Market Conditions: More Chicago Area Homeowners Are Underwater
Zillow is reporting that 46% of single family homes with a mortgage in the Chicago area (not only the city) were underwater in the third quarter.
This is up 9% from the second quarter and also up from the third quarter of 2010.
From the Chicago Tribune:
“I didn’t think this was a particularly bad housing report,” said Stan Humphries, Zillow’s chief economist. “We are much closer to the end of the housing recession than the beginning. I still think of Chicago being more of an average case of housing recession. It’s nowhere in the league of Phoenix and Vegas.”
Zillow’s report also showed that 43.4 percent of all homes sold in the Chicago area in the third quarter sold for a loss, compared to 34.4 percent nationally.
But the pricing pain was worse in some communities more than others. For instance, 64 percent of Antioch’s homes sold for a loss, compared with 30 percent in Downers Grove, and 50 percent in Lansing. Within the city of Chicago, 42 percent of residential properties sold for a loss.
Zillow also found that third-quarter home values in the Chicago area were down 9 percent year-over-year, to a level last seen in December 2000. That’s a worse reading than the most recent S&P/Case-Shiller home price index, which pegged the year-over-year price decline at 5.8 percent in the Chicago area, based on August data.
A lot of homeowners are finding themselves without refinancing options as well.
Pete Schultz bought his Jefferson Park bungalow 20 years ago. When he went to refinance, he found out he was underwater.
“I was extremely surprised,” Schultz said. “When they came out and did the estimate, I thought it can’t be right.”
Schultz said refinancing would raise his monthly payments. He hopes the housing market improves and banks ease requirements for homeowners like him.
“I wish the bank would loosen up so I can refinance. I only make more money for them. I’m still a customer,” Schultz said. “It seems like the government is doing a lot for them and they’re not doing anything for anybody else.”
Is this the worst we’re going to see or is the bottom still to come?
Nearly half of all mortgages in Chicago area underwater [Chicago Tribune, Mary Ellen Podmolik, November 8, 2011]
Chicago homeowners apparently drowning in debt [ABC7Chicago.com, Leah Hope, November 8, 2011]
And this is keeping supply off the market. Not everyone wants to do a short sale and they don’t want to write a check at closing either. So, if they can stay put or rent it out for positive cash flow or even a small loss that’s what they do. I’m in the process of updating my inventory numbers and they are very low. This is also why the % distressed sales is so high – 44% in October: http://www.chicagonow.com/getting-real/2011/11/october-another-weak-month-of-home-sales-in-chicago/
God save us from the “housing economist”. Does their “nearing-the-bottom” consensus factor a euro meltdown? Yep…Italian 10 year bonds hitting 7%. New acronym…MPC’s. Mortgage Paying Chumps.
OK – do you morons realize this article is BS? Zillow’s valuation for my home is off by at least 500k – so I can only imagine how “off” they are for other properties. I should start a site where I overvalue properties by several hundred k – then I could say that 100% of homeowners in chicago are “above water”. Ridiculous – but then again, very helpful for investors (hopefully the pussy-assed general pop – think HD, Bob, G – will be too scared to buy and will stay out of the game – less competition for the Clios of the world).
“Zillow’s report also showed that 43.4 percent of all homes sold in the Chicago area in the third quarter sold for a loss, compared to 34.4 percent nationally.”
Also, I hope you idiots realize that selling for a loss is not the same thing as being underwater. God damn – THIS is the reason education/college is so important. Most people out there are so stupid they don’t understand anything.
Clio, when something well in excess of 30% of all Chicago sales in the third quarter are distressed then I think it’s safe to say that a huge percentage is selling underwater. Granted the majority of these properties are under $200K.
Gary, even if the SALES are distressed, doesn’t mean that the value of the non-distressed properties are similar in price. Good God – did ANYONE here even go to high school?!!! If I go to happy hour and get a beer for 2 dollars – does that mean the value of a beer at the peninsula is also 2 dollars ?!!! According to your logic and the logic used in this article – YES. Now do you see how stupid the article is?
Knifecatchers abound. This mess will take years to unravel. Sellers will take losses for years to come? Will households bear these losses or will banks?
Clio, I was responding to this statement “Also, I hope you idiots realize that selling for a loss is not the same thing as being underwater.” You were talking about sales and in this case the people who sold at a loss were most likely also underwater.
So, does anyone else wonder how a guy (Pete Schultz) could have been in a house 20 years making payments on it, and be underwater? How many ARMs, HELOCs and cash-out re-fi’s have been done in the past 20 years?
He may have over paid 20 years ago and did no renovations in the same time period. If his home is comparable to the 100k crapshacks on the nw side then yes it’s possible but I imagine a lot of helocs instead.
I’m also wondering that and how “refinancing would raise his monthly payments. “
Honestly? Ok, I’ll bite: on what basis do you say that zillow is off by 500k? Based on your track record, you are the last person I’d take pricing advice from.
And save the “I’m richer than you” schtick, huh? Nobody gives a shit.
I did do a check of Zillow’s accuracy a while back and it’s pretty bad: http://www.chicagonow.com/getting-real/2011/10/zestimates-just-how-bad-are-zillows-home-price-estimates/
Maybe he has an interest only loan. In any event, I hate when they interview morons like this in these housing bust articles. If you bought your house in 1991, and you are underwater now, you have no one to blame but yourself. Period.
No doubt. If i were to sell today, it would be at a loss. But I’m not underwater and just refinanced. This is what happens when journalists pretend to understand statistics.
Nice new website.
Just wanted to comment on Zillow’s zestimtes – there is no rhyme or reason to them. Totally inaccurate.
I have found Zillow to be way off for my building because it counts parking spaces as units since they have separate deeds and tax pin ids. If you add in 200 parking spaces for 25-30K that’s going to lower the average price per square foots of the units. I’ve see parking spaces treated as units on Zillow and have emailed them to correct it to no avail. I don’t think there data is as accurate for high-rises and dense areas as it is for single family homes in the suburbs.
uhhh – no – just bc you sell at a loss does NOT mean you are underwater. Why assume this?
Ug, I saw a marketwatch article yesterday that estimated how much you would have lost if you took the 8k tax credit nonsense…
Interesting. I excluded high rises from my analysis of their accuracy because I figured those would be a cinch for them to get right. Maybe they’re even worse.
Wha? She was agree with you. WTF…
Earlier this year I took myself out of the market until 2013 and I’ve saved money and repaid student loans instead.
If I had paid mortgage principal instead, I would be flushing that money down the toilet. It feels great to be a renter these days
Zillow is a joke their zestimates are awful. Not god awful like homegain but still terrible. But I read another article somewhere earlier this AM showing at current rates it will take 10 yrs to get through current foreclosure glut at todays pace in IL. NY & MD/DC are above fifty years. Arizona & Nevada are far lower only a couple years but look at where their valuations are. There is absolutely no way we can have a nationwide housing recovery when it takes 5+ years to clear the backlog. Which I think is around 40 states.
Interesting Formerroscoevillager. Would you happen to have a link to that article?
+1
+1
Indeed. This idiot, Mr Schultz, embodies the bubble for me. He wants to RAISE his payment with a lower rate!? Yeah, he’s trying to squeeze one last drop of hard earned “equity” out of his dwelling. Will we be surprised when one day he is in foreclosure and the evil bank is throwing him out of his 25 year house??? Idiot.
I call BS on the 50 years for NY number.
Don’t forget the value of your second tier law degree is also declining in this market. You are simply paying principal on a different declining asset value. You just don’t realize it.
The only thing I can possible think of is he has several loans at different rates that he wants to consolidate. Which even though is monthly payment might go up, the overall interest he saves would be worth it? (is that mathematically possible?)
We should also keep in mind that we are reading a quote of Mr Schultz, so someething could have been omitted, augmented, or misquoted between the interview and press time.
“Schultz said refinancing would raise his monthly payments. He hopes the housing market improves and banks ease requirements for homeowners like him.”
well moron if you didn’t use your house as an ATM, or do a “cash out” refinance, you wouldn’t be having this problem!
Man they really do find the stupidest people for these articles, live beyond your means, pay up! Its that simple.
http://www.usatoday.com/money/economy/housing/story/2011-11-07/foreclosure-pipeline/51126600/1
57 years chucky. thats at least two generations worth..
based on 2 unsolicited offers I have received in the past year, moron.
Zillow? Seriously?
I don’t doubt that someone wrote that. I just don’t believe it’s true. All stats are lies.
Bob – you are a complete and total moron if you believe that. I will actually buy you a plane ticket to new york and put u up at a hotel if you go out to times square and spout your nonsense about taking 50 years to go through the housing inventory in New York. If that was the case, prices would be low – have you ever looked at prices in New York. God – you are dumber than a monkey’s butt!!!
Its based off the denominator of current processing in pipeline. Which was slowed dramatically by govt intervention. Which means true price discovery will be prolonged for quite some time, explaining their high valuations today you genius. Clio you are too stupid to ser you reinforced my point.
Chuk you can have a nihilist take on all the stats it just means your opinion is anecdotal, and hence worthless to me at least.
Your insults just show your ignorance of my situation.
Geez, why the attack? That stat is meaningless and absurd. It’s like people that point to year over year increases in sales after dough for dumps ended. Makes a good headline, but it is MEANINGLESS. Just like your 50 year foreclosure stat. Garbage. Stop reading articles and use your own head. I’m sure your own common sense (and mine) is more accurate than any shitty article in USA today. I actually agree with most of what you say about the RE market, not sure why you think I am on such a different page.
Areas of the city that gentrified during the 90’s and 2000’s seem to have less inventory because there are more underwater homeowners, whereas established suburbs or city neighborhoods with more long term owners seem to have a relatively healthier mix of properties for sale. Relative of course, because inventory is way down in nearly every area.
I haven’t found Zillow (or other Automated Valuation Models) to be remotely accurate in densely populated areas. Their algorithm simply can’t account for the differences that going two or three blocks makes in home values in some parts of the city. For example, condo on Astor is comped against condo on Clark street. Close but worlds apart. Condos in the heart of Andersonville comped with stuff East of Broadway. Totally different hood. It seems to be reasonably accurate in cookie cutter suburbs though.
The other issue is that if there are a lot of distressed sales, it brings down the value of non distressed properties. While distressed sales should certainly be taken into consideration, it is faulty to assume that distressed sales are solid comps for non-distressed sellers and buyers.
Housing is not a commodity and the nuances between different properties make it nearly impossible to automate valuation.
Sounds about right.
New York Times article which mentions the bubble craziness
“One evening in 2006 comes to mind. My sister-in-law was thinking of moving to Las Vegas, and a real estate agent told me about an open house for a new Toll Brothers community. This wasn’t a come-by-for-cookies type of open house; it was held at a Las Vegas hotel ballroom. I arrived to find a line that led down a flight of stairs and out of the front door. Before I got to the front of the line, they stopped admitting people. Then people rushed the door, like it was a rock concert. ”
rest of article here
http://www.nytimes.com/2011/11/09/business/how-a-financial-pro-lost-his-house.html?hp=&pagewanted=all
shesh
hence the UG, looking for it but cant find it…
Not an attack. The stat just shows that some states are absolutely not dealing with this problem. Illinois at 10 years backlog appears to be among them. Why would any non-investor buy when this issue remains looming??
I’m pretty sure I’m underwater on my student loans. I do, however have equity in the house only because I’m a contrarian.
FOUND IT
http://www.marketwatch.com/story/the-great-26-billion-real-estate-swindle-2011-11-08
Maybe if the issue wasn’t looming, prices would be higher? When everything is rosy, it’s a terrible time to buy. Not saying this is THE best time to buy (I think 1-2 years will be), but the more negatives there are in the market, the lower prices are. Of course the market is not 100% efficient, but people are not completely oblivious to the foreclosure problem, and little/some/all of that is factored in. Take away that issue, and you are taking away one pressure on pricing.
The issue with the foreclosure is that nobody really knows the extent of the mortgage problem. Every reporting entity give different numbers and there is no one authority to coordinate it all. So on the one had the analysts try to collect and aggregate the data and then each analyst comes to their own conclusion.
Underwater loans are the huge problem going forward. It’s uncertain how many of these will be walkaways or future foreclosures. Life happens, people move & such. People won’t continue paying on their underwater mortgages forever unless they have to but a lot of these people in their 40’s with 25 years left on their refi can’t/won’t be paying $2,000 a month mortgages until they retire, it’s just not going to happen, and by the time they’ve paid off enough principal so they’re not underwater, only god knows what the future holds. My cousin calls me on a monthly basis looking for a way, any way, to get out from under his mortgage. He put down 10%, bought in 2006, and his house in NW suburban cook county is worth nearly half of what he paid. He can afford the mortgage but he’s 48 years old, is paying $2,000 a month and he knows he can’t keep that up forever. There are just too many of these types out there, too much uncertainty, it’s nearly impossible to factor this into any equation. That’s why I joke with you about your ‘priced in argument’ because everything is priced in, until it isn’t.
The thing is, I am not even saying its correctly priced in. Just that pricing isn’t oblivious to it. People could be underestimating or even overestimating (albeit not likely) the issue in their pricing. The point is, you don’t need to process every single foreclosure to have them influence pricing. I repeat, I am not claiming that things are 100% accurately priced in. I am certain they are not. I am just saying that current pricing is not based exclusively on today’s environment. If you wait for the environment to completely improve, I am certain that the market will price that in in advance. Things were rosy in 2006/7….
how many people bought a place in 2004/5/6/7/8 as a percentage of total homeowners? anyone able to find that stat?
All JMM has is insults. He’s already been exposed for the bloviating fool he is.
Thanks for the link chichow. Multiply that by 50 states (and now it seems the world), and you get a sense of what happened… and is still happening.
I remember sitting at a salesperson’s desk at Loeber Motors in 2006, ready to write a *check* for a car; I’ve purchased my cars from them every few years, for many years… bread and butter client. Although I realize any new car is a poor financial decision, it’s my cash and I can afford it. I presented my offer to the salesperson (about 7% less than the outrageous list price), and he gave me a WTF look and replied that the car is selling for about 10% *over* list. I said I didn’t think the manufacturer would allow dealers to do that… another WTF look and he pointed to a 20 something ‘wazzz-up’ brass logo D&G baseball hat’d playa who just bought the same model with an even bigger engine. ‘Seriously? I buy from you every few years and I’m being told to stay behind the rope because he’s willing to sign his name on any amount and I’m not?’ I ended up buying all they way up in Madison (honest guys and I’ve purchased another car from them), and a year ago I spotted the Loeber guy working a Macys… true story.
I actually agree chuck. Your estimate of when might be optimal is near my timeframe. I still don’t know what I want but I am already starting to see distressed sales that meet all my criteria except price or location but each month gets closer. And that point will be reached if I can hold a job to save up the downpayment.
Anecdotally things have been picking up on the hiring front the last 30 days big time.
Also eurozone meltdown could bring the best price+rate combination to those of us financing a large portion of our purchase in the near future. You really can’t lose with 15yr at 2.75%. And who knows 30yr could hit 3.375% with points buydown in near future.
I have to agree Zillow is pretty off too.
and, how many bought with crappy option ARMs or whatever that are resetting now, like this article indicates?
http://www.credit.com/blog/2011/11/expert-the-double-dip-housing-recession-has-begun/
is there a latest revision to that Credit Suisse graph that shows all the various mortgage types that will be resetting in the future?
Bob, why are you going to buy a condo? Why don’t you wait for Miss Beautiful Anglo-Teutonic to latch on to you and then buy a SFH and have kids?
Good to hear on employment and hiring, curious what’s the source?
I haven’t checked in a while but a year ago they were way off. I had the tax pin ids of units and parking spaces, including my own, and they had my parking spaces listed as units. One of their competitors does this to. Who really uses zillow as a guide. Don’t most people get a realtor who can pull more detailed and specific comps?
Agree. No bargains here in NYC or suburbs. You could go all the way out in Brooklyn and Queens and not find anything. Practically the whole city has gentrified. It’s all pretty much nice and liveable. If I happen upon an open house when I’m in Queens, I’ll stop in to take a look, but all I’ve seen are inelegant floorplans, astronomically high assessments and stinky buildings. The inventory here is mostly co-ops too. There were some new construction condos which did not sell – you tend to see them in Williamsburg and Greenpoint, but the developers just turned them rental and are sitting pretty. There are some foreclosures here and there in Jamaica or the Rockaways, but they are still expensive and crappy.
I haven’t been following the Upstate market because it might as well be a different country, but I’d assume places like North Tonawanda aren’t doing so well and maybe that’s what skews the distressed numbers higher for NY.
The problem is that many of these properties are sub-par. I’ve been looking for good foreclosures an there is not a lot of great product out there. So much of it is in deteriorating neighborhoods on the south side. Show me a great foreclosure in RN, LP, GC, Evanston, etc… They are few and far between. Frankly, those go so quick they seem like inside jobs among friends at banks.
Studios in Fort Greene, Brooklyn are going for around 250K at the moment. This is a neighborhood where they couldn’t give them away for 30K in the mid-nineties and you had to run from the subway to your apartment if you got home late at night.
Safety and amenities have greatly improved, but it’s still an inconvenient commute to Manhattan, underserved by basic services and has a high riff raff factor. It’s the type of place where you could be living next to Section 8 and a French Patisserie with $5 lattes, but try to find a supermarket or a dry cleaner.
…and how many of those payments do you think he made on that car?
I don’t like this new format – it is too easy for people to ignore my posts.
USA Today says 2.1 million in foreclosure or seriously delinquent. Calculated Risk says 4.1 million. Big difference. Wonder why?
http://www.calculatedriskblog.com/2011/11/housing-reo-and-mortgage-delinquencies.html
I think the message of this article is that court intervention and intervention by state AGs is slowing down the foreclosure process harming us all and helping very few. California started out as one of the worst states; however, because foreclosures don’t go through the court system, the foreclosure supply is much lower and buyers have a sense of where the bottom is. As I have been saying for years, rip the bandaid off — no government intervention, let foreclosures happen, let banks go after recourse loans if they so choose, but don’t tighten lending to an unreasonable degree and let prices fall but buyers will come back to the market.
Bob likes the olive skinned mediterranean Club Med women too; he’s got nothing against southern europe except for their debt.
““I didn’t think this was a particularly bad housing report,” said Stan Humphries, Zillow’s chief economist.”
Zillow has a chief economist???
If you look at his bio, Dr. Stan seems to have v limited training in economics. A number of tech companies have chief economists these days (generally much much more qualified than Dr. Stan). Google prob led the trend.
http://www.zillow.com/corp/WhoWeAre.htm
I posted the October Chicago & selected neighborhood sales data in the end of the Sept Market Conditions thread. You can get to ‘Market Conditions’ category by selecting ‘Housing Market’ at the top of the page. Or, go here
http://cribchatter.com/2011/10/market-conditions-september-sales-rebound-yoy-but-still-under-2008-and-2009/#comment-200578
Hmmm. Another benefit. But seriously, for once I agree with you. It’s very hard to keep up with earlier threads.
I do like that when you select “notify me of followup comments via e-mail” it only sends you responses to your thread, not every comment that is posted to that listing
“If that was the case, prices would be low – have you ever looked at prices in New York. God – you are dumber than a monkey’s butt!!!”
It’s talking about NY State. “NY” doesn’t just mean the city. You might have heard about places like Buffalo, Syracuse, Albany- to name a few. You think it won’t take decades for prices to get back to bubble level there? Go and visit sometime.