According to a recent article in Crain’s Chicago Business, it has now been ten years since the housing bust, but many condominiums have not bounced back from the high rates of foreclosure during the recession. Indeed, as the article highlights, “when the housing market crashed in 2006, Chicago was awash in unsold condominiums—and the wave tripled in size as the crisis deepened.” Even now, condos still are worth, on average, 7% less than they were just prior to the housing crash. What does this mean for condo owners in the Chicago area? A lot of these properties went into foreclosure, and they simply are not worth what they were a decade ago. As such, for any condominium owners who are underwater and are hoping to sell for a profit, it might not be possible.
The “Logjam” of New Condominiums in Chicagoland
In 2006, condominium construction was booming in Chicagoland—from buildings downtown in River North to suburbs in Naperville. Yet, as the article explains, this sudden growth in condo development ultimately led to “what would turn out to be an epochal logjam of new condos.” When 2006 came to an end, about 2,500 condominiums had gone unsold, and that number rose to more than 7,500 by the end of 2007. And for those who did purchase condos in 2006, many of them ended up underwater.
Why were many condo buyers underwater by 2008 and later? In short, at the peak of home sales and condominium construction, prices for condos were high—it was a seller’s market. For instance, if a buyer paid $400,000 for a condo in 2006, statistics show that the condo likely would have been valued at just over $270,000 by the start of 2012. If the condo owner was having difficulty making mortgage payments and decided to sell the condo, she probably would have ended up still owing more than $100,000 (to make up for the change in value), and that is assuming that she was able to sell the unit at all.
Chicago Continues to Have High Number of Bank-Owned Homes
In some ways, the market for condominiums has recovered more firmly than has the single-family home market. The change in average home prices dropped more substantially for condos than single-family homes (approaching a decline in value of nearly 35%, as opposed to an approximately 30% decline for single-family homes). However, the average difference between condo prices now as in September 2006—the peak of the market—is only minus about 7.5%. Compared with single-family homes, which remain at a deficit of about 13.6% since 2006, condos are selling, on average, for prices that are closer to those in 2006.
While condo prices may look like they are becoming steadier, presenting the possibility that Chicago can get out from under the “logjam” of empty condos, Chicago remains at the top of the list for unsold, bank-owned homes. According to a recent article in the Chicago Tribune, Chicago is second only to Detroit in having the highest number of bank-owned homes that remain empty. Although the number of foreclosures has declined significantly in the city and surrounding neighborhoods, “more buildings are sitting vacant as banks prepare to sell them,” the article explains.
If you have questions about avoiding foreclosure, an experienced foreclosure defense attorney in Oak Park can help. Contact the Emerson Law Firm today for more information.
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