Tribune staff reporter

October 26, 2007

More than two dozen housing and public-policy experts painted a gloomy portrait Thursday of the home foreclosure crisis across the Chicago area, with some worrying that the worst is yet to come.

"This is going to have a major impact on the economy for the next decade," said Malcolm Bush, president of the Woodstock Institute, a non-profit research and policy group that participated in a meeting at the Federal Reserve Bank of Chicago.

A recent study by the organization found a 36 percent increase in home foreclosures across the region in 2006, compared with the previous year, Bush said. Meanwhile, foreclosures in Chicago during the same period jumped 37 percent.

Many minority communities and neighborhoods have been hit hard, said Robert Wharton, president of the Community and Economic Development Association of Cook County.

One need only drive though Chicago's South Side or communities in the suburbs with large numbers of minorities to see freshly boarded-up single-family homes, he said.

"This is a major threat to these communities, since many of them already have economic problems," Wharton said.

During the meeting, representatives from such communities as Harvey and Robbins discussed the need for more counselors to help those who cannot afford their homes and have fallen behind in mortgage payments.

"The number of people getting into trouble is going to grow, and the need for housing counselors is going to grow as well," said Tammie Grossman, executive director of Housing Action Illinois, a Chicago-based training and advocacy group.

Brenda Grauer, a prosecutor in the office of Illinois Atty. Gen. Lisa Madigan, said foreclosures caused by fraud are becoming "incredibly prevalent."

Poor communities on the South Side and in the south suburbs, she said, are prone to illegal mortgage practices -- everything from a broker or lender overstating a borrower's income to inflating property values on a loan application.

The Woodstock study found that areas with high concentrations of minorities in the south suburbs and in older sections of towns such as Elgin, Aurora and Carpentersville had among the highest foreclosure rates per 1,000 properties.

The problem is readily apparent in the 700 block of Jackson Avenue in the heart of Carpentersville's burgeoning Latino area, where three vacant homes are in foreclosure and four others recently were put up for the same.

"No one wants to see my house when it's in a neighborhood that might soon be headed down," said Christopher Cruz, 25, who is trying to sell his home on the block.

Carpentersville posted 277 foreclosure filings through August, more than double from the same period a year ago, according to RealtyTrac, a national real estate data firm.

Across Elgin, foreclosure filings from January to August climbed to 560, nearly double from the same period a year ago, according to RealtyTrac. Elgin officials say foreclosures are particularly heavy on the city's east side -- home to a large concentration of minorities.

Many with mortgage problems fell victim to the same things that fueled a rise in home foreclosures across the nation this year, said Elgin City Council member Juan Figueroa.

These included adjustable-rate mortgages that homeowners found difficult to repay once higher interest rates kicked in and borrowers with poor credit histories who financed more than they could afford, he said.

In Aurora, the second-largest city in the state with 175,000 residents, the number of foreclosures hit 668 from January to August. That's up from 385 during the same period a year ago.

Michael Kamon, Aurora's director of neighborhood redevelopment, said his city is experiencing a surge in foreclosures like many other communities across the region.

Some homeowners have put their properties up for sale to keep from losing all of their investment in a foreclosure, but the slow housing market is making that difficult, officials said.

The foreclosure landscape also has been affected by the city's crackdown on more than one family living in the same home, said Ald. Juany Garza.

"When the extended family leaves, that leaves just one wage earner with the responsibility to pay a mortgage they can't afford," Garza said. "Before long, that home is lost."

The fact is, while some Chicago neighborhoods are showing declines over the last year in both asking and selling prices, other areas of the city - notably, Des Plaines - are showing encouraging increases. And, while the Chicago housing market is not as “hot” as it was a couple years ago, it is certainly a great place if you’re looking to buy a home that you plan on keeping for a while (whether a home or a rental property). Here’s why:

GROWTH & “REHABBING”

Yes, at 3 million inhabitants (9.5 in the Chicago Metropolitan Area, or “Chicagoland”), Chicago continues to grow. As both a testament to and a symbol of this growth, the magnificent 2,000 foot tall Chicago Spire (now under construction) will be (upon completion, in 2010) the tallest building in America, and the tallest residential building in the world. For those who aren’t thrilled about living almost half a mile above the Windy City’s streets, there are plenty of other housing options in “Chi-town”.

“Rehabbed” buildings account for some of Chicago’s most architecturally interesting and sought-after homes. Rehabbing is simply the rehabilitation, refurbishment and often restoration of old buildings that have fallen into disuse, usually for residential use (lofts). Rehabbed buildings include former warehouses, factories, and other industrial buildings, many of which have been granted Heritage status by the City. Chicago’s industrial past has left a wonderful selection of beautifully restored loft buildings, and matching neo-architectural condos.

Another choice open to those looking for a home in Chicago, is the foreclosure market. While this can be a tough nut to crack - and an especially difficult for those just looking to get rich quick - it is a viable way to save considerable money on a home. Whatever you choose to do, whether it’s a loft, a condo, or a new family home, if you’re looking to buy a home in Chicago right now, the market is on your side!

You should never feel out of touch when clients are telling you about their dream green home. That’s why we asked Jessica Jensen, co-founder of green home-improvement Web site Low Impact Living, to share some key terms that every real estate practitioner ought to know.

EcoBroker. This real estate certification program helps practitioners become experts in helping consumers and communities use energy efficiency and sustainable design. Through EcoBroker educational courses, you acquire knowledge and resources to become a Certified EcoBroker, which gives you a leg up in assisting home owners in purchasing and marketing properties with green features. Classes are available online, and may count as continuing education credits in your state.

FSC-certified wood. A key component of green building is using sustainable wood. Quickly renewable woods like bamboo are inherently sustainable. In selecting other types of hardwoods, it’s important that the wood be grown and harvested in a sustainable manner. The Forest Stewardship Council (FSC) maintains standards and certifies woods for sustainability.

Geothermal. Geothermal power uses heat from the earth to generate electricity. This is a clean, renewable power source. Geothermal energy is harnessed with a Ground Source Heat Pump (GSHP) to tap the stored energy beneath the planet’s surface. These pumps can be used to provide heating, cooling, and hot water for residential and commercial buildings.

LEED. LEED is an abbreviation for Leadership in Energy and Environmental Design. The LEED rating system was designed by the U.S. Green Building Council and is the standard for the design, construction, and operation of green buildings. LEED started in the commercial building sector, and a rating system for residential construction is in the works. Architects and builders often refer to themselves as LEED AP; the AP stands for Accredited Professional. This means they have passed the LEED exam and are well-versed in the program’s standards.

Native landscaping. Selecting plants indigenous to your area means they’re better adapted to the local climate, use appropriate amounts of water, resist local pests, and provide food for area wildlife.

Runoff. The waste water that flows from our gardens, lawns, driveways, and streets into our sewer systems carries various pollutants, including fertilizers and pesticides from our yards. The water eventually travels into rivers and oceans where they degrade water quality for humans and animals. To reduce runoff, home owners can make sure they don’t over-water their lawns or accidentally water their sidewalks and driveways. Permeable stone pavers in driveways also help curb runoff.

Solar PV/ Solar Water Heaters. Solar PV stands for Solar Photovoltaic, which are the panels used to create electricity. PV cells are comprised of semi-conductors, most often made of silicon, which convert sun power into electricity. These are different from (and more expensive than) solar water-heating systems. A solar water-heating system is fairly simple with the solar panels typically installed on a roof. The sun then heats the panels; the solar collectors heat a fluid in pipes held in the interior of the panel boxes, and the fluid is transported into the house where it heats water in a storage tank.

Sustainable/Sustainability. Sustainability refers to meeting present needs without compromising the ability of future generations to meet their needs. This involves using, re-using, and conserving natural resources to do the least harm to the natural environment. It’s now used almost interchangeably with “green” and “eco-friendly.”

VOC. An abbreviation for Volatile Organic Compounds, VOCs are emitted as gases from various solids and liquids like wall paint, furniture, and household cleaning supplies. Many chemicals are harmful to human health; some are carcinogenic. But no- or low-VOC products now available represent good non-toxic replacements.

BY BARBARA BALLINGER
from Realtor Magazine On-Line

Ron Knoll @ 773 330-2353 cell
Saffron Realty Group

A measurement of industry sentiment about the housing market fell in June for the fourth straight month to the lowest point in more than 16 years.

Housing developers are being squeezed by tighter lending standards for borrowers trying to get mortgage loans. In response to weak demand, developers are cutting prices and offering buyer incentives to cope with a mounting supply of unsold homes, the National Association of Home Builders said Monday.

The trade group's housing market index, which tracks builders' perceptions of current market conditions and expectations for home sales over the next six months, fell to 28, the lowest reading since February 1991, the NAHB said.

Wall Street had expected a reading of 30, according to the consensus forecast of Wall Street economists surveyed by Thomson/IFR. Ratings higher than 50 indicate positive sentiment about the market. The seasonally adjusted index has been below 50 since May 2006.

The continuing slump is bad news for housing developers like Lennar Corp., D.R. Horton Inc., Pulte Homes Inc., Centex Corp. and Toll Brothers Inc., the largest U.S. homebuilders by market value.

The index has been sliding since March as demand for new housing slumped amid a rise in defaults for borrowers with weak, or subprime, credit.

"It's clear that the crisis in the subprime sector has prompted tighter lending standards in much of the mortgage market," David Seiders, the group's chief economist, said in a statement, adding that rising interest rates have also eroded demand.

Home sales will continue to decline in the months ahead, he said, and housing starts are not expected to improve until next year, he said.

Sales of new homes, which represent about 15 percent of all home sales, surged in April, but median prices fell 11 percent from the previous month as builders slashed prices.

Mortgage giant Freddie Mac reported last Thursday that 30-year, fixed-rate mortgages averaged 6.74 percent,the highest level in 11 months.

Meanwhile, the troubled market for homebuyers with weak, or subprime, credit has hampered investors in mortgage securities who bought loans backed by subprime mortgages. Moody's Investors Service said Friday it downgraded 131 mortgage investments tied to subprime loans.

Moody's said the downgrades were a result of a higher-than-expected default rate among second mortgages issued to subprime borrowers last year and stemmed from "an environment of aggressive underwriting."

The Mortgage Bankers Association reported last week that the percentage of payments that were 30 or more days past due for subprime adjustable-rate mortgages jumped to nearly 16 percent in the first quarter, the highest number on record. Foreclosure filings, meanwhile, were up 90 percent in May compared with last year, according to industry data firm RealtyTrac Inc.

Copyright © 2007, Chicago Tribune

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Saffron Realty Group
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