Suburban Condo Projects Drive Up Foreclosures (WBEZ-FM/Chicago Public Radio)

By Ashley Gross

July 21, 2010

Just a few years ago, foreclosures were confined to certain pockets of Chicago.

The south and west sides were hard hit as subprime loans went bust.

But now, new numbers out today show that foreclosures in those areas are tailing off while the rest of the region copes with big increases.

And some places you wouldn’t necessarily expect are getting walloped.

Every few months, Geoff Smith plows through foreclosure filings to make sense of it all.

He’s with the non-profit housing group Woodstock Institute.

Smith says foreclosures in the Chicago area lagged behind parts of the country that had huge housing bubbles – like California and Nevada.

Now we’re catching up.

SMITH: it’s still definitely a big issue in the Chicago region – you’re going to see an increase year over year from 2009 to 2010 and it will probably be larger than what you’ll see in the country. In the country you might even see slight declines.

And the places driving those increases are the ‘burbs.

DuPage County? Up 75 percent in the first half of this year.

Lake County? Up 65 percent.

Northwest Cook? Up 55 percent.

And within those numbers, Smith says one thing leaped out at him.

SMITH: We were pretty surprised to find that in Northwest Cook, 44 percent of all foreclosure activity was on condo units, we didn’t really think of the suburbs as being a real hotbed of condo activity, but apparently they are.

ELAINE HELLMAN: I don’t know where they thought they were going to sell this place simply because it’s not kept up really nice.

Elaine Hellman is walking me through one of those hotbeds of condo activity – a sprawling 1970s era complex in northwest suburban Palatine.

She points out litter and yellow grass and then stops in front of one cluster of condos to count the lockboxes where realtors store keys for the empty units.

HELLMAN: One, two, three, four, five, six - these are all lockboxes. This building, this one in particular here, is almost vacant.

Hellman has been a renter here at the Woods at Countryside for 12 years.

She says things started to go downhill a few years ago when a development group bought the whole place – all 719 units – to convert to condos.

Ambitious, yes, but lots of developers were tackling big redevelopment projects during the condo boom.

This one – like some others in the suburbs – went bust.

HELLMAN: They had very few takers. It never went over.

So it’s left behind a big tangled mess.

One woman who owns three units now in foreclosure is suing the developers, claiming her identity was stolen to buy the units.

A lawyer for the developers says that’s baloney.

But people who did buy condos are now bailing out at a pretty astonishing rate.

Geoff Smith of Woodstock says 98 of the units went into foreclosure in the first half of this year.

That’s more foreclosures than in all of Highland Park.

REID OTTESEN: You don’t want something that says oh, Palatine is a town of foreclosures.

That’s Reid Ottesen, village manager in Palatine.

OTTESEN: And when you see a big spike in one development that can raise your community to the top of the chart, yes that is a concern. But I think at least there’s a unique situation to tell in this case that it was a timing issue of when they bought it and when they tried to go through with a conversion.

Ottesen says so far the Woods at Countryside hasn’t become blighted.

But the broader concern for Palatine along with other suburbs coping with lots of foreclosures is what happens now to home prices.

The worry is that all those bank-owned properties will keep pushing prices down – prolonging the slump.

And that pain stretches beyond the boundaries of one struggling development.

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