By Dan Weissman
Homes that are underwater — mortgaged for more than they’re worth — represent a much smaller fraction of the housing market than they did a few years ago, according to a new report from RealtyTrac, a real estate data company. However, some parts of the country are doing much better than others.
The national average, at 13.3 percent, isn’t all the way back to normal, but it would sound awfully good to places like Tampa, Cleveland, Las Vegas — or Chicago, where almost a quarter of mortgages are still underwater.
Ironically, one culprit may be state and local homeowner protections that make it harder for banks to foreclose, according to Daren Blomquist, vice president for Realty Trac.
"You have many properties that are kind of sitting in foreclosure limbo," he says. "And not only are those properties likely underwater, they’re likely dragging down the values of surrounding homes."
In Chicago and elsewhere, underwater homes tend to be in the poorest neighborhoods.
"What’s happening on the Gold Coast in Chicago — which is very expensive — has very little to do with what’s happening in traditionally disadvantaged areas on the South or the West Side of the city," says Spencer Cowan, senior vice president for research at the Woodstock Institute, a local think-tank focused on economic equity.
Eight ZIP codes on Chicago’s South and West Sides have underwater rates above 50 percent — more than three times the rate for the Gold Coast area.