The numbers are in. Illinois had the highest foreclosure rate in the U.S. last month as reported in a recent article in Businessweek. RealtyTrac Inc., a California based company that tracks data on foreclosure numbers across the U.S. reported that 17,781 properties in Illinois received a “filing of default, auction or repossession in August.” This number is “up 42 percent from a year earlier and the eighth straight monthly increase on an annual basis” according to RealtyTrac Inc.
How Does Illinois Compare to Other States and Their Foreclosure Rates?
The U.S. national average rate of foreclosure filings per household was one in every 681 households. The rate in Illinois was one in every 298. Other states report that foreclosure filings are decreasing with only a 1% increase in filings in August from the previous month. Now contrast that with Illinois which saw foreclosure filings climb 29% over the previous month. Foreclosure filings will most likely increase “each month in 2012 and break the record set in October 2009 as lenders release a backlog or repossessed properties” explains the article. Buyers understand that since the market has not improved, many lenders are holding off on releasing properties until prices start to rise. The lenders and sellers do not want to sell at the bottom and buyers do not want to buy if the market is still on the way down. So the situation is not going to improve until the lenders release the foreclosures and buyers start purchasing homes to flush the distressed properties through the system. Add to that the fact that property values in the Chicago area have declined every month on a year-over-year basis since May 2007.
Illinois is a judicial foreclosure state meaning the courts must oversee the process and ultimately decide the outcome of the foreclosure proceedings. The national average length of time it takes a bank to complete the foreclosure process is 378 days. The Illinois average time is 647 days. This lag in process time continues to compound the recovery problem.
Why are Foreclosure Filings Increasing in Illinois?
The lag in process time and reluctance of lenders to release properties may not directly increase the number of filings, but those factors drag out the process and give the impression that there is not an end in sight to the foreclosure crisis in Illinois. Another huge factor leading to the increase in filings is the increase in job losses over the last couple of months. The unemployment rate rose to 8.9% in July from 8.7% in June. The Businessweek article sites the work of Bob Tomarelli, a U.S. economist at IHS Global Insight Inc., an economic forecasting firm. Tomarelli attributes the increase in unemployment rate to the “shrinking manufacturing base and public-sector job losses.” The combination of buyer uncertainty over the declining values and an increase in unemployment rate means the market will continue to decline and thus lead to more foreclosure filings.
Another factor the article points to is the fact that Illinois real estate does not attract the numbers and types of investors that states like Florida or Arizona attract. Investors looking for second homes or retirement properties are not likely to purchase a foreclosure in Illinois. However, certain investment groups do see the value in purchasing properties in Illinois to renovate and rent to long term tenants. This might be a bit of a silver lining to this bad news.
Opportunities Amidst Foreclosures
Waypoint Real Estate Group, LLC is a real estate investment group that is “bullish” on the Illinois real estate market. Waypoint and similar companies see the value in buying homes that have lost 50% or more of their value, renovating them, and then leasing them out to long term tenants. Many of the very people filing for foreclosure end up needing a place to live so the rental market these companies hope will strengthen.
Our attorneys are skilled in not only foreclosure defense, but real estate law as well. If you are a homeowner facing possible foreclosure, then we can discuss your options to either contest foreclosure or make it through the process as painless as possible. Our experience will come in handy to individuals needing advice on how to handle a myriad of questions surrounding every real estate transaction.
See Our Related Blog Posts: