Tuesday, May 12, 2009
foreclosures in suburban chicago
Home foreclosures are surging in Chicago's suburbs just as they level off or decline in many city neighborhoods already ravaged by mortgage defaults.
Foreclosure cases filed in the first quarter jumped between 25% and 70% from the fourth quarter in DuPage, Will, McHenry, Lake and Kane counties, according to new data provided to Crain's by the Woodstock Institute, a Chicago-based housing advocacy group. Meanwhile, foreclosures fell 8% in Chicago, the first quarterly decline in a year.
Across the six-county Chicago metropolitan area, foreclosure filings rose 6% in the first quarter to 17,819, the highest one-quarter total since the housing crisis began in mid-2006.
The shifting locus of new foreclosures shows how the recession and job losses are supplanting subprime lending as the main driver of mortgage defaults, says Geoff Smith, vice-president in charge of research at Woodstock. While the first wave of foreclosures hit hardest in poorer city neighborhoods targeted by high-interest-rate lenders with loose credit standards, the latest round is striking middle-class areas where most borrowers qualified for standard-rate mortgages.
Foreclosures in the suburbs aren't likely to abate until unemployment stops rising. That means more downward pressure on home values across the metropolitan area as foreclosed homes hit the market at fire-sale prices. Suburban communities also will face the consequences of vacant houses and dislocated families, which range from overgrown yards to increased demand for social services.
it's nice to pretend, but the truth is that suburban homeowners are in many cases poorer than inner-city residents; they simply have a higher income to mask their deeply negative equity. loans made to the poor suburbans may have started out as prime loans at one point, but as consumption outstripped income and asset price increases reversed these credits refinanced their way into lower brackets. ft alphaville recently highlighted a boston fed study which noted that some 60% of subprime defaults and 28% of all defaults began life as prime loans -- in other words, this is not about unemployment, or at least not strictly about unemployment. it is, however, about poverty disguising itself in the middle class suburbs.