Market Conditions: Foreclosures Affecting All Parts of Chicago
The Chicago Tribune explored the growing foreclosure crisis in Chicago with a Sunday Tribune cover story showcasing the problem in both the south and north sides of the city.
As foreclosures soar to historic levels, the infection has spread beyond places of perennial concern, such as West Garfield Park and Englewood.
Condo ghost towns replete with granite and stainless steel have emerged on stretches of the North Side, leaving a pox of hollow buildings dotting the landscape.
“We’re kind of in an unprecedented moment,” said Philip Ashton, an assistant professor of urban planning at the University of Illinois at Chicago. “A lot of the research that is on the table relates to a completely different world.”
“Condos do present a different challenge, but it still is not at all at the same scale,” said Ellen Sahli, first deputy in Chicago’s Department of Community Development.
Not at the scale of neighborhoods such as Humboldt Park, where more than half of the loans issued in 2006 and 2007 qualified as subprime and unemployment hovered around 11 percent in 2007, according to city data. There, gangs often take over abandoned homes, peeling back the bowed plywood from the windows to store drugs and set up shop, residents say.
“When we first moved over here it was a nice, mixed neighborhood,” said Barbara Carter, who has lived on her block more than 20 years and has seen some of the neighborhood’s elderly lose their homes. “Now, it’s been so many shots [fired] at my house I ain’t got fingers to count.”
As we’ve chattered about here before, foreclosures are especially spiking in Rogers Park where there were simply too many condo conversions. With the current market downturn, the smaller developers can’t hold on and many are facing foreclosure.
What about those homebuyers who have already bought a unit in those buildings in trouble?
The half-empty Rogers Park condo building at 1633 W. Farwell Ave. shows the breadth of the foreclosure crisis in many different ways.
Miller’s building has 39 units—20 are vacant, foreclosed on after the builder couldn’t sell them. Rogers Park saw 288 foreclosures in 2008, a 157 percent increase from 2007. Eighty percent of those were condominiums.
Some builders estimate there is two years worth of housing stock for sale in Rogers Park thanks to overdevelopment and rapid, unregulated conversions.
Other areas seeing spikes include Lincoln Square, where foreclosures rose nearly 134 percent from last year; two-thirds were condo units.
Foreclosures spur neighborhood ghost towns [Chicago Tribune, Azam Ahmed and Darnell Little, Feb 22, 2009]
Deserted condo units test those who remain [Chicago Tribune, Feb 22, 2009]
In Washington Park, condo boom went bust [Chicago Tribune, Feb 22, 2009]
Vacant homes offer ominous view of Chicago Lawn [Chicago Tribune, Feb 22, 2009]
I think a rift is developing between “toxic” buildings and stable buildings.
many if not most buidlings completed subsequent to 2003 will end up being toxic due to the high level of speculators and iffy financing. There aren’t any long-time owners who have very small or even paid off mortgages. Just a couple foreclosures can create major problems for all the owners, from higher assessments as well as terrible comps in the buidling.
on the other hand, you’ll have more established buildings with lots of long term owners and far fewer foreclosures. theses buidlings will suffer too, but nearly as much as toxic buildigns. for the sake of debate, i’m gonna say a standard condo building will see 20% price declines from peak to trough, whereas a toxic buidling will see 50% price declines.
bubbleboi,
As a not yet owner this only makes the toxic buildings more attractive if these declines become reality. It isn’t happening yet but we’ll see. Like we’ve been saying on here all along its pretty obvious who is going to win the stalemate when it is buyers vs sellers.
Many of these buildings, these recent conversions froom 2003 forward, in RP and elsewhere, will end up as rentals.
One question I was wondering is, where the hell are all these people living now? NW Indiana? The burbs?
Or were they all just idiots who bought multiple houses?
All of the above:
My neighbor (over heloc’d neighbor) lives in IN;
Plenty of people have moved to the ‘burbs
and of course the builders built too many houses. Way to many houses.
“One question I was wondering is, where the hell are all these people living now? NW Indiana? The burbs? Or were they all just idiots who bought multiple houses?”
By how much can an HOA legally increase dues to make up for people not paying? I am assuming 5-10% max but in a building like 345 N LaSalle or 33 W Ontario…..
The Rogers Park conversions need to revert back to rentals. Years ago when these conversions started happening I was wondering why someone would want to pay $250,000 and up for an old apartment that was renting for about $800 a month. A few cosmetic fixups, which were all that was done in most conversions, are not enough to make this a worthwhile purchase. What happens when the century-old boiler need to be replaced? With few exceptions, I doubt these conversions would have ever happened if everyone weren’t so blinded by greed during the bubble.
I can imagine condo boards are allowed to increase assessments by any amount necessary to cover shortfalls.
Rogers Park (in the areas of the massive gut re-habbing of courtyard apartments) is a ghost town! Absolutely insane how nothing is up there right now!
“By how much can an HOA legally increase dues to make up for people not paying? I am assuming 5-10% max”
Someone has to pay the bills whether they’re up 2% or 200%. That’s going to be part of the problem for high foreclosure buildings–the remaining owners will have to pay much higher assessments to cover the vacant units’ shares. Yes, the overall costs go down, but the doorman gets paid the same and outdoor maintenance costs the same, insurance might actually go up, etc., etc.
Remember, a foreclosed unit can only accrue 6 months of assessment arrearage; so if the unit is vacant for 12 months, the rest of the association gets to make up the shortfall.
I bet some of these foreclosure-stressed buildings will do away with doormen — it’s one of the few ways to significantly reduce expenses without degradiing the physical infrastructure.
“I bet some of these foreclosure-stressed buildings will do away with doormen”
I’d be shocked if they didn’t. But, in the newest buildings, they’ll probably have to wait until the developer turns over the building–with a large deficit.
I looked at many of these Rogers Park conversions to buy during the bubble years, and made low ball offers on 4, which were all rejected. I’m now very grateful that they were, even though I wasn’t at the time.
In the case of the rehabs, the old boilers were taken out along with everything else, and charming old apartments were destroyed- gutted and clean-walled to death, with forced-air furnaces installed. Frankly, I wish they’d just left the old boilers and had done a “soft” rehab of just the kitchens and baths, instead. You can replace the boiler with a new, super-efficient one for about $20K- I know, because I’ve priced them for 40 unit buildings. But once the place is gutted and fitted with ductwork, you’ll never recover the beauty, or inherent rightness, of the old building.
The units are usually outrageously overpriced relative to comparable rentals, and every unit I viewed that was halfway in my price range was steeply inferior to my beautiful old $850 rental, which includes radiant heat! Why should I pay $1400 a month inclusive of mortgage, taxes, heat, assessments and insurance, to take a comedown in my lifestyle AND be on the hook for liabilities left behind by other owners, such as unpaid assessments on foreclosed units? Just to say I “own” something? Yes, I like ownership, but I want it to be real ownership, not perpetual high rent and unlimited liability, with no real equity, ever. At the rent I now pay, I can save mucho bucks for the place I really want, for downpayment and improvements, while living very well in a really beautiful and well-kept old apartment, which is in much better condition mechanically and cosmetically than many of the condos I viewed.
The silver lining is that, while many lovely old courtyards were destroyed by tasteless de-habs, a number of other, really bad buildings got cleared and rehabilitated. Some of these buildings were absolute slums and were the locus of crime and social problems. They are now completely rehabbed and if they do not succeed as condo buildings, they will supply good rentals, such as 1200 W Pratt, a building I used to call 911 on practically every other night, but which was converted to laughably overpriced condos and is now a fine rental with lovely tenants, mostly young single people.
Newer (built or converted) buildings with inexperienced condo boards, no decent reserves built up, hardly any owners with appreciable equity, serial flippers and investors among the ranks, dubious quality rehab work or construction – yikes!
Great discussion, especially Laura’s as so many of my questions regarding what happens when a building goes belly up in regards to foreclosure have been answered. I too am currently a renter in a beautiful and tastefully done, newly restored 1880’s warehouse and I love being here….rent is a bit high, but all my ‘must have items’ are covered here, so I can’t whine too much. I also walk downtown to work with no need for the abundant public transportation available all around me. One question though, if a newly converted loft building does not completely sell out, and the vacant units remain on the market with no interest for a few years, does a condo board get formed to look over the building? My landlord is telling me that since 1/3 of the building is unsold, there is no board to regulate the bylaws here but he still is paying a mid-range assessment monthly. The residents here have had a few ‘issues’ regarding maintenance and they are told because it is not board run that it is difficult to get the developer to cave in and correct the issues presented to him. We do have a rather inexperienced “building manager” who is unable to address correctly the situations brought up to her…so what happens now when there is no board to oversee the building? Do we just have to live with the problems and wait until 100% of the units are sold and a condo board is formed?
Westloopelo:
Some others have addressed the issue of the board before.
The board must be formed if 75% of the units are sold OR within 3 years of closings. So- there will be a board- eventually.
Housing Prices Continue to Plunge
“but anyone who thinks that housing prices are about to stop falling is deluding themselves. Anyone who thinks that there will be a big bounce back after the declines stop is just plain being silly.”
http://biz.yahoo.com/zacks/090224/17670.html?.v=1