Housing Bulletin: Riding the Foreclosure Bus
It’s only a matter of time until some enterprising Chicagoan emulates the Stockton, California, real-estate agent who dreamed up this idea: a bus tour that takes potential buyers all over town to view the foreclosed houses for sale. It’s a long tour.
And if the real-estate forecasts play out as prognosticated by some—that is, if hundreds of thousands of over-extended U.S. homeowners have to bail out of their houses in the next 18 months as their once-cheap Adjustable Rate Mortgages (ARM) reset at dramatically higher prices—that Stockton bus tour might become a national franchise.
Nationwide, foreclosures are spreading like a bad rash. On November 1st, the California-based Realty Trac reported that 446,726 U.S. homes were foreclosed during the third quarter of 2007—twice what it had been a year ago.
Illinois looks a little better. Foreclosures from July through September here were up by “only” 38.7 percent from the same period a year ago. The 19,128 foreclosures during the quarter were heavily concentrated in the Chicago area and the St. Louis suburbs. Foreclosures actually fell by 4.2 percent in Illinois from the second quarter to the third. “That isn’t necessarily the beginning of a big drop,” says Darel Blomquist, a spokesperson for Realty Trac. “We expect it to remain high” as the ARM resets continue.
For individual buyers looking for a bargain on a home, the itchy truth is that these foreclosures—bad news for their former owners, the lenders, and potentially the larger economy—could be good news. The banks that take possession of these houses don’t want to keep them: they want to sell them, and fast. Typically, they just want to get back what’s owed on the house. They don’t count on making a profit, as individual homeowners do, notes Stephen Chip, a spokesperson for foreclosure.com.
That’s why there are hundreds of properties on the market here in the Chicago area right now at bargain prices. It’s also why investors and others are touting the sold-at-foreclosure market as the next great thing. Here in Chicago, foreclosurebuyer.com plans to launch a new magazine, Foreclosure Buyer, in January.
You can still find many nice foreclosed properties—with a healthy discount thrown in as enticement—the old-fashioned way: through an agent. On the Web, searching the most extensive listing site for foreclosures—foreclosure.com—I found properties with asking prices tens of thousands of dollars below what their owners had paid two or three years ago. (Those are the asking prices; the ultimate sale price may be even lower) I searched by ZIP Code and found a potential bargain in virtually every corner of the six-county Chicago area. It does cost $39.80 a month to join, but there’s no requirement that you belong for longer than one month. Maybe that bus tour won’t be necessary, after all.