Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=105515
Story Retrieval Date: 3/7/2014 2:25:09 AM CST
One out of 410 Illinois homes went into foreclosure in October, a 24 percent jump over the previous month according to a report released Thursday by RealtyTrac Inc.
A total of 12,681 Illinois properties are in some stage of foreclosure, a 31 percent increase from the year-ago period. Foreclosure filings include default notices, auction sale notices and bank repossessions.
Cook County was hit the hardest with 6,885 property foreclosures filed during October. This is more than half of the total foreclosure for Illinois, which is ranked ninth among U.S. states with the highest foreclosure activity. Indiana is ranked fourteenth, Ohio tenth and Michigan seventh.
States in the Midwest, where the economies are largely manufacturing based, historically have higher foreclosure rates, said Pete Novak, executive vice president of the Greater Northwest Indiana Association of Realtors, which covers Lake, Porter, Newton and Jasper counties.
Economies once based on steel mills and the automotive industry lost momentum when the housing market came to a screeching halt, Novak explained.
During October, 815 properties received foreclosure notices in Lake County, Ind. In Illinois, another 990 were filed in Will County and 807 in DuPage County.
Foreclosed properties become comparisons for neighboring homes and drag those property values down as well. “People are afraid,” said Novak. “Foreclosed homes sell for less.”
Nationally, foreclosures rose 25 percent from October 2007. Foreclosure filings were reported for 279,561 U.S. properties—one in every 452 homes—last month. However, foreclosures in the United States rose only 5 percent from September due to new legislation to stem the tide of foreclosures in states like California.
“We’ve seen sharp declines in new foreclosure filings after legislation mandating delays to the foreclosure process was signed into law in several states,” said RealtyTrac chief executive officer James Saccacio in a statement. “Despite this, October marks the 34th consecutive month where U.S. foreclosure activity has increased compared to the prior year.”
Although foreclosures in California dropped by double digits for the second straight month in October, Saccacio is skeptical about the state’s new legislation.
“While the intention behind this legislation—to prevent more foreclosures—is admirable, without a more integrated approach that includes significant loan modifications, the net effect may be merely delaying inevitable foreclosures,” he said.
Although Illinois legislators have introduced similar legislation, the Chicago area is taking other steps to reduce foreclosures.
Brian Ortiz, a Realtor with RE/MAX in downtown Chicago, said his firm is working with clients on short sales, when homeowners are forced to sell their home for less than their outstanding mortgage. Through new agreements, homeowners and their Realtors talk with banks when they start having trouble with their mortgage. When a deal to sell the home is worked out with a bank , Realtors list the property and homeowners would have a better chance of purchasing a new home, Ortiz explained.
“If everyone is proactive on it, you can really work on avoiding a foreclosure…Banks are taking a loss but less of a loss than if they took full foreclosure,” he said.
Ortiz said banks have been receptive to short sales. The only downside is the two to three month turnaround time for these arrangements, he said. However, banks are hiring more people to address this concern, Ortiz added.
The John D. and Catherine T. MacArthur Foundation announced last month that the organization would invest $68 million in grants and low-interest loans to prevent foreclosures in Chicago neighborhoods.
The investment could reach up to 10,000 households and provide counseling to 6,000 borrowers. Through the MacArthur Foundation’s effort, the largest investment made by a private foundation to address the U.S. foreclosure crisis, foundation official said that 2,700 foreclosures could be prevented by 2010.
What will the housing market look like then?
According to Novak, the Indiana Realtor association executive, simple economics may predict the area’s housing foreclosure trends. “What we’ve seen for the last year is low demand and high supply of homes for sale,” he said. “Now there are fewer houses going up for sale, which is a good thing. There’s less to choose from, and we are meeting demand more appropriately.”
Novak said he believes we are nearing the bottom of the foreclosure crisis, with demand catching up to supply.
“When it does, housing is always a great investment,” he said. “It’s a vehicle that drives our economy and will in the future. But it always has its ups and downs.”
Ortiz, the Chicago Realtor, agreed, “I think hopefully if we can get through winter here during a quieter time, I think we will see a good clearing out.”