Home prices in some areas of the nation are plummeting, but Champaign-Urbana avoided both the inflation bubble and dramatic downfalls. Still, buyers with strong credit and money to put down can find prices lower than in recent years, many homes to choose from and cheap financing.

According to David Domal, a real estate agent with Re/max Choice in Champaign, home buyers looking for the best interest rates should have a credit score of 680 or higher, about a 10 percent down payment, and should plan to stay in their home for five or more years.

Debbie Jenkins closed on her first home, priced under $300,000 and located near the Champaign Country Club, in January. She and her husband waited to buy a home until they could commit to staying.

She thought prices were fair, but not extremely low. She looked at 15 homes, but only two appealed to her.

To offset worries about job security, she and her husband made a 6 percent down payment instead of the 20 percent they had wanted, in order to keep more money in savings.

"We decided that (job security) is not going to be something that holds us back right now," Jenkins said.

Today's market in Champaign-Urbana

Fred Giertz, an economics professor at the University of Illinois at Urbana-Champaign, said today's real estate market offers the unusual combination of both low prices and low interest rates. He said people can expect to pay up to 25 percent less for property than they might have a few years ago, although this is less than California and Florida's 50 percent price declines. The most expensive homes are most deeply discounted, he said.

For any home, Giertz said buyers can negotiate much more than in recent years. "You can bid quite a bit more under the asking price," he said.

Nothing can guarantee that prices will not decline further, but Donna Rose, managing broker at Coldwell Banker Devonshire Realty in Champaign, said that year-to-date pending sales this year are slightly higher than year-to-date pending sales this time last year. She said she feels there are some signs that the market is stabilizing, including the increase in year-to-date pending sales, a significant decrease in inventory and the $8,000 non-repayable first-time home buyer tax credit for homes purchases that close on or after Jan. 1 and before Dec. 1, which will help stimulate sales.

While there is no tax recapture on the tax credit, income limits do apply, but they are fairly generous. Rose said the credit stimulus might help people sell their homes to first-time home buyers, freeing them to purchase a second home at a higher price point.

"We remain optimistic due to the University and strong health care facilities," Rose said about the real estate market in Champaign-Urbana.

In addition, Scott Bechtel, a real estate agent with Keller Williams in Champaign, said higher-priced markets, such as homes in Champaign-Urbana that cost more than $400,000, have seen some inventory increases.

He said that in Champaign-Urbana, the real estate market has hit bottom.

"I believe we're at the true bottom of the market," he said. "What we don't know is how long we're going to be there."

But housing expert Daniel McMillen, an economist with the Institute of Government and Public Affairs at the University of Illinois, said he doesn't think the housing market will bottom out until after the economy starts to recover.

"Until then, I think home prices will keep dropping, but how much is anyone's guess," he said.

Interest rates, however, are dropping. In early March, qualified potential buyers could secure interest rates as low as 5.375 percent on a 30-year fixed rate mortgage, according to a loan officer at First Federal Savings Bank in Champaign. Earlier this year, rates for 30-year fixed rate mortgage for qualified buyers dropped as low as 4.75 percent, he said.

David Strang, senior vice president for mortgage lending at Busey Bank, said that although it is harder to get a loan, banks still have money to lend.

"There's no definite (credit score) cut-off," Strang said, adding that buyers with credit scores lower than 680 can expect to pay higher interest rates or obtain a different type of loan. More people are using Busey's adjustable-rate mortgages due to denial from secondary lenders.

But Domal cautions that adjustable-rate mortgages may increase 2 to 4 percentage points over time. "You can almost double your payments," he said. Both Domal and Strang suggest some buyers consider waiting until they have more money for a down payment so they can qualify for a lower interest rate.

Strang said 83 percent of Busey loans approved through Freddie Mac in the last year have financed buyers with a 20 percent or greater down payment for their homes.

Homes as an investment

Real estate agents suggest that a home is a good investment after about five years of growth. Furthermore, owning a home instead of renting brings tax incentives and equity.

However, Giertz said that some tax benefits may be negated by transaction costs. Giertz also said that the equity gained in a house down payment could be used for other investments, such as stocks.

Giertz said that since housing markets don't reverse as quickly as the stock market, it takes much longer to recoup any losses. Also, if the market begins to decline, it is difficult to sell a home quickly, unlike more liquid investments, so an owner may be stuck with a declining investment.

"In the old days, homes automatically went up in value," he said. "You can't count on that anymore. A home is an investment vehicle, but is it a good one?" Giertz recommends buying a home for a place to live, not as an investment.

Not everyone can afford a new home or qualify for financing today. "But if you get to that point where you have the resources, it's great," Domal said. "The home market is a price war and a beauty contest right now."

Median home sale price for fourth quarter 2008 down 13.2 percent from fourth quarter 2007

According to the Illinois Association of Realtors' fourth quarter 2008 report, Illinois home sales, which include single-family homes and condominiums, totaled 21,382 in the fourth quarter, down 22.2 percent from 27,483 home sales in the same period a year ago. For the year 2008, total sales were down 23.3 percent with 107,680 homes sold compared to 140,378 sales in 2007.

In the fourth quarter, the statewide median home sales price was $165,000, down 13.2 percent from $190,000 in the fourth quarter of 2007. The median is a typical market price where half the homes sold for more, and half sold for less.