Market Conditions: Polish Neighborhoods Feel Chicago Housing Bust
Tucked away in last weekend’s Chicago Tribune Magazine article about how more Polish immigrants are returning to Poland than are coming to Chicago, was this tidbit about how easy money and the housing boom is affecting the Polish immigrant neighborhoods.
But these days, the old Polish corridor that stretches along Milwaukee Avenue is looking a little frayed. Many of the Polish families who used to live in the tidy bungalows that line the residential streets have moved out to the suburbs. Others have gone back to Poland. The bungalows are still tidy, but now they are occupied by Mexicans. In the front windows, Our Lady of Czestochowa has been replaced by Our Lady of Guadalupe.
Anna Klocek, a real estate agent, knows these streets well and has a sharp eye for signs of transition.
“Look at all these suitcases on sale,” she says, indicating a sidewalk sale outside a shop on Milwaukee Avenue. “It means that Poles are leaving.
“And look over there,” she says, nodding toward a restaurant on the other side of the street. “It looks like they just remodeled, so probably they are planning to stay.”
She also has taken note of the unusual frequency of “for sale” signs on the residential streets, and the names on the mailboxes, which are mostly Polish.
This, she explains, is the Polish connection to the sub-prime mortgage crisis. Polish immigrants have a long tradition of home-buying—their way of staking a claim in the New World. So when offered a chance to buy a home for no money down and token payments for the first few years, it was hard for these immigrants to say no.
Now they are saying goodbye.
“It wasn’t a calculated move on their part,” says Klocek.
“They really wanted this American Dream. And the real estate agents were pushing them; the mortgage brokers were pushing them. Everybody was making money until the market collapsed.”
“So they have no equity in the house—they look at it as paying rent for 10 years; and they look at Poland, which is doing well, and they say, ‘Forget it, we’re not making it here, we’ll leave.’ Especially if one partner is not here legally,” she says.
Return Trip: Many Poles who once flocked to Chicago are going back to Poland. Life may be kinder there than here. [Chicago Tribune Magazine, Jan 18, 2009]
‘No doc’ and ‘no verification’ loans still required you to not commit fraud in relaying what was not documented and/or verified.
Before we weep for these innocent American Dream pursuers, let’s see some mortgage apps and tax returns.
G, i don’t thing anyone is weeping for them, at least not on this board.
client told me this morning that Harley Davidson is planning 1100 layoffs, announced this morning. nothing but bloated health care looks to be going up or even staying steady these days.
I hope nobody was surprised at HD. Wasn’t the HELOC-Harley connection obvious?
Those that read this story as some sort of validation for “scary people” (not ethnically, but economically) snapping up loans without regard for the realities misses the point of the article.
I read this as yet another factor (reverse-immigration) I had not thought of which is depressing the market.
Immigrants, legal or otherwise, generally obey the law and pay their bills (cash is much more the operative way), so the story of these loans plays as more tragic than most to me.
Imagine being new in a country, getting along fine, then having something as amazing as a home placed in your lap. As the article eluded to, the idea of home-ownership is a strong component of the desire to immigrate here in the first place. Moving that dream forward by 10-15 years had to be irresistible.
Just Tragic!
Before you start yelling at me about responsibility and such, which I, personally, have been, and is all any of us can control, our own actions, take a moment to reflect.
If so many the english-speaking, American public STILL have no idea what happened to the economy, the housing market or how to go about buying a house, imagine how much more obfuscatious the process must have been for the immigrant population. The intent of these buyers (for the most part) could not have been to “get more than I can afford”, but instead, let me move my dream forward by a few years.
The problem, as with all this mess, was predatory lending.
I can’t imagine there was any way to prepare for the xenogenetic rates that kicked in after the first 6-12 months of signing on the line.
Great article, I totally missed it. That’s why I love this site. Thanks for the great read.
How about a company more closely related to housing?
Williams-Sonoma is cutting 18% of it’s workforce.
1400 workers at the end of this month.
I was recently scrolling on realtor web-site listings for Chicago’s predominantly ethnic Eastern European northwest side neighborhoods, and was stunned by the number of “for sale” listings. There seems to be a disproportionate number of homes for sale in the “Polish Belt” neighborhoods than in the otherwise working class and middle class neighborhoods, Belmont-Cragin, Avondale, etc. Prices also appeared particularly depressed.
I was listening to WBEZ yesterday morning; guest speaker noted that a disproportionate number of foreclosures and mortgage fraud cases occurred with immigrant (illegal immigrant?) home purchasers, who are now defaulting and probably returning home. (Here I thought that subprime mortgages had been targeted at working class black home purchasers.)
Many of the now unsaleable “McMansion” infill single-family houses were also developed and constructed by Eastern European “pick-up truck” contractors, who often didn’t follow zoning or building code requirements, didn’t obtain proper permits, and didn’t properly detail or construct the building exterior walls (exterior concrete block problem endemic to Chicago). Beyond the granite and SS appliances, these houses are often junk.
bi-owner, you’re oversimplifying by saying the problem with this whole mess was predatory lending. it was more a perfect storm of ideas from grassroots (no personal responsibility) to corporation (making $$ pushing paper) to gov (guaranteeing FNM/FRE).
you can say why wouldn’t an immigrant want to speed up their american dream by 10-15 years by getting a no doc mortgage, but on the flip side you can say that banker was moving up his american dream by 10-15 years too by bringing in revenue for his company. While being a homeowner after immigrating certainly feels like the “worthier” American Dream compared to a banker buying a 2nd condo in MIA to retreat to, they are both American Dreams. You say “The intent of these buyers (for the most part) could not have been to ‘get more than I can afford'”. that is a huge generalization and most certainly incorrect in some ways.
Anna Klocek, a real estate agent, knows…”…the real estate agents were pushing them…”
More often then not it was members of their own community who pushed them into the subprime, ARM and OPtion-ARm loans. “Oh they must be polish/armenian/serbian so I can trust them” yeah right
Of note in the article, sections of milwaukee ave have been run down for years, well before the subprime. Lots of polish immigrants have been moving to the NW suburbs and SW suburbs like arl hts, elk grove, des plaines, mt prospect. Oh that’s right the trib doesn’t send reporters farther west than Harlem ave on the nw and sw side. nice fricken reporting, losers. I laugh while I watch your old media i.e. print media DIE
We are screwed.
“Of note in the article, sections of milwaukee ave have been run down for years, well before the subprime. Lots of polish immigrants have been moving to the NW suburbs and SW suburbs”
Yeah, I think they missed the point–it’s not so much that people are leaving, but that there are fewer coming to replace them. And the citation to the 500,000 Poles in UK & Ireland is dated–they’ve been going back to Poland in droves, too, esp. from Ireland where the economy has taken a much steeper drop (which will directly impact any future the Spire has).
My dad talked to relatives in Poland over xmas, and he mentioned this exchange, when asked how things were going here and he said, “not so good economically” and the response was “oh, in Poland things are never so good economically” (I think it might have been we always have economic troubles or problems rather than just not so good).
I gather that a lot of recent Irish immigrants (esp. illegal and in the NYC area) who arrived in the 80s are also going back to Ireland, and finding things dramatically changed – maybe less so since the crash.
Boo-hoo. Pay your bills or leave. Part of the “American Dream” and being an American is staying here to fight for the betterment of the country. Not abandoning ship when things go south.
“going back to Ireland, and finding things dramatically changed”
Dublin, at least, changed noticeably b/t ’01 and ’06. Largely in the number of non-Irish working **everywhere**. I understand that many, many of them have been leaving, as there is much less demand for workers.
Yeah, they went back expecting to be able to buy a huge house for nothing from their savings and to be able to get a low level service job, which were taken by non-European immigrants, who hadn’t been there when they left.
People were still leaving Poland until very recently, and may still be, because things are still bad there. I think they were both freaking out at the deterioration and not understanding how it could happen and why they could be affected. But no riots there yet, like in the Baltic states.
Let them go back – quite a few of them lacked papers anyway. The American dream isn’t about sucking money from a host country until there’s enough to return home.
I have a thoughts on a few posts.
ChiGuy, one of the “give-aways” to writing a short post in a comment section is oversimplification. Not dumbing down, just simplifying.
That said, i fully understand there are numerous reasons for the current housing crisis, some that extend back decades. However, the reason why there is no clear way out of the morass is deeply rooted in predatory lending.
The securitization of mortgages allowed companies with ZERO risk (as they planned to package the papers and sell them immediately) to seek out anyone they could find to take a home loan. This, as you well know, led to writing mortgage paper and selling securities, the largest job growth areas from late 1999 through mid-2006, all the while we were in a soft recession.
That kind of growth has never been experienced in any industry, especially housing-related, during rough economic times, or even through relatively stable times. The dot-com boom of the early to mid 1990’s and the post-war industrial boom of the early to mid 1950’s are the only instances such times have occurred.
So while some repeat the, “it’s everyone’s fault” mantra, I tend to lay a bit more at the feet of the authoritorian parties feet. When a kid at the grocery store knocks over a display of stacked cans, most people would not be mad at the child (the offender), but instead wonder where it’s parents (the authority figure) were while it happened.
The idea of owning a home is “the American Dream”. Those that try to sell the notion of owning 2 mansions, a condo on the beach, a jet and a stable of cars as “the American Dream” are simply misguided, or worse mendacious.
Zejas, the realtor, also shed light on a very important point; the “pushing” factor.
Many of these companies “hired” community leaders (so some of the burden falls on them as well) , at great salaries (+commission), to solicit or make introductions in their respective communities. This is well documented, with even some members of the clergy acting as proxies on behalf of the banks in some cases.
These innovative, intense, consistent and varying methods have to count for something, no?
Ireland = Gov. intervention at it’s worse.
step 1. give huge tax breaks to companies to bring jobs to ireland
step 2. build big factories and put a lot of foreigners to work
step 3. gov rakes in $$. commits new funds to “the ppl” in form of entitlement
step 4. bubble pops
step 5. foreigners get the f out of dodge b/c it’s easy
step 6. gov. is responsible for massive deficits from less than normal taxes from corp and overspending in good years.
step 7. factories are empty. gov. built housing for workers empty.
step 8. actual irish people screwed
biowner: my definition of the American Dream is the harder you work, the more $$ you can make. AMerica is the land of unlimited potential and payoff. If I work my ass off and go to Harvard Law and make 600K/year + bonus and buy another 3 houses, that is the AMerican Dream to me.
One problem w/ the Democrats is that they had the same sentiments as you saying that if you own a house, you are living the american dream, therefore they made it easier for low income people to buy houses “so they could realize the american dream”, even if these people would be better off renting. THese immigrants (and many americans) were living pipe dreams if they thought buying a house with 100% financing without having to save was the American Dream. The American Dream is all about hard work and the payoff that comes with it, whether $$, personal fulfillment, or whatever payoff means to that person.
/voted for BHO and Durbin. not a Re-thug-lican.
“Yeah, they went back expecting to be able to buy a huge house for nothing from their savings”
If they did that, post-2003, they hadn’t been talking to *anyone* in Ireland. We had a cab driver in ’06 with a ~800k Euro house (purchased for ~10% of that in ~’98). They might have had a reasonable expectation of getting a mortgage w/o a job, tho, b/c lending standards in Ireland and the UK were as bad as here.
“[jobs] taken by non-European immigrants”
Not non-european (altho some Canadians, Aussies and Kiwis); almost all eastern Euros–from the 21st c. admittees to the EU. Labor laws made it possible for them to work there, EasyJet and RyanAir made it really, really cheap (sub 20 euro r/ts) to get to Ireland and go home for visits whenever.
Yes, non-Europeans, there is a significant population of Bangladeshi and African immigrants in Ireland as well, especially considering it was 100% European until the 90s.
I still want to see some mortgage applications and tax returns.
Many signed their names to obvious fraud on one or the other (if they even bothered with the tax return.)
” therefore [Democrats] made it easier for low income people to buy houses “so they could realize the american dream”, even if these people would be better off renting.”
You’re falling for a (at best misleading) narrative with this. The CRA is NOT the source of the problem. There are no statistics to back it up. The problem was the BS underwriting of so many lenders and the support give the BS UW by the rating agencies. And a bunch of other stuff, too. But the contribution of CRA loans to the total housing-related losses is barely more than a rounding error–in other words, if CRA loans were the only problem, there would be no problem and if there were no CRA loans, we’d still have a HUGE problem.
As if only poor minorities lived beyond their means…
Or, is the argument that if only they had continued to live beyond their means then the rest of us could have lived within ours?
“there is a significant population of Bangladeshi and African immigrants in Ireland as well”
Depends upon what you mean by “significant”. And the South Asians are mostly Indian, rather than Bangladeshi, and predominately work in Tech–there are Indian companies that run call centers in Ireland for US customers. And “African” includes South Africans of European decent–the black African population of Ireland is not much in evidence, tho it is true that none has turned to some, mostly b/c only a madman would have gone to Ireland to look for work before the mid-90s.
In any case, Poles were by far the largest group:
From 2006
“Ten years ago there were almost no foreign workers in Ireland. Now there are about 243,000, more than eight percent of the total workforce, with the largest group, about 120,000, from Poland. Half of the 92,000 new jobs created in Ireland in 2005 were filled by immigrants.”
From this week (in an article titled “3,000 Poles leave Ireland every month”):
“We estimate that the number of Poles in Ireland, which was put at 316,000 last year, is now down to around 250,000,” [of course, that’s over 5,000 a month, but what do you expect from reporters?]
Forget Poland, Mexico is the one to watch….
Money has no political parties. Blaming republicans or democrats in the US or labour or conservatives in the UK or where ever in the world is a waste of time. This was a perfect storm of greed everywhere on the planet. Nevertheless, I’d really like to go off on a tanget about my hypothesis that 90% of all FB’s across the country vote democrat, but, I’ll keep that one to myself until I can get some better data to back it up.
“hypothesis that 90% of all FB’s across the country vote democrat”
All depends how you define “FB” and “vote democrat”. Construe things broadly or narrowly enough, you can prove anything, especially when it involves a non-verifiable variable (here, who they actually voted for). I could probably “demonstrate” that 90% of FBs didn’t vote (which is actually somewhat likely–tho 90% is too high), or thought that Jed Bartlett was the best candidate.
“I’ll keep that one to myself”
Oops.
90% of all FBs who complain about it to the media vote democrat. Those FBs who understand they played a role in digging their own hole are likely to embarassed or ashamed to run crying to the media.
Classic D party line: its not YOUR fault happened to you/you did something.
dems wanted low income people to be homeowners (I never said poor minorities, G) so they basically told fannie/freddie to lower their standards to accomodate. This was the problem. the result was the “greedy” bankers gave the lax lending standards to anyone. I only mention dems because it is osmething that the Repubs would have never have tried to do, since (historically) they forget about the lower class.
“the result was the “greedy” bankers gave the lax lending standards to anyone”
So, the CRA is responsible for bankers taking stupid risks. Got it.
Obviously Bob did not listen to Obama’s lecture to the country during his inaugural address.
“That we are in the midst of crisis is now well understood. Our nation is at war, against a far-reaching network of violence and hatred. Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age.”
“In reaffirming the greatness of our nation, we understand that greatness is never a given. It must be earned. Our journey has never been one of shortcuts or settling for less. It has not been the path for the faint-hearted — for those who prefer leisure over work, or seek only the pleasures of riches and fame. Rather, it has been the risk-takers, the doers, the makers of things — some celebrated but more often men and women obscure in their labor, who have carried us up the long, rugged path towards prosperity and freedom.”
“But those values upon which our success depends — hard work and honesty, courage and fair play, tolerance and curiosity, loyalty and patriotism — these things are old. These things are true. They have been the quiet force of progress throughout our history. What is demanded then is a return to these truths. What is required of us now is a new era of responsibility — a recognition, on the part of every American, that we have duties to ourselves, our nation, and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character, than giving our all to a difficult task.”
SteveA,
And when the KoolAid buzz wears off you will finally realize that noone can work miracles. Roubini is predicting 2.5T of bank and financial system losses now from this crisis. Should he be right will the taxpayers be willing to fund repeated multi-billion dollar bailouts?
‘Roubini is predicting 2.5T of bank and financial system losses now from this crisis. ”
You’re out of date Bob. He bumped it to $3.6T.
I think at this point, he’s (partially) working to stay out in front, because if he somehow ends up predicting something *less* bad than what actually happens, it will reflect (somewhat) negatively on his predictive abilities, where being (somewhat) wrong on the downside allows him to write a lot about how the worst was avoided.
Roubini is behind, he always has been too conservative. The losses will accelerate once Britain goes Iceland, mortgage cramdowns begin and credit card reform is passed.
anontfo: So, the CRA is responsible for bankers taking stupid risks. Got it.
That’s exactly what I’m saying. per Wikipedia:
“The Act [CRA] requires the appropriate federal financial supervisory agencies to encourage regulated financial institutions to meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation.
Therefore, the CRA required the gov. to “encourage” [read: force] banks to lend to their local community.
Because it was a federal program, it came along with implicit guarantees from the gov. that if the banks lend to an unworthy person, the gov. will pick up the slack. SO, why shouldn’t a banker take a stupid risk? They’re “encouraged” to by the government and since the gov. is encouraging it, they’ll pick up the tab as long as the bankers are following the rules…
/not defending bankers
On that note I love reading about the banks imploding. Just today in the WSJ there were two articles about that. One was saying that regional banks are “preparing for the worst” and another was saying that banks were failing so fast that regulators couldn’t keep up. “Theres no forewarning, they catch a cold and then they’re dead”. LOL. Stupid bankers wrecked this country with their debt-crack.
ChiGuy:
The actual CRA loans are (1) a rounding error in the whole mess and (2) performing better than non-CRA loans. Because the bankers extended lax UW beyond CRA loans is NOT due to the CRA; it’s due to the stupidity/greed (greed–for lack of a better word–is their job; not saying it’s an inherently bad thing, notwithstanding it’s deadly sin status) of the bankers and their customers and a raft of other things. CRA is a boogie man or a mcguffin depending on how you look at it. I’m not excusing FNMA/FHLMC; I’m not saying that there wasn’t Federal encouragement (which also came from the Bush admin, notwithstanding the contrary narrative being spun); I’m not saying that the CRA was a *good* idea.
I am saying that blaming the CRA is facile and doesn’t stand up to any real scrutiny; that it is dittohead nonsense; that it’s a fever dream, a conspiracy theory, not worthy of being repeated by serious people.
CRA was only a small part of it. Subprime is not CRA.
This whole mess was created by Wall Street greed which encouraged banks to make riskier loans because Wall Street was willing to purchase them. One of the first thing you learn working in the mortgage biz is that banks don’t make mortgages that make sense, they make mortgages that have a value on Wall Street. If Wall Street says they will pay 2 or 3 points for a stated income/no asset loans at 100% loan to value, a bank is going to make that loan regardless of how moronic it may be. Now Wall Street is saying they don’t want mortgages of any kind that aren’t Fannie/Freddie which is why even millionaire’s can’t get decent rates on Jumbo loans these days because all the lenders have to portfolio the loans since there is no market to speak of for non-conforming loans right now.
Until banks get back to actually lending and making underwriting decisions based on the individual merits of the borrower and property instead of blindly using FICO scores and rigid bullshit guidelines, we are going to continue to have these problems. This results in deadbeats getting loans because it fits in the box, but good credit borrowers often being denied great financing over technicalities that have nothing to do with credit risk. There are banks that would deny a certifiable millionaire a mortgage on a condo with 50% down just because the development has less than 10 units right now, but would lend money to a 660 FICO borrower with a 55% DTI and 5% down all day long without batting an eye.
In addition, all of the money flowing so easily led to a massive amount of speculation and mortgage fraud. I mean MASSIVE. This is the part that gets glossed over. All the Alt-A stuff is nothing but specuvestors and fraud. EVEYRONE and their grandmother decided to become a real estate investor/flipper. Probaly 60% of the foreclosures are investors and specuvestors. You have entire high rises in Miami that are completely empty because no one but investors bought units and I would guarantee that 90% of the mortgages claim to be primary residences.
Just look at all the stuff on this site anecdotal evidence on this site.
OK, back to the topic a little… I imagine many Poles would be going back because the dollar is so much stronger now, whatever they have saved here will allow them to buy a home in Poland more easily than even one year ago.
More generally, I imagine there might be a bit of “white flight” here. The more Mexicans come to Chicago, the easier it is for the whites (and the NE Asians) to leave, whether to the boring suburbs or back to the old country. At least this is what I’ve been hearing from some of the Koreans in Chicago.
Third point–someone mentioned that their Polish acquaintance said “things are never so good in Poland” economically. Partly this is a cultural bias. Poles (I am one) seldom talk good news. There is tendency to emphasize the negative. Objectively, though, Poland has been growing steadily for two decades now, last year 5% again, and so far predictions are that it’s the only country in Europe that looks to escape negative growth this year.
Jerry,
If only more whites were educated as to the per capita crime statistics, particularly violent crime statistics, perhaps this wouldn’t be happening. Mexicans only commit violent crimes at a 30% higher rate than whites, perhaps explainable by poverty/environment. Blacks, on the other hand, have a 350% higher per capita violent crime rate (thats 4.5x). The media won’t go near these stats as the media always kow tows to blacks even though they are not the largest minority in America anymore.
I feel a _lot_ safer around hispanics than blacks given knowledge of these statistics. Its too bad too many whites form their worldview from our media which is not objective at all and instead aims to shape societal norms and values. I am gleeful in the downfall of newspapers in America as they haven’t been reported hard facts in quite awhile now. J-school teaches people ideology above how to write.
ONLY a 30% higher rate? That’s one way to market a Mexican neighborhood.
And what about non-violent crimes?
BriBri,
I’ll have to dig up the stats on non-violent crimes. I don’t remember there being much difference from violent ones. But the damage and cost from property crimes can be covered by insurance.
And yeah ONLY 30% higher. I’d take any hispanic neighborhod over Englewood any day.
If immigration reverses housing prices are going to be hosed, many neighborhoods in chicago are solely dependent upon immigration, also the population of the city has generally been flat for many years if the population decreases there will be no support for housing prices in the city.
Not to mention the immigrants who pick up and leave are probably the motivated ones who work hard and want a life, the ones who stay are more likely to be satisfied with the govt handouts.