Chicago distressed properties hit market, lure investors
The market for real estate in Chicago has experienced notable improvements recently, with home sales on the rise, inventory low and time on the market on a downward trajectory. However, this big city market has become notable for its high rate of foreclosures, while the state of Illinois was recently listed on an industry report as having the highest foreclosure rate in the country.
Illinois' foreclosure surge could be in part due to rises in job loss and the state's judicial process for foreclosure proceedings. Chicago magazine "Deal Estate" columnist Dennis Rodkin recently wrote an article for ABC affiliate WLS in which he explained that compared with non-judicial states such as California and Arizona, Illinois foreclosure processes take more time to make their way through the court system, and the foreclosure moratorium in 2011 created a backlog of homes that are still in the process of being cleared.
Rodkin wrote, "Our real estate market has been far slower to recover than that in many other parts of the country. As a result, people who've been having trouble holding on see that it will be many years before that asset (the home) will be positive again, so they let go."
Another recent article by Rodkin, in Chicago magazine, cited industry information from Midwest Real Estate Data which showed an increase in sales in July and August for Chicago-area homes that were either foreclosed or sold for less than the value of the mortgage. These two types of distressed homes made up roughly 38 percent of total local home sales in Chicago, leaving traditional home sales only 62 percent of the market. This percentage was down 4 percent from June.
According to a recent article in Bloomberg News, the surge in foreclosures that the state of Illinois and city of Chicago are experiencing has begun to lure investors looking for property deals for homes priced at half of what they were before the recession. The industry report that placed Illinois at the No. 1 spot for foreclosures revealed that foreclosed properties in the Chicago metro area were sold in the second quarter at an average discount of 46 percent. The average cost of a Chicago foreclosure is $131,562, the third lowest of the top 20 largest metros in the country. The national average cost of a foreclosed property is roughly $170,040, which is nearly $34,000 more than the going rate in Chicago. Investors are looking to Chicago to take advantage of significant returns as the housing market continues into recovery over the next several years.