By Mary Morrison
November 3, 2011
The Chicago-area homeownership rate edged lower in the third quarter, a trend likely to continue as more people lose their homes to foreclosure and others either can’t get a mortgage or are afraid of buying.
The percentage of local homes occupied by their owners fell to 68.2% in the quarter, down from 68.4% in the second quarter and 68.5% a year earlier, according to data released Wednesday by the U.S. Census Bureau.
The ownership rate has declined from the pre-bust peak of 71.2% in 2006 but is still well above the mid-60% levels of the 1990s.
“We expect to see that rate inch downward as people make the choice to not own or because people aren’t able to own,” said Geoff Smith, executive director of the Institute for Housing Studies at DePaul University.
Many would-be buyers are no longer able to qualify for a mortgage under today’s tough lending standards, while others, fearing home prices have further to fall, are renting for the time being. And many owners continue to lose their homes through foreclosure, depressing the rate further.
Illinois saw 32,297 foreclosure-related filings in the third quarter, representing one in every 164 properties in the state — ninth-highest nationally, according to Irvine, Calif.-based RealtyTrac Inc. Though foreclosure activity decreased 32.4% compared with the third quarter of 2010, it is because of processing delays and will likely begin to increase again, the company said.
Chicago homeownership rates remain higher than the national rate, which declined slightly to 66.3% in the third quarter from 66.9% a year earlier. Chicago and the Midwest typically have had higher ownership rates, with Chicago “more affordable for homeownership than some of the other major cities,” Mr. Smith said.
Homeownership rates jumped in the late 1990s and the early part of this decade as lending standards loosened, said Erik Hurst, professor of economics at the University of Chicago’s Booth School of Business. In particular, ownership rates among younger and lower-income people climbed — a trend that will likely begin to reverse.
A drop in homeownership in low-income neighborhoods is of particular concern because as more people lose their homes, more properties sit vacant and lose value, said Tom Feltner, vice-president of Chicago-based Woodstock Institute.
That loss of value in such properties erodes consumer confidence in ownership, he said.
“People who may be on the fence thinking about going from being renters to owners are thinking twice because they see properties sitting on the market for long time,” Mr. Feltner said.
Getting people back into those vacant properties should be a priority, he said. “That’s what will ultimately preserve value and make sure there’s some confidence in choosing homeownership,” he said.
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