Each October, with help from Midwest Real Estate Data (MRED), Chicago publishes its annual real-estate chart, which, among other things, shows the average price of a house in all 77 city neighborhoods and more than 200 suburbs. The chart also notes how this year’s prices compare to the prior year and to 1994, the earliest year for which MRED has data for most of those neighborhoods and towns. Usually that comparison with 1994 is a heartening measure of the long-term growth in the value of a Chicago-area home.
But in the latest charts—on newsstands now in the October 2009 issue—the 1994 comparison for six neighborhoods and 16 suburbs presents a stark picture of just how badly the foreclosure crisis has hurt those areas. In all 22 of those communities, the average sale price in our tracking year—July 1, 2008, to June 30, 2009—was lower than it was in 1994. (In Chicago, the neighborhoods are Englewood, Roseland, South Chicago, West Englewood, West Garfield Park, and West Pullman; the suburbs are Burnham, Calumet City, Calumet Park, Chicago Heights, Dixmoor, Dolton, Harvey, Hazel Crest, Maywood, North Chicago, Olympia Fields, Park Forest, Phoenix, Riverdale, Robbins, and Sauk Village.)
“I don’t think you’ve seen home prices so low here since the early 1980s,” says Bert Herzog, the village administrator of Dolton. “That’s the last time you could find housing here in the thirty thousands and forty thousands.” In nearby Burnham, a 116-year-old 15-room house that has been divided into four apartments sold at foreclosure in June for $7,500; it had gone for $250,000 four years earlier.
Other than North Chicago, Maywood, and West Garfield Park, all the communities are south of the Loop, and they are mostly moderate-income places with predominately black populations. Their plight mirrors the recent talk of the difference between the “black recession” and the “white recession,” with the former being far more severe.
While foreclosures have occurred in affluent communities, they tend to be concentrated in moderate-income areas that were targets for subprime lending and hyperinflated appraisals—places now hit hard by job losses and foreclosures. “You see whole blocks that have been devastated,” says Geoff Smith, a vice president of the Woodstock Institute, which studies and promotes economic development in lower-income and minority communities. “They’ve been hit so hard that you have to think about what the possibility is for recovery. What will it take to salvage those communities?”
Where large numbers of homes have been foreclosed, everyone in town feels the impact. “The taxes that aren’t being paid on those houses hurts the schools,” Herzog says—not to mention the costs to police departments and other municipal agencies that must monitor those empty properties.
But those same municipalities are working to combat those negative economic effects. Under the auspices of the South Suburban Mayors and Managers Association (SSMMA), a coalition representing the hardest-hit towns wants to buy foreclosed properties in bulk, rehab them, and get them back on the market. “In 12 of our communities, the [rate of foreclosure] has been double the average of the rest of Cook County,” says Ed Paesel, the executive directive of SSMMA. To fund its plan, the coalition is asking for some of the federal stimulus money awarded to Illinois. “We’re now in fruitful discussions with the state,” Paesel says.
Meanwhile, in Chicago Heights, where about 600 homes—or 7 percent of the town’s housing—are in foreclosure or preforeclosure, city leaders have approved a plan to provide $10,000 to anyone who buys a foreclosed home. Make that home your permanent residence for five years and you don’t have to pay the money back. “If you will come into our town, buy a house, and stay here, the city wants you,” says Matthew Fares, the chief of staff for Chicago Heights mayor Alex Lopez.
Next week: A closer look at the prices being paid for foreclosed properties in these distressed communities—and who’s doing the buying