Chambana Sun

Illinois residents burdened with falling home values and high property taxes are headed toward a cliff if Springfield doesn't do something soon to pull the state back from the precipice, a financial analyst said.

"This is a very scary cliff we're heading toward," WirePoints writer Mark Glennon said during a recent edition of Illinois Rising. "I think we're at the point where consumers are going to start concluding that buying real estate in Illinois, particularly homes, is not a safe bet because prices are, at best, flat if not going down. And they're end up being trapped in an underwater mortgage."

Those numbers are mounting in Illinois, Glennon said.

"We already have a stunning 500,000 homes in Illinois -- 20 percent of them -- that are seriously under water, that the value of the home is at least 20 percent less than the value of the mortgage," he said.

Glennon's recent article, "Freeze Property Taxes NOW or Illinois Homes Will Become Roach Motels," described the point that Illinois has reached in its housing market.

“A tipping point is at hand in Illinois," Glennon wrote. "It’s the point when potential homebuyers conclude they’ll never cash out whole because of increasing taxes and declining values: buyers can get in but can’t get out — a Roach Motel. A buyers’ strike can follow, speeding the spiral downward."

Excessive property taxes are driving the potential disaster, according to Glennon's WirePoints article, and a property tax freeze is essential to head it off.

During his Illinois Rising appearance, Glennon said that much of Illinois' home value problem is a perception issue, which he compared to the decline of the Ford Pinto after stories of exploding gas tanks became common.

"I think we're getting very close to the point where an overwhelming number of potential buyers see Illinois homes that way," he said. "And if they stop buying and if it gets this reputation, it's going to snowball and make the situation worse."

The problem is driven primarily by heavy property taxes, according to Glennon. Illinois property taxes have long been the highest in the nation, according to a CoreLogic analysis of real estate property taxes nationwide issued last spring.

"It's over double the national average, statewide in Illinois," Glennon said. "And, as we've discussed before, it's just absurd in many of the suburbs."

The falling value on existing homes and high property taxes in Illinois diminish new home starts, according to Glennon.

"That will be the next problem as a result of the housing situation," he said. "I think we've already started to see it slack off. There was a boom of new apartment construction in the city, which led to a pretty good supply right now. My guess is we've seen the end of new construction like that."

He added that some Chicago-area residents may deny that's a problem because they do see some local new growth, but that is confined in the most affluent areas near the central business district, in Lincoln Park and perhaps a few suburbs.

"That has pushed up the numbers a little bit in the past couple of months," he said. "But it's a tale of two cities and the rest of the state. I live in a very nice suburb with great schools, and it's gotten very soft here. I've talked to Realtors here and they are very concerned about it: they identify in particular the drop off in corporate relocations coming. Frankly, I wouldn't own my home right now if I had my choice. My neighbor had theirs on the market in the fall and they took it off the market because they weren't getting any showings. I think it's already started to happen."