By Mary E. Morrison
August 2, 2011
The foreclosure crisis is far from over, but fewer homes in the Chicago area are sitting empty, a welcome if only temporary sign for the battered local housing market.
The Chicago-area home vacancy rate dropped to 3.6% in the second quarter, down from 4.3% in the first quarter, which was the highest rate in at least 15 years, according the U.S. Census Bureau.
The second-quarter drop also was the first decline in a year. The vacancy rate was 3.1% a year earlier.
Home vacancies have risen in recent years as more delinquent borrowers have lost their homes to foreclosure, fueling worries that a glut of abandoned properties will lead to neighborhood blight. In some cases, lenders are dragging their feet in the foreclosure process, letting homes sit unattended in a state of in legal limbo.
While the vacancy rate has declined, the drop may not mark the beginning of a trend. Foreclosure filings in the Chicago area fell 29.3% in the first half of the year vs. the same period in 2010, according to RealtyTrac, an online marketplace for foreclosed properties. But the drop largely reflects processing delays rather than a real improvement in the housing market, suggesting that foreclosures will remain a drag on the market for a while — and vacancies will remain high.
In another surprising twist, the local homeownership rate rose to 68.4% in the second quarter, its second straight quarterly increase but still down from 69.8% a year earlier, according to the Census.
Nationwide, the homeownership rate was 65.9% in the second quarter, down slightly from 66.4% in the first quarter and 66.9% from a year earlier, according to the Census
The local and national rates have been falling for about four years as lenders have tightened their underwriting standards and the housing crash has spooked many would-be buyers. The local rate still has a ways to drop before hitting pre-bubble levels of the late 1990s.
“If people are concerned about the values of their homes and the values of the homes in their community, that ultimately makes them pause when they think about whether or not homeownership is going to be an option going forward,” says Tom Feltner, vice-president of policy and communications at local advocacy group Woodstock Institute.
The Standard & Poor's Case-Shiller index of Chicago-area single-family home prices rose 1.7% from April to May — its first monthly increase in nine months — but was still down 8.1% from the year-earlier level.
Distressed properties also drive down property values, creating more uncertainty.
“As long as we continue to see 70,000 to 80,000 foreclosures annually in the Chicago region, it'll continue to have a negative impact on home values, which is ultimately what determines whether or not people choose homeownership as option,” Mr. Feltner says.