August 14, 2005
Marilyn Kennedy Melia
You don’t just buy a house, you buy a piece of a neighborhood.
A new study finds that if a homeowner down the block can’t make his or her mortgage payments, YOUR home value might drop.
In the city of Chicago, anytime a foreclosure is started on a house, it
lowers by 0.9 percent the price of other single-families within an
eighth of a mile (a city block) that sell within two years, according
to research conducted by the Woodstock Institute, a Chicago non-profit.
A foreclosure “start” doesn’t mean that owners are actually kicked out,
explains Geoff Smith, project director at the institute. “It just means
that a lender has started a foreclosure action and entered [that
action] on the public record,” Smith explains. In some instances,
owners find money to stop the foreclosure. Not all foreclosure starts
end in auctions at sheriff sales.
Still, Woodstock Institute
analysis of sales data — of homes sold within a block of 9,600 houses
with foreclosures started during 1997 and 1998 — finds that the price
was 0.9 percent lower than it would been if there were no foreclosure
Moreover, there’s a cumulative effect, Smith says,
with each additional foreclosure start on a block depressing values by
another 0.9 percent.
The 0.9 percent decline is a citywide
average. In lower income neighborhoods, each foreclosure drops home
values by an average of 1.44 percent, the research found.
higher income areas, Smith speculates, “If a homeowner is having
difficulty making a mortgage payment, they can more easily sell the
home.” A quick sale means a foreclosure that is started never winds up
being seized by a lender or stands in a state of disrepair because an
owner lacks the funds for maintenance.
The Woodstock report
says that foreclosure starts in Chicago rose by more than 200 percent
between 1995 and 2000. The report says much of the gain in foreclosure
starts can be attributed to the increase in “subprime” loans, which are
typically characterized by high rates and fees.
– Buyers often
scout for a neighborhood first, then look for a house. Now, LaSalle
Bank Corp. is searching neighborhoods for borrowers who may qualify for
a special mortgage loan.
A team of loan officers, who live or
work in neighborhoods like Humboldt Park and Lawndale, will be touting
LaSalle’s “Community New Start Home Loan” to community organizations
and in neighborhood seminars, says Carl J. Pietraszewski, vice
president and regional sales manager for the LaSalle mortgage group.
Borrowers who have an annual income below the Chicago-area median
($68,550) and who buy in census tracts designated as low- or
moderate-income by the Census Bureau and HUD can receive up to $4,000
as a grant from the bank for down payment and/or closing costs.
Others may qualify for a loan for 100 percent of the purchase price under this program.
Borrowers also do not need a traditional credit record to qualify for
one of these loans. Rather, LaSalle will accept rent records, cell
phone bills and car insurance records as alternative proof of
By accepting alternative credit, LaSalle has
geared the program to help immigrants and others who do not use
financial institutions for their savings or do not use credit cards,
Pietraszewski says. LaSalle expects several hundred borrowers to
qualify for this loan.
LaSalle Bank is conducting seminars at
many of its city neighborhood branches in September and October to
explain the Community New Start Program loan and how borrowers can
qualify. Contact the Community Home Lending Group for more information:
– Spanish-speaking home buyers can find
statistics on neighborhoods, an explanation of what it takes to qualify
for a mortgage, hints on establishing good credit, and other home
purchase tips at the Web site Centrohipotecas.com.
introduced by the Mortgage Bankers Association, a trade group based in
Washington, D.C., the Web site was established to help the U.S.
Hispanic community. Over the next decade, more Hispanics will become
first-time home buyers than will any other ethnic group, the
The full report is available for download below:
educational purposes (and other related purposes). If you wish to use
this copyrighted material for purposes of your own that go beyond “fair
use,” you must obtain permission from the copyright owner. Please
contact Woodstock Institute for more information.