Sue Fox, @Properties. Direct 773.816.1788
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While home sales have jumped significantly in the Chicago area, another less hopeful housing indicator — home foreclosures — is also on the rise. During the first quarter, more Chicago-area homeowners lost their homes to foreclosure than in any other quarter in the past five years.
Nearly 3,500 homes in the city of Chicago went through a court-ordered auction, the final step in a foreclosure, and 95 percent of them were reclaimed by lenders, according to a recent report by the Woodstock Institute, a Chicago-based think tank. In the six-county Chicago region as a whole, 9,302 homes went to auction during the first quarter.
It looks like the Obama administration’s Making Home Affordable program and other government efforts to stem the foreclosure crisis aren’t working. Loan modification often fails for people who simply can’t afford their homes. Illinois, one of the hardest-hit states in terms of foreclosures, now faces 11.7% unemployment — far worse than the national average. If people are out of work, it becomes pretty hard for them to pay their mortgages.
So what does all this portend for our local market? I see two trends that I expect to continue in Chicago through 2010 and perhaps beyond:
1) The surge in foreclosed homes will continue to push Chicago home prices down across the board, particularly in neighborhoods with lots of distressed properties. In the North side neighborhoods I cover, this would mean falling prices in Rogers Park, Albany Park and perhaps Uptown and Edgewater, and continuing pressure that holds down prices in more affluent areas like Lakeview, Lincoln Square and Andersonville.
2) The foreclosures — at least the ones in decent shape — will present an attractive buying opportunity for both first-time buyers who couldn’t afford a home in years past, and investors who are taking advantage of the bargain prices. I’m even seeing investors who buy foreclosed houses and condos, spruce them up a little, and then flip them back onto the market. Often the end buyer, who still gets a deal on the price, is a first-time home buyer.
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