Market Conditions: Nearly 2 Years of Shadow Inventory in the Chicagoland Area
I’ve been saying for awhile that I am seeing more short sales appearing. Too many people are underwater, even in the best neighborhoods of Chicago.
The Tribune discusses the large shadow inventory hanging over the market and how it means prices will continue to go lower.
In the eight-county Chicago area, 19 percent of mortgages — representing nearly 1 in 5 residential properties with a loan — are delinquent by at least one month, helping create an inventory of almost 204,000 homes at risk of reverting back to lenders, according to data provided to the Chicago Tribune by John Burns Real Estate Consulting in Irvine, Calif. That “shadow inventory,” as experts define distressed homes not yet put up for sale, is the largest in absolute terms for any metropolitan area in the country.
Based on its calculations, the firm believes that 80 percent of those homeowners eventually will lose their property, either through foreclosure or a short sale, in which the lender permits the home to be sold for less than the value of the loan.
For Cook, DeKalb, DuPage, Grundy, Kane, Kendall, McHenry and Will counties, the shadow inventory number translates to 22 months of distressed housing supply. The combined shadow inventory for Lake County and Kenosha County, Wis., where the delinquency rate is 18.4 percent, is more than 22,000 homes, or a 23-month supply.
“A fifth of people (in the Chicago area) aren’t paying their mortgage,” said Wayne Yamano, a vice president at John Burns. “Next year is when you’re going to have the most competition in the market and the proportion of distressed sales will be the highest.”
The Tribune provides some specific examples of distress in certain zip codes.
•In Evanston’s 60202 ZIP code, for example, only 0.55 percent of homes were foreclosed upon and reclaimed by lenders in June. However, almost 7 percent of mortgages were at least 90 days delinquent, putting the future of those homes at risk.
•In Chicago’s 60611 ZIP code, part of Chicago’s affluent Streeterville and Gold Coast neighborhood, only 0.52 percent of properties were bank-owned in June, but 5.31 percent of homeowners hadn’t paid their mortgages for 90 days.
And what about all those homeowners who want to sell and are “waiting” for the market to improve (which many are assuming will be “next spring” now)?
Some real estate agents say they’re seeing an increase in the number of financially strapped homeowners interested in listing their home as a short sale. They’re also fielding questions from traditional sellers who held their homes off the market this year with the expectation that their home will fetch a better price in 2011.
“I’m not sure that’s going to happen,” said Mary Ann Manna, an agent at American National Real Estate in West Chicago. “I know what’s out there and I know the pipeline is pretty full, and banks aren’t even putting all the properties they have on (the market). This is not over.”
More mortgage distress in the air [Chicago Tribune, Mary Ellen Podmolik, September 30, 2010]
