Huge inventory of foreclosed properties and fewer bidders means lenders on the hook for billions in Chicago region so far
FOR IMMEDIATE RELEASE
Thursday, August 21, 2008
Contact: Geoff Smith, Vice President, 312-368-0310
Huge inventory of foreclosed properties and fewer bidders
means lenders on the hook for billions in
Property investors, who in previous years helped drive the housing boom, acquired just six percent of the properties being sold at foreclosure auctions, down from nearly 30 percent just three years ago.
“With fewer buyers, these foreclosed properties are reverting to lenders, who are in the business of lending, not managing huge real estate portfolios,” says Geoff Smith, Woodstock Institute’s vice president and author of the report.
Communities throughout the region are saddled with more
and more of these real estate owned (or REO) vacant properties, with the South
Even areas not previously associated with foreclosure and
vacancy, such as North Cook,
Providing detailed 2007 and first half 2008 foreclosure
auction results for all
1. Recent increases in foreclosure auctions greatly
outpace increases in foreclosure filings.
Between 2006 and 2007, foreclosure filings in the
2. As investors shun foreclosed properties, a growing
share of foreclosure auctions is going to lenders. In 2005, 70.5 percent of regional auctions
went to the foreclosing lender while 29.5 percent went to a third party
investor. By 2007, this number jumped to
94 percent, with only six percent of properties in foreclosure auctions sold to
third party investors.
3. The flow of properties into the REO inventory has increased substantially. Between 2005 and 2007, the number of properties entering into the regional REO stock increased by 231 percent. In total, over 22,500 properties entered the REO portfolio of lenders through foreclosure auctions between 2005 and 2007, with nearly 13,000 in 2007 alone.
4. The cost of acquiring 2007 REO properties at auction value exceeded $2.5 billion. Several proposals to mitigate the effect of vacant properties are under consideration but the key issue is cost. At the current auction value, this report suggests that the overall cost could be considerable.
5. The City of
6. A growing share of REO foreclosure auctions in the
7. The problem is getting worse. In the first half of 2008 alone, over 10,000 properties became lender owned. This was a nearly 98 percent increase over the first half of 2007.
Beyond reporting raw foreclosure figures, Woodstock Institute advocates policies and practices that reduce the neighborhood impact of the foreclosure problem. The Institute has released a series of reports tackling issues such as the concentration of high-cost loans in minority communities, lending patterns of defunct mortgage companies, and, most recently, the growing number of multi-family foreclosures.
For more information on our Chicago-region foreclosure research program visit us at: