Sue Fox, @Properties. Direct 773.816.1788
Subscribe to Site
- FHA loans
- Market conditions
- Tax credits
Real Estate radio
Archive for the 'Short sales' Category
Home prices have been falling — plunging, really — in Chicago for the better part of a decade now, declining about 30% since the city’s housing market peaked in 2006. But 2012 was supposed to be different. And for most of the year, it was.
Chicago prices finally stopped their downward slide and began to turn up, little by little, as the spring and summer buying season progressed. With inventory tight, many buyers found themselves competing for available homes, especially properties in good condition in coveted neighborhoods. Multiple offers became more common and homes sold more quickly than in previous years.
But a recent survey of home prices in 20 major U.S. cities — the monthly S&P/Case-Shiller report — shows that Chicago was one of only two cities where prices actually fell over the past year. The report (which covers the most recent data, through October 2012) found that Chicago home prices slipped 1.3% over the past year. The other city where prices fell, New York, saw a 1.2% decline.
Chicago prices also fell on a monthly basis, dropping 1.5% in October over September, the weakest result among all the cities surveyed.
So what’s ahead for our local real estate market? I read these numbers, which always vary slightly from those compiled by the Illinois Assn. of Realtors, as a sign of stability. Prices are pretty much flat over last year. But after years of large declines, this is a marked change in direction. The market has now reached a turning point. It’s no longer in free fall, but prices are not appreciating yet, either.
Is this what the bottom looks like? Probably, although we may bump along here for awhile longer before prices really start to climb.
A sustained recovery depends on strong employment in the Chicago area and a decline in the thousands of foreclosures seen annually here, both of which the city has yet to achieve.
Short sales are getting a tad easier these days. That’s not to say they aren’t a pain in the neck — they are, for both buyers and sellers — but hundreds more of them are closing in the Chicago area, and nationwide, as banks finally realize that in many cases this is a better outcome than a foreclosure.
Why are short sales so difficult? The answer is that someone — a bank — will lose money. With a short sale, a borrower is trying to sell his/her home for less than what they owe on the mortgage, sometimes considerably less. In order for a short sale to close, the lender must agree to the loss, and banks by nature don’t want to lose money. Many banks are also swamped with mortgages gone bad, and they typically take months to respond to a short sale offer. And sometimes they say no.
Right now, I have three different short sale deals under contract with various buyers. One was supposed to be ready to close “right away,” since several previous deals had fallen through and the bank had already approved the list price. But it’s been more than a month so far. The other two deals will probably drag on for much longer, since the banks involved have yet to approve a short sale or even respond.
Still, short sales are on the rise. According to a story yesterday in the Chicago Tribune, there were 907 short-sale transactions in the Chicago area in January alone — a 35% increase over a year ago. Foreclosures, however, accounted for twice as many sales.
Nationally, too, more short sales are being completed. An estimated 105,000 short sales closed during the first quarter nationwide, the highest number in three years.
I still don’t advise attempting to buy a short sale if you’re on any sort of a timeline. But if you have months to spare, and plenty of patience to boot, you could give it a shot. More deals seem to be closing, and you’ll probably get a good deal on the price. Short sales sold at an average discount of 23% in January, the Tribune said, while foreclosures sold for 29% off.
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.
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?
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.
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
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.
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.
- Sizzle is back in the South Loop
- How to Buy a Chicago Foreclosure (as Supply Steadily Shrinks)
- Home prices jump 15% in 2014, but cold weather chills sales
- Lincoln Square on a Tear as Average House Price Tops $600,000
- More choices ahead for Chicago buyers as rally cools