With all the news about rising home prices, Chicago home buyers might be surprised by the number of distressed properties that still exist in our area. The USA Today recently reported that Chicago held the highest number of negative equity homes in the country, based on a study by ATTOM Data Solutions. Most of the homes with negative equity have current market values of $100,000 or less.
Negative equity means that the liens against the home, namely mortgage loans and home equity lines of credit, exceed the current market value. Not all of these homes are destined for foreclosure, however. A homeowner can be perfectly current on their mortgage payments, but their property value could have suffered due to localized market conditions beyond their control. During the Great Recession, Chicago homes experienced substantial losses in market value, and some neighborhoods have recovered better than others.
It’s true that homeowners with negative equity face greater financial risks. A home with negative equity cannot go through a typical real estate sale; instead, the lender(s) must approve what’s called a “short sale” and agree to take a loss on the loan. Even in the best-case scenario, a homeowner with negative equity walks away with nothing from the closing table. Homeowners with negative equity also lack the ability to borrow against their home value, meaning that expensive repairs may be impossible to afford. Homes that fall into disrepair lose more market value, worsening the downward spiral.
It’s important to remember that all real estate is highly localized. This means that home values and sales trends are going to vary by neighborhood and by street. So, please take the following information with this in mind. The list from the USA Today is based on public information about outstanding liens vs. automated market value data. From there, they boiled it down to ZIP codes where 65% of the properties had negative equity:
- West Englewood – ZIP Code 60636
- North Chicago – ZIP Code 60064
- Riverdale/Calumet Park – ZIP Code 60827
- Dolton – ZIP Code 60419
When you are looking for your first Chicago home, location plays an important role in your home buying decisions! Neighborhoods with good schools, located close to pubic transportation, with amenities in walking distance, are always in demand. Also, pay attention to the condition of the homes and yards around the property you are considering. Your neighbor’s property condition can, and will, affect your own home value.
StartingPoint Realty – dedicated to first-time Chicago home buyers!
StartingPoint Realty provides complete education and guidance to first-time home buyers throughout Chicago and the Northwest suburbs! Attend our free home buying seminar for an introduction to the home buying process. There’s never any sales pressure or obligation!
Check out our list of home buyer assistance programs on our website! You can also visit our Chicago Resource Center for neighborhood information and personalized assistance.
Always feel welcome to contact us for help with your Chicago home buying questions!
Ryan Gable Broker/CEO Starting Point Realty
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