Life in the Slow Lane: Get Used To It
A new federal report has provided yet another sign that Chicago’s housing market is in the slow lane on the road to recovery. The report, issued last week with the government’s monthly housing scorecard, noted that, during the past year, the area saw a 1.5 percent increase in the number of homes at risk of foreclosure, rising from 125,400 homes in January 2011 to 127,300 homes in January 2012. During that same time period, the risk of foreclosure declined nationally by 10.4 percent. What’s more, the report said that Chicago’s rate of at-risk mortgages is worse than the rate in 93 percent of the country’s Metropolitan Statistical Areas.
Data released by Zillow on Tuesday confirmed that the Chicago-area continues to lag behind the rest of the country in rebuilding home values. That report pegged Chicago’s home values in February at 11 percent below where they had been a year before—the worst year-to-year drop among the nation’s top 25 cities. Nationally, Zillow said, prices were down 4.5 percent from February 2011.
Keep in mind that, even if your home is paid up or not at risk, foreclosures in the area are impacting its value. “Foreclosures have a downward pull on the entire neighborhood,” says Spencer Cowan, a vice president of the Woodstock Institute. That’s in part because, when foreclosed homes go on the market, they are offered at rock-bottom prices that undercut sale prices of other homes.
This week, Woodstock has a new report showing that foreclosure filings in the six-county metro area were down 18.9 percent in the second half of 2011. What’s more, virtually every town or city neighborhood within those counties saw a drop in the number of foreclosures. “That should not be interpreted as an increase in economic security,” warns Woodstock’s Tom Feltner. Like most close observers of the foreclosure crisis, he suspects that there are many more foreclosures headed this way as the economy remains in the doldrums and banks step up their foreclosure efforts now that the pause caused by the “robo-signing” controversy is most likely over.
Furthermore, Woodstock’s data shows that the majority of mortgages going into foreclosure here are conventional loans, not the exotic instruments, often peddled by predatory lenders, that sparked the first big round of foreclosures. The difference is significant because it indicates that these latest foreclosures are not the result of unsustainable loans. “It’s not product-driven, it’s employment-driven,” Feltner says. And as this chart from the New York Times makes clear, the path to job recovery could be lengthy.
If there’s a silver lining, it may be the opportunity these foreclosures have created for Habitat for Humanity. On Saturday, the organization’s chapter in south suburban Cook County will turn over to a new homeowner a rehabbed former foreclosure in Park Forest. The group bought the house in 2010 for $36,050—that’s 29 percent of what the foreclosed homeowner had paid for it in 2006.
The group used to build two houses a year, says its development director, Melvin Thompson, but it has picked up the pace since shifting its focus to rehabbing foreclosures. Already in 2012, the chapter has bought 20 foreclosures; the plan is to buy and rehab 25 or so this year, and possibly more in 2013. “We’re going to be very, very busy the next several years,” Thompson says.