By Chris LaFortune
February 25, 2010
Oak Park and River Forest experienced almost three times the number of foreclosures last year as they did in 2005.
According to the Woodstock Institute in Chicago, Oak Park had 230 foreclosures in 2009, up from 81 in 2005. River Forest experienced a similar increase, from 18 in 2005 compared to 51 last year.
The increase in foreclosures is reflective of an increase throughout the region. According to the Woodstock Institute, there were 21,302 foreclosures in Chicago’s six-county region in 2005. By last year, the number had risen to 70,122, more than three times 2005 foreclosures.
In that time span, the number of foreclosures in both Oak Park and River Forest climbed each year, even before the housing crisis and recession hit the United States.
In 2005, the number of foreclosures was small enough that they flew under the radar of most real estate agents, RE/MAX in the Village co-owner Marion Digre said.
Most recently, the poor economy and the after-effects of relaxed lending standards have led to the rise in foreclosures, Digre said.
“There’s so many people that put zero down or minimal amounts down,” Digre said. “Those people get into trouble, and now their property is worth less than what they owe. There’s not a lot of incentive for people to keep making payments if they’re in trouble.”
From what all the experts are saying, Digre said, there will be more foreclosures to come.
“It could be at least three years before we’re out of the woods with that,” she said. “They call that shadow inventory, the stuff that’s going to be for sale that we don’t even know about yet, lingering out there.”
Bad news, because the current inventory is already pretty big. In 2009, there were 335 single-family detached homes sold in Oak Park, Digre said, 68 in River Forest.
As of Feb. 18, there were 192 single-family homes on the market in Oak Park, 53 in River Forest, according to figures Digre pulled from Midwest Real Estate Data.
When it comes to condominiums and townhouses, the numbers are worse. In 2009, there were 190 single-family, attached homes sold in Oak Park, 34 in River Forest, Digre said.
As of Thursday, there were 314 single-family attached homes on the market in Oak Park, 65 in River Forest. That’s about a year-and-a-half worth of inventory sitting on the market, Digre said.
And the end of two federal programs may make things worse. The first-time homebuyer tax incentive stops at the end of April, Digre said, and the federal government is set to stop buying mortgage-back securities, meaning interest rates will rise.
“Realtors have to be eternal optimists,” Digre said. “I think everyone is a little worried about what will happen after that incentive is gone.”
Mortgage rates are expected to rise, American Bank and Trust Mortgage Consultant Dan Matas said. But the River Forest-based mortgage consultant said no one knows for sure how much rates will increase.
Whether an increase in rates will translate into more foreclosures is a good question, Matas said.
“Obviously … people should be refinancing how,” Matas said. “A lot of people across the country were taking advantage of this last year.”
If rates rise to 6 percent, and people already have a home loan with 6 percent interest, it will make no sense to refinance, Matas said. But lenders may be willing to modify loans to keep buyers in their homes.
“That’s what they’re doing now,” he said. “A lot of people can’t refinance because they may have bad credit, due to not making payments. Lenders are modifying their existing homes to help those people out, giving them some really low interest rates … to help them with the payments.”
And Matas hopes the federal government extends the first-time homebuyer tax credit. There’s not much talk of it now, he said, but when the deadline nears in April, he expects Realtors will actively work to get it extended.
Even if it isn’t extended, people will still have to buy homes. With values down to 2004 and 2005 levels, even if interest rates rise to 6 percent, Matas believes the market will be good for buyers.
“Are we going to see a big boom this year?” he said. “No. It will be a steady increase over last year, as far as sales increases. People will move, they’ll have to buy homes. People will be transferred into Chicago and transferred out.”
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