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In Chicago, Growing Numbers of Vacant Buildings Remind Us Housing Crisis Here Far from Over!

There's a growing tragedy here in bustling Chicago

Previously, abandoned housing was a serious problem in only the most depressed neighborhoods here.  As the Real Estate Downturn continues, however, it seems that even more affluent Chicago Neighborhoods - including Rogers Park, West Ridge, Kenwood, Chicago Lawn, and even tony Lincoln Park - are not immune to the problems the economic downturn has created.

It was only a couple of years ago that builders would get loans to rehab old, 1920's-era Chicago Courtyard Buildings.  Older houses were purchased by investors across the city, either extensively renovated, or torn down with new, yet vintage-look homes built in their places.

And the properties or condo units would sell.  In condo buildings, after 50% of the units changed hands, they were turned over to the newly-formed condo board, who would oversee the project, assuming the builders completed a relatively-intact and professionally-remodeled building with little maintenance required for a few years.  They would then manage the building, and fund future maintenance needs from collected assessments.

Everything flowed.  Neatly!

Apparently - not so much anymore, according to Chicago Tribune Reporters Azam Ahmed and Darnell Little in Sunday's paper.  This is especially true for several buildings in some of the Neighborhoods in Chicago distant from Downtown and The Loop.  Neighborhoods recently bustling - like Rogers Park, Albany Park, and West Ridge on the North Side, or those with bustle-potential, like Kenwood or Chicago Lawn on the South Side, or Humboldt Park on the Northwest Side.

Presently, our Team is working with an out-of-town client who owns a condo in an unfinished building on the 1600 Block of West Fullerton Avenue, in the swanky Lincoln Park Neighborhood, on the North Side of Chicago.  Since less than 50% of the buildings total units have been sold - those units, along with common-area hallways and outer facade,  sit unfinished. 

Sale without an in-place condo association is impossible to buyers needing financing - the only option available is to rent the units, and hope for an improving financial picture down the road to spur an investor to buy, at a deep discount, the remaining units, finish off the decaying common elements, and complete and resell the units themselves.

Today, the residential blocks are littered with as-yet incomplete buildings whose developers were forced into bankruptcy or foreclosure before they could find enough financially-qualified buyers.  Those unit owners who did close encounter mechanical system breakdowns - of heating systems, roofs, masonry, or electrical wiring.  Plumbing pipes leak.  Common area amenities - such as carpeting and hallway paint - sit unfinished for months, even years!

Often thieves or squatters invade the properties - making a bad problem far worse for the few tenants who remain!

What happened?

During the boom years, few buildings and houses would sit abandoned, as investors snapped them up as short sale properties, fixed up the buildings or homes, and quickly resold them at a profit.  Within the past year however, according to The Woodstock Institute in Chicago, a research firm, nearly 99% of all foreclosed homes went back to the bank rather than being sold to a third party investor.  That's nearly $1.9 Billion worth of property in the City of Chicago alone!

Since banks become landlords only reluctantly, many bank-acquired properties sit largely vacant and boarded up.  According to the U.S. Census Bureau, vacant properties across Chicago spiked 20% between 2000 and 2007.  Today, there are nearly 166,000 vacant housing units in neighborhoods across Chicago. 

In 2009, foreclosure filings are likely to pile on last year's numbers.  According to national estimates, an additional 2.7 Million foreclosures are likely this year.

Is help on the way?  Perhaps, but in a small way.  President Obama's new Neighborhood Stabilization Program will pump over $55 Million into Chicago to help renovate and sell approximately 1,500 units in boarded up buildings, as well as abandoned and vacant single-family homes.  Most of the money will go to properties on the economically-depressed South and West Sides of Chicago, sidestepping, for now, some of the North Side Neighborhood Properties who can also benefit from the funding.

But what of the other owners?  They just bide their time, mostly, and keep up on repairs impacting their unit as best they can.  One day soon, they hope, an investor will acquire and complete their properties, and repair common infrastructure.

Until then, however, their unanticipated misery remains!

Ahmed and Little's story also links to accompanying video and photos.

Please see our post today via BlogChicagoHomes.com.

DEAN & DEAN'S TEAM CHICAGO

Comment balloon 13 commentsDean Moss • February 23 2009 05:15AM

Comments

The entire nation is facing a housing crisis but look for the silver lining - when things are this bad the only way is UP!

Posted by Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional, Palm Harbor, Dunedin, Clearwater, Safety Harbor (Charles Rutenberg Realty) over 9 years ago

Dean, It is a sad state of affairs isn't it? Around here we're seeing major department stores closing inside the malls and the smaller shops closing their door regularly.

Posted by Barb Szabo, CRS, E-pro Realtor, Cleveland Ohio Homes (RE/MAX Trinity Brecksville Ohio) over 9 years ago

Dean, sounds interesting. You mentioned in Chicago it is 1.9Billion of foreclosed properties. Then Obama will pump 55Billion into Chicago. That seems to more than enough cover the problem. Also, foreclosured properties do not mean value of zero, which means not every distressed property means total loss. Am I missing anything?

Posted by real estate real estate over 9 years ago

Dean--I don't know the exact numbers but the situation is similar in Minneapolis and St. Paul area with several anchor stores closing in shopping malls and all the smaller business owners being drastically affected. Condo associations are seeing similar problems as foreclosure units mount. There will be no easy answers but we have to work through it.

Posted by Teri Eckholm, REALTOR Serving Mpls/St Paul North & East Metro (Boardman Realty) over 9 years ago

Dean, here in WV there are a lot of people being laid off.  Small businesses, just can't make it in todays economy.  Real estate is moving, but very very slow. 

Posted by Rebecca Gaujot, Realtor®, Lewisburg WV, the go to agent for all real estate (Perry Wellington Realty, Adam Conrad, Broker) over 9 years ago

Dean,

Here's a stat for you, according to the U.S. Census Bureau, in the 2nd quarter of 2008, only 58% of all homes were owner occupied.

42% of all homes are either vacant, second homes, or investment properties.

If you are wondering how far the market can fall, especially considering Obama's stance on being anti real estate investment, this could get very ugly.

Posted by Mark MacKenzie over 9 years ago

The good news is that markets do come back, or at least they always have in the past - the strong survive and new businesses replace the old failed businesses.  I guess we'll see if this administration puts too many obstacles in the way of that happening in this round.

Posted by Margaret Woda, Maryland Real Estate & Military Relocation (Long & Foster Real Estate, Inc.) over 9 years ago

Hey, gang -

Thanks for your comments, all!

Correction, folks - earmarked money for the City of Chicago from the Housing Recover is only just over $55 Million - not Billion, as before (as some in Washington might say - Million, Billion - what's the difference besides a few zeroes!)

Thanks, Huiting!

And, Mark - I wouldn't characterize President Obama as "Anti Real Estate Investment."  Perhaps more "Distressed Homeowner Friendly - but not for ALL distressed homeowners" is a better characterization.

Enjoy the night - I'm here in FL at Keller Williams Family Reunion - and can't get over the warm weather.  It's almost decadent!

DEAN & DEAN'S TEAM CHICAGO

 

Posted by Dean Moss, Dean's Team Chicago IL Real Estate Team (Dean's Team - Keller Williams Realty Partners Chicago IL) over 9 years ago

Dean, my brother in-law and sis in-law have a condo in Chicago and now live in Oak Park, IL. You are so right. They've shared similar sentiments with me.

Posted by AMBER NOBLE GARLAND - Top Real Estate Expert, Property Tax Appeal Specialist & Author, - The Agent You Can Trust To Deliver REAL Results! (Strategic Marketing Expert & Relocation Specialist Serving New Jersey and nationwide!) over 9 years ago

Do you have any information about how an investor can access the funds that are being allocated for redevelopment?

I am a real estate investor and architect.  We are currently looking at several deals where we would be taking an incomplete building over from a bank or failed developer to complete the deal, and in the process.  Negotiating with banks on real estate is terribly slow.  This won't shake out for some time.

Thanks,

Andy

www.1016architecture.com

Posted by Andrew Wilson over 9 years ago

Hi Dean! Azam interviewed me last week about doing a similar story for the Tribune about how the foreclosures and short sales are affecting neighborhoods in Naperville. 

You are right.  We are no where near the bottom of this thing.

Posted by Julie Ferenzi, Julie Ferenzi (john greene Realtor) over 9 years ago

Dean,  Here in Prince William County, VA we are among the foreclosure leaders in the cuntry  Karen

Posted by Karen Kruschka, - "My Experience Isn't Expensive - It's PRICELESS" (RE/MAX Executives) over 9 years ago

EVER so TRUE   Born and raised in the west (Aurora,IL).  Realtor in sunny Florida now, and we have buyers calling and even flying in to see real estate. Million dollar guestion is this the bottom and can they find a way to finance a part. Enjoy your blogs you say what a lot of us are thinking, we will continue to keep our toes in the water.  Kathleen Herron

Posted by Kathleen Herron over 9 years ago

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