We’ve been chattering for awhile about the foreclosures and short sales in the South Loop.
The Chicago Journal reports that foreclosures have jumped 54% in the South Loop in the first six months of 2010.
When Mohammad Valadan first starting hearing about the South Loop in the media several years ago, it was described as a rapidly expanding neighborhood. In short order he decided that residential real estate in the area had lots of upside for someone, like him, looking for an investment opportunity.
On Aug. 7, 2006, he and his wife took out a $118,320 mortgage to purchase a unit in the building at 1620 S. Michigan Ave., a new construction condominium tower that now contains 249 residences. The idea was to rent out the unit, earning a bit of income each month.
“It was growing and everybody was talking about it,” Valadan said of the South Loop. “I bought and a lot of my friends bought.”
Valadan’s was the sixth foreclosure suit to hit a unit owner in 1620 S. Michigan this year, Circuit Court of Cook County records show. The seventh, filed on May 16, foreclosed on a mortgage taken out by Romelia Montoya, a Cicero resident who works in human resources. As was the ninth.
Montoya said she closed on two units in 1620 S. Michigan in 2007, hoping to eventually resell them. She soon had them rented out — one to a flight attendant, one to a relative. Another flight attendant, she said, later moved into the second unit as well. Even when both were occupied — the tenants were gone by October 2009 — the finances were difficult. The tenants’ combined rent of $2,400 didn’t cover her two mortgages, which ran to approximately $3,600 each month.
“The plan was to refinance and that didn’t happen, and my cash reserves went away,” Montoya said.
The economic crisis and struggles of the housing market blindsided her.
“For years you figured the bottom’s going to drop, the bottom’s going to drop and it never did … and then it dropped,” Montoya said.
Three South Loop buildings are mentioned in the article:
- 1620 S. Michigan: 14 foreclosure actions through June
- 1720 S. Michigan: 22 foreclosure actions through June
- River City, 800 S. Wells: 22 foreclosure actions through June
Here are some of the statistics, compiled by the Woodstock Institute, for the first 6 months of 2010:
- South Loop: up 54% to 131 foreclosure actions
- Near West Side: up 72% to 227 foreclosure actions
- Loop: up 120% to 132 foreclosure actions
- Citywide: up 38%
A lot of the buyers in the South Loop appear to have been investors.
The investor issue is evidenced by interviews with borrowers and by “second home riders” attached to mortgages.
Foreclosure filings also sometimes indicate borrowers who live far from Chicago. A New Jersey couple, for example, faces a foreclosure filed on Feb. 25 for a unit they purchased in 1720 S. Michigan.
Michael Murphy, who sells real estate in the South Loop for Prudential Rubloff, said some South Loop and West Loop developers sold heavily to investors who “thought they would close and they would think they could flip” the units.
“Now they’re stuck,” he said. “They can’t get rid of it. They can’t rent it.”
What comes next for the borrowers — and their units — depends on the person and circumstance.
Valadan said he wants to restart payments on his loan, pending a modification. But Montoya has determined that if her units aren’t sold to an investment group in a short sale — where the lender agrees to sell a unit for less than the balance due on the mortgage loan — she will give them up to the bank.
“I have no choice,” she said.
Several never made ANY mortgage payments on their properties. This is what I have been bringing up again and again with regard to the price declines continuing.
It is taking years for these properties to work their way through the system. Sometimes up to 4 years.
When will prices stop declining? When all of these properties are finally through the system.
A man who in September 2007 had taken out a loan valued at $284,800 for a condo in 1720 S. Michigan had paid off less than $300 on the principal by November 2009. Another buyer in the same building had not paid a single cent toward his $326,619 mortgage 13 months after the mortgage was recorded.
Valadan, who said he has hired an assistant to bargain with his lender, is still hoping for the best. In spite of the problems he has experienced with his South Loop unit, the property remained, he said, “a good investment.”
I encourage everyone to read this article as there is a lot of good information in it and very few of the media outlets in Chicago are covering the housing market to this extent (and with this kind of detail.)
Yay for the Chicago Journal!
Foreclosure filings rise; Pace quickens on Near South, Near West sides [Chicago Journal, Micah Maidenburg, July 28, 2010]
