Sue Fox, @Properties. Direct 773.816.1788
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Sue Fox interviewed on WBEZ
This morning I was interviewed by WBEZ housing reporter Ashley Gross about the low prices of foreclosures in Chicago. Buyers can expect about a 50% discount off regular market prices when buying a foreclosure in the Chicago area, according to data gathered in the fourth quarter of 2011 by RealtyTrac.
But, as I cautioned WBEZ listeners, that’s often because foreclosed homes are in lousy shape and need work. Single-family houses that have been seized by lenders sometimes have leaks, mold, damaged floors and other problems. Many of them are missing kitchen appliances, and occasionally they’ve even been stripped of copper plumbing (which thieves find valuable). No one is living there — often for months — and the neglect takes its toll. Foreclosed condos, too, can spring leaks (I have seen two where the refrigerator leaked in the vacant unit, damaging the condo downstairs as well.) And they often are found in buildings with other distressed condos, which can mean the building itself is financially unstable and thus it will be difficult to get a mortgage there.
Remember how a home winds up in foreclosure to begin with: its owner couldn’t afford it. That usually means the owner couldn’t afford to maintain the home, either. Rare is the foreclosed property that is in sparkly new condition.
Anyway, most of this didn’t make it into Ashley’s interview because the final cut was only 30 seconds long… but here is the link in case you’d like to hear it:
Chicago home prices sink again
ANOTHER FORECLOSURE: This 4-bedroom, 2-bath house in Albany Park just closed for $160,000 -- which is roughly the median price these days in Chicago. It was a distressed property, like almost half the sales now taking place in the city.
The latest figures are in for December home sales, and once again, prices have slipped in Chicago as distressed properties gobble up nearly half the market.
The median sale price is now $156,000 in Chicago — a 6.2% drop from December 2010, when it was $166,250. Back in the robust days of 2005, 2006 and 2007 before the housing market crashed, Chicago’s median price stood between $279,000 and $287,000 each December. So you can see how dramatically local prices have fallen.
But the price plunge is deepened by the kind of properties now selling. Nearly half the homes trading hands, about 45%, are foreclosures or short sales. Many people may imagine that these homes are fabulous deals, attractive houses or condos sold well below market value. But as a realtor who actually tromps through these distressed properties on a regular basis, let me assure you that a lot of them are in crummy shape.
Foreclosed homes are vacant, and vacant homes invite leaks, mold, animals, vandalism and occasionally even squatters. They are often missing their kitchen appliances. An angry former owner may have damaged the home on the way out. Stained carpets, holes in the drywall, buckled floors and other maladies are common. Short sales, on the other hand, are still owned by a financially-strapped homeowner, so while they are often occupied, they may have been the victim of deferred maintenance for years. Sometimes tenants live there, and many times these homes are not in great shape by the time a short sale is finally completed.
Every once in a while you do run across a distressed property that is in good condition, but I would say that is the exception in most Chicago neighborhoods. The point is, with so many foreclosures and short sales now in the mix, Chicago’s home prices have been dragged down by the sheer weight of all these lower-end properties.
This phenomenon has made it very tough for ordinary sellers (who aren’t in foreclosure or attempting a short sale) to compete on price, particularly in areas with a lot of distressed homes like Rogers Park, Uptown, or Albany Park. Many people are opting to stay put (or try to rent out their homes) rather than sell in this environment.
Obama refi plan could help housing market
UNDER DISTRESS IN GRACELAND WEST: This 3-bedroom 1908 home is now listed as a short sale for $500,000. It was snapped up by a buyer in just a day, but has yet to close. Like many distressed homes in Chicago, this one bounced on and off the market for several years at much higher prices, starting at $945,000 in 2007.
In his State of the Union speech last night, President Barack Obama proposed a new plan to let all underwater homeowners refinance at today’s super-low mortgage rates — a proposal that could help heal the housing market and inject fresh cash into the economy.
If Congress approves it, that is. And with a Republican-controlled House that continues to block many of Obama’s initiatives, that is a big if.
The Obama administration has already offered a variety of programs aimed at stemming the tide of foreclosures, helping people modify their loans, and promoting refinancing for government-backed mortgages. But so far, the impact has been minimal and more than 3 million homes have been repossessed since the housing boom ended in 2006.
In Chicago, where the median home price has dropped about 30% since the downturn began, thousands of underwater homeowners have either lost their homes to foreclosure or been forced to sell in a short sale. Nearly half of the recent sales here now involve distressed properties. Each year, I meet dozens of people who would like to sell, if only they could get enough to pay off their mortgage.
Obama’s plan would at least help these folks hang onto their homes. Each homeowner could save an estimated $3,000 per year if he/she could refi and take advantage of the lowest rates (around 4% for a 30-year fixed mortgage) in half a century. Then they could pump those savings back into the economy, whose lifeblood is consumer spending. The Obama administration estimates that the program could benefit two to three million homeowners, according to the New York Times.
It’s a sensible plan all around, but some financial analysts are already proclaiming it dead on arrival, saying it won’t get through Congress. The sticking point seems to be a “small fee” that would be imposed on large banks to help fund the plan. Will this prove to be another instance of Congress protecting Wall Street profits at the expense of Main Street homeowners?
Buyers on prowl for bargains in 2012
SELLING SHORT IN WEST TOWN: It's been a long road for this short sale, a modern 5-bedroom house located at 1634 W Erie. It was built in 2006 and originally priced just over $1.2 million. But despite being billed as a "smart" house with skylights throughout, high-end appliances and a media room with stadium seating, it never sold. By 2009 it was marked down to $680,000 and offered as a short sale. It's been under contract -- but failed to close -- four times in the last two years. The home is now priced at $615,000 and the listing says it's an "approved short sale" that can close in 60 days.
Happy 2012! Especially if you’re a home buyer.
From what I’ve been seeing over the past few weeks, Chicago buyers are already out shopping for their next home. Even during the height of the holiday season, I witnessed: One of my condo listings go under contract two days before Christmas, two separate buyers (in the Loop and Uptown) who are preparing to make offers this week, and another three new buyers who are starting their single-family home searches (in Bucktown, Irving Park, and Andersonville).
Home sales are on the rise throughout Chicago… but home prices are not. And neither, for the time being, are mortgage rates. That’s why it’s such an incredible time to be a home buyer. At no other moment in the past decade could you find home prices so low in Chicago (the median is now $160,000, nearly back to the levels of 1999), nor interest rates hovering below 4% for a 30-year fixed mortgage. Savvy buyers with solid income and credit scores are seizing the moment — and many people are simply paying cash for their properties these days, if they can afford it.
A major trend in 2012 will undoubtedly be the flood of foreclosed and short sale properties hitting the market; they already make up almost half of Chicago’s home sales. Illinois now ranks fourth in the nation for foreclosure activity, with 12,398 properties receiving foreclosure filings in November alone. In Cook County, foreclosure activity jumped 20% in November, according to a recent story in the Chicago Tribune, which attributed the rise to a 57% increase in homes sent to court-ordered auctions.
Buyers are out there, but they are definitely looking for bargains in 2012. And with homes now selling for about 30% less than what they commanded just a few years ago, bargains are not hard to find. It’s much harder to find home sellers — particularly the traditional kind who aren’t in foreclosure or attempting a short sale — willing to accept the new market reality and price their properties accordingly.
Distress home sales creep into Lincoln Park
THE RICH GET POORER: This 4000-square-foot mansion at 2461 N Geneva Terrace was built with "only the best materials and construction methods" and priced at $6.25 million in 2009. Almost three years later, it had fallen into foreclosure and was sold for $2,725,000. It was one of dozens of homes (mostly condos) sold as a foreclosure or short sale throughout Lincoln Park this year.
With so many foreclosed homes and short sales on the market, I’m sometimes contacted by home buyers hoping to scoop up a distressed property in one of Chicago’s most affluent neighborhoods. Trouble is, these areas have held their value better than most, and often there aren’t many foreclosures or short sales to choose from.
But in Lincoln Park, I have seen distress sales steadily rising over the last couple years — to the point that more than 1 in 8 condo sales in Lincoln Park in 2011 involved a foreclosure or short sale. So far, there have been 658 condo sales this year; 45 were short sales and 42 were foreclosures, meaning that 13.2% were distress sales. The majority of them involved homes that sold for $250,000 or less.
The bargains included 20 condos, all studios or one-bedroom units, that sold for $100,000 or less — a price range once virtually unheard of in Lincoln Park.
If you’re hoping to find a single-family house being sold under a financial cloud, however, your choices are fewer. Only 13 out of 135 Lincoln Park houses sold in 2011 were short sales or foreclosures. That’s less than 10%.
Most of these single-family houses sold for less than $1 million, but there were a handful of high-end luxury homes that also slid towards foreclosure. In some cases, it looks like a developer overestimated the market and got caught with a new home he/she couldn’t sell. At 2664 N Greenview, which the listing describes a 6-bedroom “designed mansion” built in 2008, the developer originally listed it for sale four years ago at $2.4 million. But as the market tanked, no buyer stepped forward, and the price was steadily chopped until the house finally sold this June (as a short sale) for $1.5 million.
Even a millionaire likes a bargain, after all. The most expensive distress sale in Lincoln Park was a new 15-room mansion at 2461 N Geneva Terrace “designed by a European architect for himself,” according to the listing, that sold in September for $2,725,000. Apparently the European architect couldn’t afford the grand home, which hit the market in early 2009 with a $6.25 million price tag. By 2010, it was being marketed as a short sale, and it eventually was seized by the bank and sold as a foreclosure.
It was still one of the most expensive homes sold in Lincoln Park this year.
Please see my other blog posts at www.hometochicago.com
Back to 2000! Chicago home prices fall to levels last seen 11 years ago
A BUNGALOW BARGAIN: This 3-bedroom house, a foreclosure in old Irving Park, sold in October for $160,000 -- which is roughly the median price in Chicago. Hundreds of North Side bungalows in good condition can now be had for similar amounts, as prices return to levels not seen in a decade.
Eleven years ago, the U.S. presidency was up in the air, with everyone waiting to see whether George Bush or Al Gore had won the 2000 election as Florida struggled to recount its votes. The Y2K bug had proven to be relatively harmless, and 9/11 was still in the planning stages. No one had ever heard of the Ipod, Friendster, or Wikipedia, let alone the Iphone, Facebook, or WikiLeaks.
And the median home price was about $174,000 in Chicago. Today, according to data just released by the Illinois Assn. of Realtors, we’re back to those days. In fact, Chicago’s median price slid even lower last month — to $162,000 — than it stood in the year 2000.
While the median price fluctuates a bit from month to month, this is the lowest I’ve seen it in ages. Chicago’s home prices have fallen 11.5% just in the past year. This is a pretty grim sign for anyone hoping to sell their property.
However, the number of homes changing hands is up — another indication that the Chicago market may be stabilizing, albeit at a lower price point. Nearly half of the sales these days involve foreclosures or short sales, and most of them are at prices below $200,000. Sales of single-family houses and condominiums totaled 1,312 in October, up 7.9% from 1,216 homes sold in October 2010.
“The increase in units sold in the city of Chicago continues to show the absorption of distressed properties in the market,” said Bob Floss, president of the Chicago Assn. of Realtors. “Prospective buyers in the market are making investments that make sense long-term.”
Nearly half of Chicago houses are underwater
UNDERWATER IN LOGAN SQUARE: It's not much to look at, but this 2-bedroom house at 2829 N Elston sold for $159,500 in August after just a week on the market. It was a short sale, meaning the seller owed the bank more than the house was worth. Property records indicate that owner took out a $250,409 mortgage in 2007. Almost half of Chicago houses with mortgages are now underwater, according to data compiled by Zillow.
Although you don’t often hear Chicago mentioned as one of the epicenters of the housing bust — the media tends to focus on sun-splashed cities like Las Vegas, Miami and Los Angeles — our market has definitely been staggered by the downturn. Illinois was ranked #1 nationwide in the number of foreclosures earlier this year, and now comes a report that says almost half of all houses with mortgages are underwater in the Chicago area.
More than 46% of Chicago’s single-family houses are worth less than what the homeowner owes on the mortgage, a condition known as being underwater, according to the real estate website Zillow. That’s much worse than the national average of 28.6% of homes with mortgages that were underwater this fall.
And the pain seems to be increasing in the Chicago area: The percentage of underwater houses jumped 9% from the second quarter to the third quarter of 2011.
Yet Stan Humphries, Zillow’s chief economist, told the Chicago Tribune there was still reason for optimism. “I didn’t think this was a particularly bad housing report,” he said. “We are much closer to the end of the housing recession than the beginning. I still think of Chicago being more of an average case of housing recession. It’s nowhere in the league of Phoenix and Vegas.”
The Zillow data also showed that 42% of the homes sold in the city of Chicago in the third quarter sold at a loss , compared to 34.4% nationally. Zillow said Chicago-area home prices fell 9% in the past year, to a level last seen here in 2000.
Chicago foreclosure filings jump sharply
A RARE GEM: This luxury penthouse, in a brand-new building on Buckingham Place in Lakeview, slid into foreclosure after several years on the market at prices above $525,ooo. It finally sold in April for $450,000. Most Chicago foreclosures, however, aren't so grand.
Another wave of Chicago-area foreclosures may be ahead, according to recent data gathered by RealtyTrac. The number of homes that received notices of mortgage default in the metro area spiked 30% in August over the previous month.
Some 6,239 delinquent homeowners received notices — the first step in the foreclosure process — in Cook County and the surrounding areas (DuPage, Kane, Kendall, Lake, McHenry and Will counties). The vast majority of the troubled properties, however, were in Cook, the nation’s second-largest county. Foreclosure filings jumped 24% in Cook County.
I see plenty of foreclosures, and most of them need at least a little work (and some of them require a total rehab). Missing or broken kitchen appliances are routine, as are floors that need refinishing and walls that need repainting. Because many foreclosures have been vacant for months, there are frequently leaks that have damaged the floors or drywall (I have seen more than one foreclosed condo where the refrigerator had leaked onto the hardwood floor.)
But for homebuyers seeking a bargain — especially if they have a little cash to put into repairing the property — foreclosures can be a good opportunity. There are a lot of good deals out there right now, and mortgage interest rates are super low.
Chicago’s foreclosure crisis has been uneven, devastating some communities while barely touching others. Even in the more affluent neighborhoods like Lakeview, they tend to be clustered in certain buildings like 655 W Irving Park Road or 3660 N Lake Shore Drive. And in the poorer areas, such as South Shore, you’ll find some blocks — even blocks right by the lake — where it seems that every other house is a boarded-up foreclosure.
What’s harder to find is a single foreclosed property in the middle of an otherwise stable, desirable neighborhood. Those homes tend to sell quickly, especially if they are priced below market value, and they often attract multiple offers.
Chicago ranks #1 nationwide in foreclosures
CHICAGO, THE NEW FORECLOSURE CAPITAL: Unfortunately, Chicago now leads the nation in the number of foreclosed homes. This 3-bedroom, 3-bath foreclosed house in Lakeview, which was listed at $586,000 at the end of 2009, finally closed last April for $405,000.
The Chicago area now has the largest inventory of foreclosed homes in the nation, and these abandoned properties take longer to sell here than in most other cities.
With 118,776 homes that are either bank-owned or in the midst of being seized by lenders, Chicago ranks first in foreclosures among the 20 biggest metro areas, according to RealtyTrac, a company that compiles housing data. Even the cities that were hit hardest by the housing bust, such as Los Angeles, Miami, Las Vegas, and Phoenix, had tens of thousands fewer homes in foreclosure when the data was collected in May. Los Angeles, for example, was #2 with 86,745 foreclosed homes.
As a realtor who regularly shows homes throughout Chicago, particularly on the North side, I can testify that many of the foreclosures here are: 1) concentrated in poorer, less desirable neighborhoods with older housing stock 2) in lousy condition, often missing kitchen appliances or pockmarked by signs of neglect, such as water leaks and mold 3) if they are condos, located in buildings that may have other foreclosures, short sales, units not paying their assessments or financial problems that make lenders unlikely to give a buyer a mortgage there 4) owned by banks that are disorganized, unresponsive, and even idiotic in their approach to selling the home.
In a story today in the New York Times, the glut of Chicago foreclosures is also blamed on Illinois law that protects delinquent borrowers by requiring lenders to go to court to foreclose, creating a backlog of cases. Meanwhile, Attorney General Lisa Madigan is investigating banks’ “robo-signing” practices, involving the creation of false loan documents.
Also slowing down the sale of distressed properties is the reluctance of banks to lose money. Banks will be banks, of course, and they don’t want to sell foreclosed homes for substantially less than what the borrower owed on the mortgage. (I also see this mindset slowing down and often thwarting short sales, which is why I generally discourage buyers from even pursuing them until the banks get their acts together.)
The bottom line is that Chicago and its suburbs, especially the poor neighborhoods, are full of foreclosures. Buying one requires lots of patience and the acceptance of more risk than you’d encounter in a normal sale. But there are still some good deals out there, and I have helped several of my buyers pursue foreclosed homes that they now happily own.
More troubled sales at Catalpa Gardens
CATALPA GARDENS FALLS SHORT: Over the past year, 9 of the 12 sales here was a short sale. Another was a foreclosure.
For a building that is only four years old, Catalpa Gardens has seen more than its fair share of trouble. This colorful complex had the misfortune to be built and unveiled to the public just as the Chicago condo market was beginning a steep decline. This plunge not only caught off guard the developers — who were forced to slash their asking prices by as much as $150,000 on some 2-bedroom units — but it pretty much trapped dozens of buyers who purchased their units here before the massive price cuts in 2009.
I’ve written about the problems here before; in fact, in late 2009 I warned potential buyers to beware of this 126-unit building, a virtual ticking time bomb since so many owners were deeply underwater. Now we are seeing the fallout.
Over the past year, there have been 12 sales in the building, including 9 short sales. One was a foreclosure, and the last two were the developer’s “liquidation” of the final units. One of those, a sixth-floor unit with 2 bedrooms, 2 baths and garage parking, sold for $230,000 — the highest price in the building all year. It had previously been priced as high as $417,301 (with parking an additional $31,900.)
But the real losers in the Catalpa Gardens debacle are the regular folks who paid top dollar for a new building whose value was sinking by the day. Like the owner of #703, who paid a whopping $439,661 for a 1200-square-foot 2-bedroom, 2-bath condo in the summer of 2008. The housing market was already crippled then, and a year later this owner was trying to get out. But Catalpa Gardens was in serious trouble, and unit #703 (priced at $399,900) did not sell. The owner was forced to cut the price seven times, to $189,000, before it finally sold as a short sale last spring.
That’s right. This poor homeowner owned the place for less than two years, sold it for an appalling 57% less than he paid for it, and destroyed his credit in a short sale. And consider the fate of a similar sixth-floor unit, #603, whose owner paid $435,061 in 2008. That one has been for sale now for almost two years, currently priced at $175,900. It’s also a short sale.
Today there are six units for sale at Catalpa Gardens, and five of them are short sales or foreclosures. The cheapest is a 1-bedroom, one-bath condo priced at $103,500. More distressed sales are certainly ahead for this star-crossed building, but prices are now so low that these units are beginning to seem like a deal.
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