Two recent reports from expert analysts of the Chicago housing scene shed new light on the impact of the recent troubles affecting the local residential real-estate market. One report shows that renters of high-end apartments are benefiting from the downtown condo glut, while the other indicates that the foreclosure wave is sweeping into Latino neighborhoods after initially hitting African American neighborhoods hardest.
Last week, in its report on the downtown housing market for the third quarter of 2008, Appraisal Research Counselors noted that the number of new condos rented out over the past year equaled about 60 percent of the number of vacant downtown rental apartments. According to the report, luxury apartment buildings—the ones most likely to compete for tenants with new condo buildings—are, on average, 7.2 percent vacant. The report goes on to point out that, if all the renters who went into condos in the past year had taken apartments instead, that percentage would be cut in half.
Ron DeVries, Appraisal Research’s vice president, forecasts that the number of condos rented out in 2009 will exceed total apartment vacancy. The result, he says, will be a “downward pressure on rents downtown.” Condos typically rent for about 10 percent less than comparable apartments, DeVries says, because they offer less in-building maintenance and repair service. (Typically, apartments are also expected to turn a profit, while the owners of rented condos these days may only be hoping to cover the mortgage via the rent.) So if large numbers of less-expensive condos are drawing renters, the obvious competitive response by landlords of big apartment buildings will be to bring down rents. “The person looking to rent a luxury apartment is the winner in this picture,” DeVries says.
The losers in Chicago’s foreclosure crisis are disproportionately people of color, according to a report released Monday by the Woodstock Institute. While the heaviest concentration of foreclosures has been in African American neighborhoods, there has been a sharp spike in foreclosures in Latino neighborhoods. This suggests that, in the future, those neighborhoods “will be the hardest hit,” says Sarah Duda, the Woodstock research and project associate who cowrote the report with Geoff Smith, the institute’s vice president.
While just 8.7 percent of mortgageable real estate in the Chicago area is in neighborhoods with mostly African American populations, 35 percent of all local mortgaged properties that have reverted to lenders are in those neighborhoods, according to the Woodstock report. (Those figures are flip-flopped for mostly white neighborhoods, which have 23.2 percent of the mortgageable property, but only 6.6 percent of the foreclosures.) The number of properties that became bank-owned in Latino areas rose by 464.7 percent between 2005 and 2007, compared to an increase of 231 percent during that time for the general population. And neighborhoods that are primarily Latino have the highest proportion—47.9 percent—of multi-family (rental) housing that has gone back to the banks. That means “a lot of affordable rental housing is being taken off-line,” Duda says.