As evidenced by Chicago’s annual real-estate chart—which appears in the October 2008 issue and spans the 12-month period from July 1, 2007, to June 30, 2008—home values are down almost everywhere in the metro region. (And according to a Case-Schiller report that came out Tuesday, prices continued to fall in July.) But the biggest decreases in housing values were primarily in places where home prices were already among the lowest in and around Chicago.
In the suburbs, home values fell significantly in Summit, Harvey, North Chicago, and Dixmoor; in the city, the neighborhoods of West Garfield Park, West Englewood, Pullman, New City, and Chicago Lawn took significant hits. (See the chart below.) During the first half of this decade, these are places where lenders were converting longtime renters into homeowners via loans that required little or no down payment and, thanks to initially cheap Adjustable Rate Mortgages, very low monthly payments.
Certainly mortgage fraud, inflated property appraisals, and other unscrupulous methods contributed to the ensuing problems. But in many cases, the people taking out these cheap loans were “American families just trying to get by,” says Victor Crook, the head of Jabez Realty & Development, in Lansing. “They wanted to reach the American dream and buy a home. Some of them bought more house than they could afford.” Once interest rates went up and lending got tight, countless homeowners either lost their homes or had to sell for less than they owed. These deeply discounted sales make up for a big part of the declines in the communities on the chart below.
Crook now specializes in selling foreclosed properties, and he has no shortage of business in the south suburban towns and the South Side neighborhoods that appear on this week’s chart. Information from Midwest Real Estate Data, which provided the statistics for Chicago’s various real-estate charts, reveals numerous foreclosures and short sales in those areas over the past year. (It’s not possible to give an exact count, because the reporting isn’t uniform.)
What’s in store for the communities that took the hardest hits? Geoff Smith, vice president of Chicago’s Woodstock Institute (which promotes community-based economic development), sees a few things on the horizon. Foreclosed properties that stay vacant will compel “municipal governments to extend services to these properties to make sure the level of vacancy doesn’t become blight,” he says. But “most of these small communities don’t have the extra resources to do that.”
Struggling homeowners who manage to hold on to their properties, Smith says, “are going to have to wait out [the financial crisis] if they can and hope that property values rebound.” With the homeowner assistance legislation that Congress passed last summer and the potential for further homeowner assistance if a federal bailout plan gets approval, Smith hopes that these people “can refinance to bring the monthly payment down and defer the negative equity they have” until the value builds back up again.
Here are the communities (with ten or more sales) whose home values dropped the most in the year ending June 30, 2008. And as you will see, not all them are low- or moderate-income communities.
|Neighborhood||Average Price 2008||Average Decline (since 2007)|
|West Englewood|| |
|West Garfield Park|| |
|New City|| |
|Neighborhood||Average Price (2008)||Average Decline (since 2007)|
|North Lawndale|| |
|South Deering|| |
|Suburb||Average Price (2008)||Average Decline (since 2007)|
|North Chicago|| |
|Olympia Fields|| |
|Richton Park|| |
|Schiller Park|| |
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