Any question about a housing bubble bursting in the suburbs was answered in 2008.
Home prices dropped in most suburbs last year after they peaked in 2007, and the number of sales again fell precipitously, according to figures from the Illinois Association of Realtors.
In 2007, home sales were down 20 percent in the Chicago area, including both city and suburbs. But average prices were up 4.7 percent. In 2008, sales dropped another 26 percent, while the average price of $311,895 represents a drop of 4.4 percent - almost the same dollar amount it had risen the year before, the Illinois Association of Realtors said.
Prices in the Chicago region have not fallen as much as in areas like Florida, Arizona and Nevada because they never shot up very fast, said Pat Callan, president of the association, adding that some years prices might have climbed 10 percent annually here, compared with 30 or 40 percent in "hot areas."
"We have a very diverse economy, and historically that's how the Midwest has reacted-more stable," said Callan, although he did say that the effect on the housing market is deeper this time than in recent recessions.
In some communities prices fell 20 percent or more, while in a few they actually rose. Industry leaders hope that federal action - including the $8,000 tax credit for first-time home buyers - will help improve things this year.
Right now it is the sale of foreclosed homes that is causing excitement among buyers - inspiring bargain hunters, especially with mortgage interest rates so low. Industry leaders say prices will stabilize only when foreclosures stop and the job market improves.
Distressed sales are not a fair sign of the market, said Sheila Butt, managing broker for Prudential First Realty in Crystal Lake and president of the McHenry County Association of Realtors.
Industry leaders disagree as to what the drop in average prices means.
While it could show that some home values have declined, it really means that less expensive homes are the ones that sell, said Steve Hovany, president of Strategy Planning Associates, Inc., based in Schaumburg.
But Callan said home prices actually fell more than the statistics show because people are buying bigger houses for that lower average price.
"The median price doesn't refer to the size of the house," said Callan, an owner of Realty Executives Premier in Wheaton. "It doesn't say they got a four bedroom instead of a three. They are getting more house for their money."
And even though average prices in Barrington Hills rose 40 percent to $1.4 million, while sales also went up 9 percent to 36, Hovany said his research in Lake Forest shows that expensive houses must be heavily discounted to sell.
Many people are postponing purchases to see if the federal bailout will mean more money for them, said Hovany. Sales of existing homes will improve so much this year that even new homes - which trail existing homes during a recovery - will show some progress a year from now, he predicts.
Callan said that areas on the edges of the suburbs where new homes are concentrated are seeing price and foreclosure difficulties. More buyers in these areas bought at the peak of the market, so they could owe more than the homes are worth.
Bob Dohn, secretary-treasurer of the Realtor Association of Northwest the Chicago area, said no matter where they bought, anyone who purchased in recent years and borrowed the majority of the price would be in trouble if they lost their jobs.
An agent with Coldwell Banker in Schaumburg, Dohn said home prices in Hoffman Estates and Schaumburg are a bit ahead of where they were in 2004, which means they lost any gains in later years. He also said it is difficult to generalize from statistics because any subdivision could be doing better or worse than the rest of the area.
Mike Drews, president-elect of the Mainstreet Organization of Realtors in the West, Southwest and South suburbs, said a bit of good news is that pending sales were up both in December and January over the same month a year earlier. He sells real estate with Prudential Doss Real Estate in Oswego.
Donna McQuade, managing broker at Coldwell Banker Primus in Geneva and president of the Realtor Association of the Fox Valley, said she is advising investors if they do buy a home and fix it up to be prepared to rent it for a few years rather than sell it.