B.J. Tregoning is the reason you can't buy a house right now.
Well, not exactly. But homeowners like Mr. Tregoning and his family on the Northwest Side would rather wait for home prices to rise than sell now and take a loss on properties purchased before the market imploded. That mindset is dragging down the pace of Chicago's real estate recovery, even as eager buyers scour the market for deals.
Mr. Tregoning, 35, co-owner of a Chicago real estate brokerage, is one of a host of Chicago homeowners whose properties are “underwater,” meaning the debt on the house exceeds its current value. Mr. Tregoning figures his home would fetch just $350,000 or so in the current market—far less than the $380,000 in loans on the house near the axis of the Kennedy and Edens expressways, let alone the $420,000 he paid for it in 2006.
Selling now would require writing a check to the bank to make up the difference between the sales price and the debt. That's a no-go, despite the family's desire for more space and different school options. “We'd have to come to the table with probably 40 to 50 grand,” Mr. Tregoning says.
More than 506,000 Chicago-area homes—or one-third of the market—were underwater as of the fourth quarter, according to California research firm CoreLogic Inc. That's up 7.6 percent from the previous year.