said. “The only question is when and how fast.”

Crowley also said the factors of rising residential prices and historic low mortgage interest rates means this is one of the better times to buy a house.

Comment on this story at

10 major causes of market crash

Michael Crowley Sr., owner of Real Estate Consultants in Spring Valley, has indicated there are at least 10 major causes of the market crash that began in 2007 and continues five years later in 2012.

1. The Federal Reserve created a storm through artificial interest rate manipulation. Instead of a supply/demand, free-market based housing industry, 40-year low interest rates created an artificial demand for housing as an investment.

2. Home flippers and speculators: With the low cost of borrowing due to low interest rates, real estate became a get-rich quick scheme for millions of investors and property traders. House flippers and price speculators used the artificial demand in housing to buy properties and re-sell them for fast profits.

3. Panic buying: Realtors and other real estate marker insiders used the previous history of ever-rising home prices as a fear tactic to scare first-time and fence-sitting home buyers into being manipulated by the industry tactic known as fear of being "priced-out" of the housing market forever.

4. Sub-prime mortgages, exotic loans and loose lending: Many exotic mortgage products were used to help potential home buyers "qualify" for a loan. No-document loans, known in the industry as "Liar-Loans," were everywhere from big banks to small-town mortgage companies who didn't bother requiring a home buyer to actually have income to cover the mortgage payments. Down payments were no longer required in many cases. Ever-rising home prices were expected to "bail out" many bad loans, and potential future refinancing for an even higher loan balance was sometimes promised as part of the bargain.

5. Media propaganda: The media was a major contributor in pumping-up the housing bubble. The real estate industry became a leading source of revenue for many newspapers, magazines, billboards, radio stations and more. Articles were printed that promoted the buying of homes and making renters feel like they were fools for not buying a home. Money and finance magazines printed articles that quoted real estate agents saying home prices were rapidly rising because the local economy, especially the real estate economy, was great.

6. Mortage and appraisal fraud: Rising home prices were enticing crooks, too. Dozens of cases a month of mortgage fraud and appraisal fraud became common in communities across the country. Appraisers were pressured by lending institutions to inflate appraisal values so the loans could close. Shady mortgage companies opened their doors, so they could reap the rewards of selling loans to desperate home-seekers and refinancing existing homeowners into lower monthly payments due to all-time low interest rates.

7. Realtors and lenders on commission: Real estate agents across the nation, and especially in hot markets, began to see every increasing products due to earning higher commission's on the sale of bubble housing prices. Higher home prices equals higher commissions for real estate agents selling houses. lender commission allowed the loan officer to reap a higher reward for making loans on these high-priced houses.

8. High home prices = bad investments: Rental income can't cover the mortgage on a bubble priced residence. A person paying $250,000 for a three-bedroom, two-bathroom home, borrowing at 6 percent APR, would mean mortgage payments around $1,500 per month. The same home would only rent for $1,000 to $1,250 a month, meaning the homeowner would have to make the difference out of their own pocket.

9. Foreclosures' double-edge sword: Foreclosures hurt the housing market by putting pressure on the supply/demand ratio as a glut of bank-owned houses hit the market. Secondly, the sight of foreclosed properties put an entire neighborhood in a bad light with the eyesore of abandoned properties and for-sale signs that told potential buyers to not buy in that neighborhood. Banks were desperate to unload foreclosed houses at a low-ball price, thus reducing the median sales prices and sales comparables for the surrounding area.

10: The economy stinks: The U.S. economy has racked up enormous debt. The cost of the housing market bubble and the attendant bailouts and stimulus programs played a big part in increasing the national debt to more than $16 trillion.

Loading more