Chicago Foreclosures up 35% in the First Half of 2007
I hate to keep posting on the negative news- but it is what it is.
The Chicago Journal is reporting that Chicago foreclosures are on the rise. From the December 13, 2007 Chicago Journal:
The Chicago Department of Housing reports that foreclosures in the city in the first half of 2007 are up 35 percent from the same time period last year, increasing from 4,695 to 6,329.
Here is an assessment of the foreclosure scene in the booming south and west loop areas:
Michael vanZalingen, director of homeownership services with the Neighborhood Housing Services of Chicago, said that while neighborhoods like the South and West Loops are not being hard-hit by foreclosures now, they could be in the future. In the those neighborhoods, he said, many condo and townhome owners purchased their units with adjustable rate mortgages, interest only mortgages and payment option arms and are going to be faced with larger mortgage payments.
He said many came in thinking they would sell their property within a few years of purchasing it and make when the principal came due. Many thought the market would continue to go up, he said.
“And as we’ve seen over the last six months in Chicago, and I think we’re going to see over the next few years, housing appreciation is flatly declining and the markets are very soft,” he said. “For those who had expected to sell or refinance … there is going to be a shortage of qualified buyers for their condos at the price they are looking for.”
He said because of the cooling market and so many defaults on loans, lenders also are tightening their underwriting standards.
“Even if someone wanted to buy a condo, they are going to have trouble getting a loan even if they have very good credit,” he said.
It seems as if everyone feels the housing market has really slowed. One homeowner facing foreclosure on the south side said:
Don said he bought the house for less than what it’s worth today, so he could probably sell it at enough of a profit to satisfy the value of the loan, but the market is so bad right now no one is buying.
Is it true that “no one is buying”? Or is it just the typical seasonal slowdown?
I for one paid no attention to housing until about a month ago, when I decided I’d like to try to move downtown. I immediately called my bank and got a loan, which they approved. I have no need to sell my current place before I buy another. In other words, no bars to buying.
Then I started looking. And started reading.
And I’m completely spooked. Unless/until I find something that really, really looks like a steal (which in my opinion wouldn’t really be a steal, but would be priced appropriately), I’m not going to buy. I’m just going to wait until prices seem to match back up with inventory. For instance, I like both 600 N. Fairbanks and 512 N. McClurg a lot. But I don’t think I’d buy a high floor two bedroom at 600 N. Fairbanks right now for more than $500K WITH parking, or a high floor 2BR at 512 for more than $400, again WITH parking. In other words, unless prices rolled back to about 2003-2004 levels. And I don’t see that happening within the next few months.
If in a year prices still haven’t come down, but units are actually selling so inventory is lower, I would buy at current asking prices.
Of course, n=1 — I dont’ speak for the whole market!
It takes time for declining prices to work their way through a market (in housing.) It can take years. In some cities right now, we have already seen 10% price reductions (where the inventory has really skyrocketed.) It will take longer in Chicago.
This spring will be interesting. We already have a decent amount of inventory and there are a lot of new buildings closing in 2008 (for condos). There will be a lot of product coming onto the market in 2008.
You can’t expect to get 2003 prices in the new buildings in the next six months. It’s not going to happen (unless we start seeing foreclosures in the new buildings.) Because the owners will never sell for that much of a loss. They’ll rent it and take a loss on the monthly payment and “wait it out” for when they think the market will again be going higher.
In my opinion, buyers should be patient.