Here we go.. prices will be dropping

Illinois foreclosure filings jump in first half

July 16, 2009

(AP) — The number of Illinois households on the verge of losing their homes soared by more than 29 percent in the first half of the year, an increase twice as big as the national jump.

The mushrooming foreclosure crisis affected more than 1.5 million homes in the U.S. in the first six months of the year, according to a report released Thursday by foreclosure listing service RealtyTrac Inc.

Just under 69,000 homes in Illinois saw a foreclosure filing in the first half, up 29.5 percent from the first half of 2008 and 19.2 percent compared with the second half of 2008.

The data show that despite the Obama administration's plan to encourage the lending industry to prevent foreclosures by handing out $50 billion in subsidies, the nation's housing woes continue to spread. Experts don't expect foreclosures to peak until the middle of next year.

"Despite all the efforts to date, we clearly haven't got a handle on how to address the situation," said Rick Sharga, RealtyTrac's senior vice president for marketing.

Foreclosure filings rose more than 33 percent in June compared with the same month last year and were up nearly 5 percent from May, RealtyTrac said. June filings in Illinois rose 32.4 percent from June 2008 but were down 1.3 percent from May, according to RealtyTrac data.

More than 336,000 households received at least one foreclosure-related notice in June, according to the foreclosure listing firm's report. That works out to one in every 380 U.S. homes.

In Illinois, 10,796 households got a foreclosure-related notice last month, or one in every 486.

It was the fourth straight month in which more than 300,000 households received a foreclosure filing, which includes default notices and several other legal notices that homeowners receive before they finally lose their homes. Banks repossessed more than 79,000 homes in the U.S. in June, up from about 65,000 a month earlier.

On a state-by-state basis, Nevada had the nation's highest foreclosure rate in the first half of the year, with more than 6 percent of all households receiving a filing. Arizona was No. 2, followed by Florida, California and Utah. Rounding out the top 10 were Georgia, Michigan, Illinois, Idaho and Colorado. Ohio ranked 12th, with filings going to a little more than 1 percent of households.

The Obama administration in March launched a $50-billion plan to give the lending industry financial incentives to modify mortgages to lower payments, but it's off to a slow start.

As of early July, about 130,000 borrowers were enrolled in three-month trial modifications under the plan, and 25 mortgage companies have signed up to receive potential payments of up to $18.6 billion, according to the Treasury Department. But analysts and housing counselors say it isn't having much of an impact.

"The plan isn't going well, at least not yet," said Mark Zandi, chief economist at Moody's Economy.com. "It's a creative plan with lots of incentives, but it's very complex."

In testimony prepared for delivery at a Senate hearing on Thursday, Bank of America executive Allen Jones said the company has about 80,000 loan modifications in the works under the new government guidelines, including some that aren't in the three-month trial phase yet.

"We have achieved this level of success by devoting substantial resources to this effort," Jones said, noting that the company has more than 7,000 employees handling calls and working on modifications. Industry experts, however, say the response from most mortgage companies has been lackluster.

"They've been slow to make sure they understand it and put all the processes and people in place," said Joel Lewis, vice president of financial services at Convergys Corp., which runs call centers for the financial industry and other companies.

A week ago, Treasury Secretary Timothy Geithner and Housing Secretary Shaun Donovan sought to ramp up pressure on the industry, saying in a letter to participating mortgage companies that the industry needs to "devote substantially more resources to this program for it to fully succeed." They also summoned mortgage executives to a July 28 meeting with top government officials.

Though the program was launched months ago, few companies are upgrading their computer systems to process loans rapidly, said Bill Kelvie, chairman of Overture Technologies in Bethesda, Md.

"They need to automate the process, and they need better technology, and they need to do this quickly," he said.

The New Market Report for Chicago

ZIP codes with highest rate of price reduction (July 13, 2009)

ZIP codes with highest rate of price reduction (July 13, 2009)

Great Time to Invest

Chicago housing prices drop even faster

Foreclosures among several factors prompting sellers to adjust

By Mary Ellen Podmolik |Tribune reporter

July 13, 2009

It's the middle of July, and home sellers are starting to feel the pressure.

Elmwood Park resident Dan Gongola is among them.

A month ago, he listed his gutted and rehabbed five-bedroom, four-bath octagonal bungalow for $549,900, almost $25,000 higher than his real estate agent advised.

"I said maybe I'd get lucky," he said.

Related links

• ZIP codes with highest rate of price reduction Graphic

• Squeeze in lending rules choking condo market

On July 2, with few showings to speak of, he chopped the price far below his agent's original suggestion. The new price tag of $485,000 is a reduction of almost 12 percent from the list price.

Real estate agents have been advising sellers for months that they were going to have to let go of a good chunk, if not all, of the appreciation their homes enjoyed during the past five years. Now it appears that a confluence of factors -- fluctuating mortgage rates, sales comparisons that include bargain-price bank foreclosures, lingering job insecurity, a real estate market headed into its August lull and a first-time buyer's tax credit that expires Dec. 1 -- are giving their argument more credence. And sellers like Gongola are taking their advice.

As of Thursday, 31 percent of Chicago-area homes listed for sale had at least one price cut, compared with 29 percent of listings in June and 26 percent of listings in April, according to Trulia Inc., a San Francisco-based provider of real estate data. Nationally, 24 percent of homes on the market have had at least one price cut.

Drill deeper into the data, though, and that 31 percent local average is healthy compared with what's going on in some neighborhoods. In the East Loop near Millennium Park, prices have been cut at least once on 43 percent of the listings, with an average reduction of 6.6 percent. In the sections of Lincoln Park and Logan Square that make up the 60614 ZIP code, 35 percent of the listings have price cuts, with an average reduction of 8.2 percent. In Elmwood Park, sellers have slashed, by an average of 9.6 percent, prices on 40 percent of the listings.

"Sellers say, 'I'm not going to give it way,' " said Randy McGhee, an agent at Koenig & Strey GMAC Real Estate. "If you want to sell, you will be giving it up for what you paid for it or less in the last four years. If you want to sell it and you're thinking of a reduction, don't wait until September. Do it now."

In some areas of Chicago, the issue is condos that were bought by investors who are trying to shed them at a loss. They are advertised as short sales, a private transaction in which an owner, with lender approval, sells the property for less than the amount owed on the mortgage.

"My last three buyers and a current one only want to see foreclosures and short sales because they believe that's where the deals are," said Kimberly Oehmke, an agent with @Properties.

"It's hurting the person who has a great property and isn't in the short sale-foreclosure predicament," she said. "Anybody that is not a short sale, we just beg our clients to rent it out, just hold on until next year."

Foreclosures, meanwhile, continue to roil the market, being scooped up more quickly and cheaply than traditional listings.

In the past 90 days, 43 percent of home sales in Cook County have been bank-owned foreclosures, according to data from Clear Capital, a Truckee, Calif.-based provider of real estate valuation data to investors. Nationally, 35 percent of sales were foreclosures.

They've sold faster, too, with an average local marketing time of 53 days for a foreclosure compared with 73 days for a traditional sale.

The impact of foreclosures is partly to blame for local home values sinking in April to the same level they were at in mid-2002, according to the S&P/Case-Shiller Home Price index released late last month.

In Elmwood Park, Gongola's real estate agent, Sally Haynes of ERA Realife Realty, blames much of his troubles on foreclosures and the too-high original home price; in a better market the home might sell for slightly over $500,000. She was surprised, pleasantly, when he opted to make the dramatic cut.

"I know it's worth more than that, but with the market the way it is right now, I have to go with what's comparable in the neighborhood," Gongola said.

"That's why I did the big reduction," he said. "Let's not play games here. I wasn't going to lower it $10,000, and then in another month another $10,000. People will [now] say, 'Hey, this guy dropped $70K, we should go look at this.' "

Haynes has had the same difficult conversation with sellers in other neighborhoods who are eager to grab hold of any market uptick.

"I'm seeing the same thing in Des Plaines and Portage Park," Haynes said, noting that her pool of buyers has increased significantly in the past three months. "They are looking for a deal."

New Programs for Mortgages

Here's a better story from Inman News on the expanded Home Affordable program for those of you looking to refinance your home. Please consult a mortgage banker to see if you will qualify.

Price Decline Coming to America's Richest Areas

It’s a similar story in Lincoln Park, where single-family home prices slipped only 2.2% last year, far less than in the rest of Chicago. But inventory has since tripled. Wagner Appraisal Group figures there’s a 16-month supply. A year ago “I was almost cocky about our position compared to the rest of the market,” says Jennifer Ames. No longer. After 11 months of lowering the $2.1 million asking price on her 3,400-square-foot house, Ames sold it in June for $1.6 million.

Given the glut of unsold homes, Lincoln Park’s prices may well slide at least 15% this year–as Chicago’s did in 2008. If you look at Fiserv data going back many years, you find values in Lincoln Park track the rest of Chicago pretty closely with a one-year lag.

By the way- even the once mighty Manhattan looks to be in for a large correction.

Unsold inventories in Manhattan are at their highest levels in a decade. You can’t tell by looking at data about its condo market. According to Radar Logic, which generates national realty info from its New York City office, condo values fell only 4% last year–far less than the 12% drop for the city as a whole. It’s been held aloft by new-construction condo sales above the $1,200-per-square-foot level, says Radar Logic founder Michael Feder, reflecting deals struck a year or two ago. Once they pass through the system, the average price of a condo will plummet to $900 a square foot, reckons Feder.

America’s Most Troubled Luxury Neighborhoods [Forbes Magazine, Stephane Fitch and Matthew Woolsey, June 24, 2009]

There is Justice

Crain’s reports that the Feds have indicted 10 people in a mortgage fraud scheme involving purchases of condos at 33 W. Ontario, or Millennium Centre, the River North high rise developed by American Invsco.

Acting together, the investors provided false information about their employment, income and assets to secure the loans to finance seven condos and two townhomes at Millennium Centre, a 59-story tower at 33 W. Ontario St., according to the U.S. Attorney’s Office. The indictment is one of five mortgage-fraud cases involving more than $48 million in loans that the U.S. attorney’s office announced Tuesday.

According to the indictment, Mhde Askar, 23, of Chicago, and Mahmoud Saleh, 35, of Hinsdale, formed a company to buy units in the 363-unit tower and profited by collecting mortgage rebates from the developer and flipping the units for a profit to handpicked buyers.

To obtain the fraudulent loans, the pair enlisted the help of Ahmad Karkukly, 33, of Palatine, a loan officer at Countrywide Home Loans Inc., the indictment says.

Mr. Askar was originally arrested in 2008 and is free on bail, court records show. One of his lawyers, Loop attorney Michael F. Clancy, could not be reached for comment. An attorney representing Messrs. Saleh and Karkukly was unavailable.

Fed: Fraud used to get loans for Streeterville condos [Crain’s, Alby Gallun and Thomas A. Corfman, June 23, 2

Foreclosure and Short Sale Timing

I have been involved in several distressed property purchases this year. Even with willing and able buyers these properties and the buying process many times are handled in strange ways. For instance, lender's make it tough to buy due to over stringent and changing rules, real estate brokers don't answer calls, banks take too long to negotiate and accept offers, etc...

David Hanna, the 2009 Chicago Association of Realtors President, recently commented on the REO (bank owned property) situation in Illinois. Here's a excerpt below from David's full post:

"In Chicago (and the overall metropolitan area) we are already adding REO inventory at a pace well in excess of the absorption rate. We hear anecdotally that there is a backlog of foreclosed property being held off market by banks and asset management companies in response to the unforeseen precipitous fall in average and median sales price in many areas.

Yes, inventory is dropping, albeit slowly. The biggest factor in the dip is the number of owners taking property off the market because they cannot sell it right now for a price they are willing to accept.

Yet many of the same banks now selling these foreclosed homes are loath to consider a purchase offer with any type of financing contingency, and they continue to accept lower cash offers on property, effectively closing the door on many buyers looking to pay fair market price for a home.

Plus, added governmental regulation created daily to deal with vacant property adds a burden of time and cost to each transaction.

The solution to clearing out the REO inventory is to prevent it (as much as possible) from entering into the system by:

1. Having people working--and providing access to lending based on rational criteria;

2. Having adequate resources directed to the implementation and support of the Obama Loan Modification program;

3. Leveling the playing field so home buyers have an equal opportunity to buy foreclosed property with investors and speculators; and

4. Allowing for governmental policy that weighs the economic and social costs of widespread displacement of millions of American households."