By Mary Ellen Podmolik
October 21, 2010
Chicago's once-hot neighborhoods are getting hammered by foreclosures.
In Chicago's Loop, for instance, 73 foreclosure filings were made during the three months ended Sept. 30. Combine that with filings made earlier in the year and foreclosures are up almost 77 percent from the first nine months of 2009, to 205 properties. The Near North, Near South and Near West sides, as well as Lincoln Park, also saw double-digit increases, according to a third-quarter foreclosure report scheduled to be released Thursday by the Woodstock Institute.
In fact, the 515 foreclosure filings recorded in Chicago's Near North Side during the first nine months of the year are the fourth-highest number for any neighborhood, behind Austin, Belmont-Cragin and West Ridge.
"This is an emerging issue in the city and it's something to keep track of," said Geoff Smith, senior vice president of Woodstock, a Chicago-based research and advocacy group. Foreclosures "are hitting more affluent people and some investors."
Many of the filings are in recently developed condominium buildings in which units were purchased by owner-occupants, as well as investors who bought units with small down payments and planned to flip them. Several years later, amid a change in the market, owners face higher carrying costs and are unable to refinance their mortgages because they owe more on the loans than the units are worth. As a result, units in many high-profile high-rises are being marketed as short sales.
"They were the hot thing to do, buy (a few), flip one, keep one and keep one in your portfolio," said Mario Greco, a Prudential Rubloff agent.
Of the 73 new foreclosure filings in the Loop, 16 were at River City, 800 S. Wells St.; nine at Century Tower, 182 W. Lake St.; and six were at Park Millennium, 222 N. Columbus Drive, the report found.
Meanwhile, buildings responsible for two-thirds of the filings on the Near South Side during the quarter included 1620 South Michigan Ave. with 12; Vision on State, 1255 S. State St., with 11; and 1720 South Michigan Ave., with eight filings.
"The reason (the South Loop) is getting crushed is it's only the South Loop in a good market," Greco said. "In a bad market, it's no man's land. In a good market, people assume neighborhoods will be expanding. When the market crashes, it's like the Sycamore or Moline of Chicago."
Kelly Cirignani, a sales agent at Patrick Jeffrey Realty, is working with a first-time homebuyer who until recently was looking specifically at newer construction in the South Loop.
The client settled on a unit and was ready to make a 50 percent down payment, until his lender said it would not approve a mortgage in the chosen building. Cirignani now is scouting properties in Old Town and Lincoln Park. "He doesn't want anything to do with South Loop," she said. "I warned him before it (happened). I guess we didn't realize how bad it was."
Overall, Woodstock's report showed a 12.5 percent year-over-year increase in foreclosure filings during the third quarter for the six-county Chicago area. For the first nine months of 2010, almost 59,000 initial foreclosure actions were filed, 28 percent ahead of last year's pace.
"I would have expected more of a plateau, given how long the crisis has been going on," Smith said. "We're still seeing a 28 percent increase year-over-year and that's not small. People are underwater and people are unemployed. Those two factors haven't changed."
Woodstock also found a rapidly increasing flow of properties exiting the foreclosure process and becoming bank-owned. For the region as a whole, the number of completed foreclosure actions rose to 9,539 properties in the six-county area, a 44.9 percent increase over 2009's third quarter. More than 96 percent of those homes were repossessed by lenders.
The number of court-ordered foreclosure auctions and bank repossessions may dip in the fourth quarter as a result of a freeze on auctions and evictions by large lenders while they investigate foreclosure procedures. Smith noted, however, that any dip in fourth-quarter numbers would be artificial and temporary.