Market Conditions: 2.5% Faced Foreclosure Filing in Chicago Market in 2008

RealtyTrac released 2008 foreclosure numbers today. It’s not totally clear what the company means by “the Chicago market” (all of Cook County or the entire Chicagoland area?)

In the Chicago market, 77,226 properties, or 2.5 percent of the housing units, faced a foreclosure filing last year, up 53.4 percent from 2007, RealtyTrac said.

In Illinois, 99,488 properties had at least one foreclosure-related filing last year, up almost 55 percent from 2007. RealtyTrac said 1.9 percent of the state’s housing units had a foreclosure filing in 2007, the ninth-highest rate in the country.

“Hitting bottom is a lot different than coming off the bottom,” said Christopher Thornberg, a principal with Beacon Economics in Los Angeles.

In Cook County, the foreclosure filings are jumping. They rose 84% in December from November and were 24% higher than December 2007.

One in every 300 homes in Cook County was in foreclosure in December.

Illinois properties with foreclosure activity up 55% in ’07 [Crain’s Chicago Business, Jan 15, 2009]

Cook County foreclosures jump 84% in December [Sun-Times, Jan 15, 2009]

31 Responses to “Market Conditions: 2.5% Faced Foreclosure Filing in Chicago Market in 2008”

  1. The dirty little secret is that increase in foreclosure activity is primarily driven by mortgage fraud and the specuvestors. The politicians though are going to spin it as little old ladies eating cat food going into foreclosure because of the big evil banks.

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  2. Has to be the 6 (or 7) Illinois metro counties. No way 77.6% of the foreclosures were in Cook County with only 43.3% of residents.

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  3. 77,226 / .025 equals 3M+ housing units. That appears to be the metro area.

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  4. From my little perspective most of the foreclosures thus far have been on the southside, west side and south suburbs. I’d bet money that 80 to 90% of subprime mortgages in these areas will eventually default and there are literally tens of thousands of subprime mortgage issued on the southside. The rest of the state doesn’t have the same subprime loan density as those areas.

    However, lately there have been more foreclosures outside of those areas. They’re all over the county now. We have two barrington foreclosures in my office. Million dollar properites too.

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  5. Edu, that “dirty little secret” applies to bubble pricing in general. How many of those sales were used as comps to justify what the bagholders, I mean homebuyers, paid?

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  6. Two flats on the outskirts of englewood were appraised at 300k at the height of the boom. Tens of thousands of borrowers heloc’d themselves to riches based upon ridiculous valuations. 80 to 90 of these mortgages will default. We are witnessing it as we speak.

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  7. HD:

    Look at the map here: http://Www.newyorkfed.org/mortgagemaps

    You’ll see that Will and Boone county had higher subprime concentrations than Cook and that the highest concentrations (not absolute numbers, buy SP loans/1000) in Cook County are almost all in teh ‘burbs–Maywood, Bellwood, Dolton, South Holland, Hazel Crest, Country Club Hills, Matteson–except 60652, on in the SW corner of Chicago.

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  8. zzz. wake me up when a 3/2 in lakeview is 300-350K that isn’t a complete dump. It’s coming sooner (or later for the debi downers) than a lot of people realize.

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  9. That’s interesting that the concentration of sp loans is greater on the south/sw burbs than on the southside of the city but you cannot deny the vast majority of foreclosures are in those areas. But like I said the alt-a wave is just beginning. In fact one of my good friends from high school came into my office to discuss what to do after he misses his first payment on his mortgage and to file bk. Yes its mchenry county but just right over the border. Its scary out there bc its not just subprime anymore.

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  10. HD:

    Play around with the map. I can deny what you say b/c the stats don’t support it. Among other things, Alt-A is less than half as prevelant in IL as Subprime (9.5/1000 v 21.4); and the concentration of foreclosures and REO are both higher in those south ‘burbs than the City. I don’t doubt that you see mostly City files, but it’s possible that the lenders you represent use other firms for most of their ‘burban FCs.

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  11. My point really was just that we see these headlines about increases in foreclosures, but the media never really points out the underlying causes of fraud/speculation. Something like 50% of foreclosures are investment properties. In addition, they gloss over the fact that foreclosures that do not involve fraud/speculation overwhelmingly are from divorce, medical, and other personal circumstances that would occur regardless of the type of loan, the economy, etc. Basically unpreventable. They make it out to be all these people innocently losing their homes through no fault of their own when it really isn’t the case. Notice the blurb about HUD counselors, etc. What is there to counsel? If you have no job, you can’t pay your mortgage.

    The reality is that the subprime industry artificially kept foreclosures low because people could always refinance out of trouble. Now that there is no longer a savior to come refi them out of trouble, they have no choice but to foreclose. Subprime was overwhelmingly targeted at refinances for people who were in or on the brink of financial trouble.

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  12. anon, those Alt-A are definitely much more prevalent on the N side than the S side. The alt-a are almost entirely low or no doc, as well. Many appear to be resetting in the next 12 months, probably not a prob from interest rates but how about those balloon 2nd mortgages? How many will qualify when docs are required?

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  13. I hear ya, Edu. Those not in financial distress (yet) opted for a lot of no doc alt-a loans. We shall see if new doc requirements make refis impossible for many in this group.

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  14. [G re; Alt-A]

    From the map, Hoffman Estates awas the Cook County ledaer in Alt-A. Kenilworth had about as high a concentration as anywhere in the City, trailing behind Lincolnwood.

    There are only 6.3% of Alt-As in IL re-setting from 11-08 to 11-09, with 50.6% which are ARMs–not sure if that’s 6.3% of all or of those w/ ARMs; if it’s the former, 1 in 8 w/ ARM are resetting soon (which makes sense). That map is **loading** with info.

    Never mind borrowers qualifying when docs are required (they weren’t for 73.6% of IL Alt-A borrowers; only 34.9% of SP borrowers got low/no doc–probably got slotted as SP b/c they actually documented), what percentage of Alt-A **properties** qualify for current loan amounts? Not a lot of 125% lenders out there anymore.

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  15. Man, that was some bad typing. Sorry.

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  16. The alt-a stuff was the home of the specuvestor with no doc stuff. A good number of them have no chance in hell of refinancing because the income cannot be documented. Most don’t live in the “primary residence” they bought so now it is an investment property as well.

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  17. It isn’t just the subprime. I believe that the subprime problem is only the canary in the coalmine.

    The HELOC abuse has been an even bigger problem. Many middle income homeowners who’ve owned their homes for years are losing them because they went to the HELOC well too many times and drank too deeply. A woman in West Ridge lost the beautiful craftsman bungalow she’d owned since the 70s because she HELOCed herself into oblivion.

    HELOC abuse is apparently very prevalent among “prime” borrowers. A few years ago, everyone around my mother in her affluent, genteel old St. Louis burb was suddenly building massive additions that doubled the size of already-large houses, adding swimming pools, and buying $85,000 cars. Lots of new BMWs and Benzes in the area. Now, there are numerous foreclosures in her area. Newer suburbs full of new subdivisions are in even worse case.

    Well, it’s going to get worse, not better, for the next few years, because our leader’s manner of “curing” the housing market is to sponsor more bad lending. Under the auspices of the FHA, a whole new wave of shaky loans is being written, targeting marginal buyers, and these will almost surely be defaulting in a few years, resulting in the need for yet another bailout.

    We never learn.

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  18. Amen, Laura. Congress is making me ill with their demands that the banks loan more money. Maybe the banks are finally thinking rationally.

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  19. the banks are thinking rationally as they know they have more crap to write down and they are hording cash so they don’t get flushed down the toilet. BofA is the latest sinker, only a few floaters left but they will likely go down.

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  20. I think the cheapest solution to the US taxpayers is to just nationalize BAC & C but not interfere with their daily operations. Let all the smaller banks fail. (Nationalize JPM too if it comes to it).

    But no of course our government is working on a more complicated, difficult to administer ‘aggregator bank’ idea similar to the S&L trust. Why they are doing this is beyond me when they can buy both of these banks for under 50B.

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  21. At least these are interesting times we’re living in.

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  22. The cheapest solution to the taxpayers AND the solution that would have protected the innocent while punishing the guilty would have been:

    1. Isolate the good money from the bad, and protect it. That means insuring all “demand money”- checking and savings, money markets, and FIXED insurance policies and annuities up to any amount of money. This is people’s personal money for daily expenses, and the money they chose not to put at risk. It is also the money businesses need to be solvent and meet payroll and daily expenses.

    2. After that’s done, just let the banks fail that will fail. That means the shareholders get stiffed, but so what. Somebody has to pay, so better them than the taxpayers.

    3. It also would mean no attempts to “cram down” mortgages or help homedebtors in over their heads to avoid foreclosure. Why even try to help people whose minimum payments will still be equal to their monthly takehome pay when you are making NO attempt to help people who are losing their houses for honest reasons like job loss and medical bills? What makes someone who borrowed 5X his income on an IO or pay option loan better than someone who lost a job?

    We can’t save everybody and everything, but that’s just what all these interventions are trying to do, at unlimited cost. Now that the basic principal involved- that the innocent should not be responsible for the crimes of the guilty- has been violated, there’s no end to it. We will keep on bailing until we no longer have the wherewithal to meet our public debt service.

    Then what?

    Who will bail out the U.S.Treasury?

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  23. Laura,

    I agree with #1 and #3. The problem with #2 is that it will mean almost all banks will be unable to issue equity and debt and cause many more bank failures than otherwise because potential investors won’t know if they are a good or bad bank.

    Also look at what effect the LEH bankruptcy had on the global financial system. BAC & C are significantly larger. Can you imagine trying to unwind a $2T balance sheet in any sort of orderly manner? Its impossible over days, weeks or months. Our economy can’t afford to have BAC & C fail in a disorderly fashion like LEH. It would be financial armageddon.

    And don’t worry, so far the government’s efforts to “help” homeowners over there head have been ineffectual because lawmakers and the media are operating under the assumption that they are otherwise good people who have fallen on hard times. With regard to foreclosures this is actually not the scenario the majority of the time: its people who committed fraud (no doc loans) or investors/flippers. These make up the majority of foreclosures and its not a popular populist cause. Look for home prices to continue circling the drain over the next few years as the government gives Advil for the flu.

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  24. Oh to answer your last question…China. Or so we better hope.

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  25. Bob, I disagree with you when you say:

    “….the media are operating under the assumption that they are otherwise good people who have fallen on hard times. With regard to foreclosures this is actually not the scenario the majority of the time: its people who committed fraud (no doc loans) or investors/flippers.”

    My experiences are anecdotal from working at a firm that has a foreclosure dept ….. but there are significant numbers of financially sophisticated persons who ‘liberated’ the equity in their home in order to achieve financial freedom.

    Excuse me, I mean hocked the house and spent extravagantly, ignorantly believing they could just refi again before the ARM reset. Which was often successful between the years 2000-2007. However, now these persons owe more than they afford to repay! Not all are predicated on fraud. Banks were giving loans with DTI’s of 45/45! Toss in other debt like credit cards, car notes, (child support), and god knows what else and you have a recipe for disaster. I just don’t think you’re blaming enough people. It takes more than flippers/fraudsters to take down major banks. This type of financial mess goes straight to the core of American society and it’s habitual, societal and culturally ingrained overspending. Countrywide and Indymac bank couldn’t have existed but for the willingness of Americans to borrow fantastic amounts of money with little ability to repay. How long do you think Countrywide would have survived in Japan?

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  26. China’s not going to save us now.

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  27. We all know who is going to save us.

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  28. And don’t forget, homedelete, that the layoff engine is starting to really get revved up. While, percentage wise, the foreclosures in NV, CA, AZ, and FL easily outstrip the rest combined, the 20%’ers that are barely making ends meet will topple if any household wage-earner gets laid off. Will it happen? Let’s see, around here we have recent announcements by Motorola, University of Chicago Hospitals, Midway Games, Tribune and Sun Times (rumored to be going down fast), City of Chicago, CDW, Lincoln Park Zoo, Field Museum, Office Depot, etc, etc. It’s hard to believe there aren’t alot more coming down the pike, which has to effect housing market stability, or lack thereof.

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  29. desteve,

    Lets not forget about everyone’s favorite whipping boy these days–the financial services industry. Its tough to see how tony LP property values will hold up if a lot of 200k+ jobs start getting axed. Theres going to be a big contraction in the financial services industry this year.

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  30. Bob,

    Yeah but in Chicago we only have significant operations, of JP Morgan Chase, Bank of America, Northern Trust, Merrill Lynch, US Bank, Charter One and Fifth Third……

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  31. Oh, and I forgot Shiticorp

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