Sue Fox, @Properties. Direct 773.816.1788
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Archive for the 'Foreclosures' Category
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.”
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.
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.
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.
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.
This week, one of my buyers made an offer on a foreclosed 2-bedroom, 2-bath condo in Rogers Park. In years past, I did a healthy business in Rogers Park; it was a popular destination for first-time home buyers who wanted to live in an affordable area close to the lake.
But Rogers Park, like so many other up-and-coming neighborhoods throughout Chicago, has been just about crushed by the real estate downturn, resulting in a massive tide of foreclosures and short sales. This has made Rogers Park something of a buyer’s banquet, with deals you can only dream of in other North side areas, like newly-rehabbed 2-bedroom condos with parking for well under $200,000.
There are now 99 condos with at least 2 bedrooms and 2 baths listed for sale for less than $200,000 in Rogers Park (and more than 20 of them have 3 bedrooms.) But the truly shocking part is that nearly all of them are distressed properties, either foreclosures or short sales seeking to avoid a foreclosure. I just combed through all 99 listings, and I only counted 28 that were NOT foreclosures or short sales.
In fact, it’s so rare to find an ordinary seller selling a ordinary home in Rogers Park these days that it’s become a selling point: “REGULAR SALE!!!!” shouts the description for 1900 W Touhy Ave #1C, a rehabbed condo priced at $135,000.
The flip side of so many great deals is that most of them, unfortunately, will be difficult to actually buy. At least half of them are short sales, which require lender approval that takes months and often never comes. Many of these will eventually slide into foreclosure and be seized by a bank. Even the foreclosed condos can be tough to buy, though, because if they are located in a troubled building with other distressed units, lenders will not want to loan in that building.
So if you are a buyer considering Rogers Park — especially if you’re a condo buyer — please tread carefully. The neighborhood’s housing market has become a veritable thicket of problem properties, and you need to make sure you are well represented as you sort through the real estate rubble looking for a gem.
Trying to make fast money by investing in Chicago real estate these days is like squeezing blood from a stone. But that isn’t stopping a few bold rehabbers from snapping up foreclosed houses, renovating them top to bottom, and popping them back on the market a few months later at double or triple the price.
I’m seeing this trend in otherwise sleepy neighborhoods like Irving Park and Albany Park, which boasts a lovely swath of vintage bungalows in its Mayfair area. Consider this renovated bungalow, located at 4839 N Springfield in Albany Park, which has 3 bedrooms (plus another one in the basement) and 3 baths. I chose this house as March’s Bungalow of the Month to call attention to the enduring phenomenon of house flipping.
The owner bought the house — a foreclosure — in July for $104,000, according to public records. It was a simple frame bungalow with white siding and black trim, being sold “as is” after spending three years on and off the market at steadily reduced prices.
Three months later, it was back on the market, totally renovated and set at nearly triple the price: $299,000. The exterior was now a soft gray with brown and white accents, the kitchen boasted dark (but plain) new cabinetry and stainless steel appliances, the floors had all been refinished and the walls repainted, the basement was finished with carpet, and the backyard now featured a new deck.
And the upgrades weren’t merely cosmetic. The house now had a new roof, HVAC system, siding and windows, electric wiring, and other improvements. There was also a new 2-car garage.
But the goal of any house flipper is to find a buyer, and in this case they have yet to do so. This bungalow has been on the market for five months now and the price has been cut twice, most recently to $259,000 last week. We will have to wait and see what the final sale price is to decide whether this was a wise investment.
Chicago is chock full of bungalows and other homes that are now languishing in foreclosure, or are trapped in a slow downward spiral as short sales. I see them in virtually every neighborhood these days, but they are especially prevalent on the South and West sides of the city. Even on the North side, you can find them in Rogers Park, Albany Park, Irving Park, Avondale, Portage Park, Jefferson Park… and the depressing list goes on.
I love bungalows, and I hate to see these historic homes abandoned and decaying. Now, this particular bungalow looks like it was stripped of whatever built-in bookshelves or hutches it once had, and it lacks a fireplace or any leaded glass windows. The new interior now has something of a generic, condo-ish feel and the finishes look like they came straight off the shelf at Home Depot. However, whoever bought and renovated this house did save it from a fate all too common these days in Chicago’s bungalow belt: utter neglect.
Chicago’s real estate market continues to gasp and wheeze this autumn, with the Illinois Association of Realtors reporting that homes sales fell 27% in September compared to the previous year. The city’s median price dropped like a stone as well, falling 20% — from $225,000 a year ago to $180,000 this September.
However, if you look at the entire year, things are a bit brighter. Thanks largely to the now-expired federal tax credit for home buyers, Chicago’s year-to-date sales jumped 11% during January through September 2010, compared to the same period in 2009. The year-to-date median home price fell 8%.
Looking ahead to the always-slow winter season, I would say that qualified buyers have a great opportunity to buy a home at both a stellar price and interest rate … but everyone else (sellers and existing homeowners) is in for a long, chilly slog towards spring.
The number of foreclosed homes, meanwhile, is soaring in Chicago. In fact, the Chicago metro region recently ranked third in the nation for foreclosures, with more than 12,000 foreclosed homes in the third quarter of 2010, behind only Phoenix and Miami. The Chicago area’s foreclosure activity jumped 35% in the third quarter, according to RealtyTrac, a company that tracks distressed properties.
Some of Chicago’s more affluent neighborhoods — like the Loop, West Loop, South Loop and Lincoln Park — have also seen large increases in foreclosures. In the Loop, for instance, there have been 205 foreclosure filings during the first nine months of the year, a 77% increase over the same period in 2009, according to data compiled by the Woodstock Institute, a non-profit research group based in Chicago.
The troubled buildings in the Loop include River City at 800 S. Wells, where there were 16 new foreclosure filings in the last three months; Century Tower at 182 W. Lake St. (nine foreclosure filings); Park Millennium at 222 N. Columbus Drive (six), according to the Woodstock Institute. In the South Loop, where many of the newer condo buildings have ended up filled with renters, a handful of buildings had two-thirds of the recent foreclosure filings: 1620 South Michigan Ave. (twelve); Vision on State at 1255 S. State St. (eleven); and 1720 South Michigan Ave. (eight).
Trying to buy a foreclosed Chicago home, as I’ve written before, is usually a huge mess requiring saintly patience on the part of buyers trying to deal with the clueless, overwhelmed and unresponsive bank selling the property. And now (surprise!) we’re learning that the banks were equally messy on the front end as they filed for foreclosure, taking homes by the thousand from delinquent borrowers without verifying the necessary legal paperwork.
So far, three major lenders — J.P. Morgan Chase, Bank of America, and Ally Financial (GMAC) — have imposed temporary moratoriums on foreclosures in Illinois and other states that require a judge’s order, called “judicial foreclosure” states. This move came after lenders admitted that employees were signing thousands of false foreclosure affidavits without confirming the underlying loan information.
Now Illinois Attorney General Lisa Madigan is demanding that 23 more loan servicers immediately halt all pending foreclosures in Illinois, including post-foreclosure sales and evictions, unless they can prove their affidavits and other foreclosure documents are legitimate.
What does this massive muddle of misinformation mean for our Chicago home market, you ask? Well, for now, far fewer homes are going to be re-possessed by banks, at least until the legalities can be straightened out. This should give the market a chance to catch its breath by temporarily stemming the flood of supply (houses and condos) and allowing the trickle of demand (qualified buyers) to build a bit.
Chicago has been swamped with a rising tide of foreclosures this year. According to a recent report by Realty Trac, a company that analyzes foreclosure data, Chicago foreclosure activity soared 69% in September compared to a year ago.
To help struggling homeowners, the Circuit Court of Cook County recently launched a $3.5-million Foreclosure Mediation Program, an attempt to push lenders and borrowers to the negotiating table to hash out a loan modification, short sale agreement, deed in lieu of foreclosure, or some other resolution. Will it work? The jury is still out, but the county says that 2,000 homeowners have already received this free assistance.
In the meantime, any break in Chicago’s foreclosure frenzy is probably a welcome time-out.
In the last week, I’ve fielded the following inquiries from potential buyers: Can you find me a 3-bedroom house, preferably a foreclosure or a short sale, for under $200,000 in Irving Park? Another buyer asked me about how to find distressed sellers of two-flats in Lincoln Park. And a third inquired about finding a foreclosed or short sale multi-unit building in Edgewater or Andersonville.
These are the kind of calls a lot of Chicago realtors are getting these days. Buyers are looking for deals, and they are extremely wary about over-paying for real estate, even in the nicest neighborhoods. They are concerned — and rightly so, given the economic data on local unemployment and foreclosure rates — that prices have further to fall.
Meanwhile, every day hundreds of new properties hit the market in the Chicago region. Just today, according to Midwest Real Estate Data, LLC, some 730 properties were listed for sale here (while just 127 closed).
What does this mean for people trying to sell ordinary, not distressed, homes in good condition? It means you need to be super realistic, stone-cold sober, clear-eyed and steely-spined — and you need to price your property at the same level or slightly below what similar homes have sold for recently. Otherwise you will just be chasing this frightful market down, watching the market time pile up and desperately cutting your price to keep up.
Unfortunately, I’ve seen a few recent examples of sellers who refused to face reality. On the Gold Coast, I had a buyer who offered a seller almost 93% of his listing price (this on a condo priced well over half a million dollars) and the seller, after waffling for days, ultimately declined. Another Gold Coast seller abruptly pulled his listing off the market rather than negotiate an offer that came in about 10% below asking price. A few months ago, I had some buyers make an offer on a renovated house in Wilmette. But the sellers refused to take $575,000, which was a reasonable offer … and today, that same house is still on the market for less than $530,000.
Look, this is not the time for sellers to be testing the waters, fishing about to see if they can get the price they want. Only serious sellers should be in this market. If you are not prepared to compete for buyers, by ruthlessly pricing your property in accordance with the current market, then don’t even bother. You are just wasting your own time.
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