29% of Chicago area mortgages underwater

By Mary Ellen Podmolik
Posted Aug. 9, 2010 at 6:52 a.m.

Almost 29 percent of all home mortgages in the Chicago area were underwater during the year’s second quarter, an improvement from the 31.8 percent level recorded in the first quarter, Zillow reported Monday.

Still, far more mortgages locally are underwater, meaning more is owed on the loans than the homes are worth, than nationally. Zillow, an online real estate site, said the number of single-family homes nationally that are underwater was 21.5 percent in the second quarter, compared with 23.3 percent in the first quarter and 23 percent a year ago.

Zillow also said home values in the Chicago area have fallen 27.2 percent since their peak in July 2006 and now stand at a level they were at in November 2002. But there is a glimmer of hope: the company also said that on a quarter-over-quarter basis, home values rose 1.6 percent during the second three months of the year. It was the first quarterly increase since the second quarter of 2006.

Nationally, sales of foreclosed homes fell to 16.9 percent of all home sales in June, down from a 2010 high of 19.8 percent of all home sales in February.

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  1. ethan Aug. 9, 2010 at 9:06 a.m.

    This article simply reinforces my belief that the housing bubble was created in no small part by over zealous real estate brokers, appraisers and loan financiers. The lack of a quantifiable standard of practice and our government’s insistence that “everyone own a home” has effectively eroded our nation’s collective strength.

    While our governnment blames “the fat-cat banker” for the housing malady, I don’t share their view in it’s entirety. While it’s true that the bank handles the financial end, the bank had nothing to do with over-selling the product. The recent round of financial reforms out of Washington did nothing to address the lack of ethics at the markter (RE end).

  2. Innocent_III Aug. 9, 2010 at 9:30 a.m.

    If you’re looking for root cause, the willingness of FHA and FNMA and GNMA to buy 3 percent down loans seems like a good place to start– it’s just a lot harder to go “undewater” if you start with twenty percent down.

    The low-down payment requirements were instituted after cursory studies showing that default rates weren’t that much higher with the low-down loans. Of course, that was in a rising market– and apparently no one was paid to think about what would happen in a declining market

    On the upside, Zillow’s “assessments” are notoriously volatile, and so the true number is probably less than 29%

  3. dr. house Aug. 9, 2010 at 10:48 a.m.

    Worry extends as jobs become a bigger issue too. It is amazing how many ‘no doc’ loans were created for people who really should not be buying $1 million homes. A glut of McMansions and this is a problem that not only impacts home ‘owners’, but also the neighborhood. Just glad I didn’t take out a HELOC at the height and blow it on vacations and cars. Now we need to really let the bottom fall out of housing vs. keeping it propped up. Supply and demand; it will go lower.

  4. romeotybalt Aug. 9, 2010 at 11:50 a.m.

    Chicago/Naperville has led the United States in job loss the past month. How real estate prices can rise when this area is experiencing rapid job loss is beyond me. This is more likely voodoo statistics. Just look at any neighborhood individually and you will see foreclosures are up in nearly every neighborhood in the city.

    We have been brainwashed into believing that rising prices are good. The lunacy is laughable. Folks, get a grip, the era of your house as an ATM is not coming back, and the government’s attempt to inflate home prices only burden prospective home buyers, thus delaying a much needed depression and recovery.

    In reality high real estate prices cause food, gas, and other necessities to become unaffordable. No wonder people are walking away from their homes in Chicago. I know I did. I let go of my Chicago home and nightmare of 400k, and it’s 4k mortgage, and bought a 60k foreclosure outright. Oh yeah, and thank you First Shitcago Bank (not real name) for giving me loan documents based on fraud, as I will use them to contest the foreclosure and contractual validity of the note under the Uniform Commercial Code.

  5. Brickhouse Aug. 9, 2010 at 12:27 pm

    I think this figure is way under stated. I believe it’s more like 40 to 50 percent of all Chicagoans are underwater. I blame the captive bankers, such as Bank of America, Chase, Wells Fargo, Wachovia, etc, wall street for selling us out, and Fannie Mae/Freddi Mac for failing us the citizens.

  6. Andy Aug. 9, 2010 at 1:37 pm

    Oh, Romeo you must be the typical loser that bought a house that you clearly couldnt afford and now of course its someone else’s fault they loaned you that much money. Enjoy your $60k shack and no chance youre winning that forclosure case on ground there was fraud because you signed the papers which means you were part of the fraud too.

  7. EvenKeel Aug. 9, 2010 at 1:56 pm

    Two things- 1. Underwater mortgages are most likely caused by HELOC’s and buying at the exact wrong time. 2. How’s sending jobs to China and India working out? Where’s Bush’s economic ‘experts’ now?

  8. Simon Aug. 9, 2010 at 1:59 pm

    The goal of home ownership in this country is such a well-crafted myth which the government and lenders have brilliantly wrapped up as being as American as mom, god and apple pie. The roots go to back to the 30’s to quell unruly workers — the logic being that debt-encumbered mortgage holders don’t go on strike. And instead of being straightforward about it, they made the country believe that it was your God-given right and patriotic duty to own your own property. Absurd.

  9. waddirum Aug. 9, 2010 at 2:06 pm


    “Still, far more mortgages locally are underwater, meaning more is owed on the loans than they homes are worth, than nationally.”

  10. ethan Aug. 9, 2010 at 3:04 pm

    EvenKeel, your post is simplistically stupid. Following your logic, 1/5th of every home (21% +) per the article was bought “at the wrong time” with corresponding HELOC’s. To blame the consumer for cashing in on the gravy train is moronic because virtually no one is going to deny a sack of money when presented before them. No one stops betting when they’re on a streak.

    “Blame Bush” adds frosting to your stupidity because NAFTA was signed into law under Slick Willy, although Bush the 1st had a hand in crafting some of the legislative details. So who are you blaming? Bush the 1st, Willy or Dubya?

    Before you reply, read today’s article about Fannie and Freddie’s request for yet more bail-out funds. Ask yourself why Freddie and Fannie are exempt from the recent financial reform legislation. Then rethink your post and offer a retraction.

  11. romeotybalt Aug. 9, 2010 at 3:14 pm

    To: Andy
    Oh, Romeo you must be the typical loser that bought a house that you clearly couldnt afford and now of course its someone else’s fault they loaned you that much money. Enjoy your $60k shack and no chance youre winning that forclosure case on ground there was fraud because you signed the papers which means you were part of the fraud too.

    Sorry Andy, wrong again. The fraud that the bank committed in my particular case was unforseeable at the time, therefore it renders the contract unenforceable. By the way, my 60k “shack” happens to be a home that originally SOLD for over 500k in a much better part of town.

    Captains go down with their ships, not homeowners. Only a fool continues to pay for an asset that has lost over 59% of it’s value. I am only adhering to the terms of my contract and returning the asset to it’s rightful owner, –the bank!

    P.S. You’re right about one thing though, I am a loser, a loser of an albatross of an underwater home!

  12. EvenKeel Aug. 9, 2010 at 4:01 pm

    To ethan: You sir need to understand that both HELOC’s and buying at the same time are two different and distinct events that did not happen to the same buyer at the same time. These events are generally mutually exclusive although it is not with out reason that some folks experienced both at the same time Your assessment that both events happened to all underwater homeowners is just plain dumb. NAFTA is the NORTH AMERICAN Trade agreement, not the WORLD TRADE Agreement. The argument you use about Bill Clinton and NAFTA is old and tired besides being very WRONG. I don’t recall anything in the NAFTA agreement about tech jobs to India or manufacturing jobs to China. If it doesn’t make sense then it is not true and that axiom applies here with your logic (illogic?) As for Bush: No where in my response did I blame Bush. It is your one-way mind at work here-dare I say your defense of Bush (why, I don’y know as he presided over the single worst financial MELTDOWN of any president besides the infamous Herbert Hoover). If you recall-I doubt that you will or do-Bush’s economic advisers claimed that sending jobs to China and India was good for America. So how’s that working? 10% unemployment and it’s here to stay for the foreseeable future. You sir are not getting the facts that you so richly deserve.

  13. ethan Aug. 9, 2010 at 5:11 pm

    EK, look at your 1st post again. “HELOC & BUYING at the wrong time.”

    Not to belabor the point, but it’s fools talk to blame the consumer when the industry engaged in practices that accellerated the condition. If conditions are such that the value of a product is vastly improving every 3 months (and it had been for some time), then the consumer is going to jump on the band wagon. No different than any other trend. The culprit is the industry, not the consumer. One of the inherent risks of a free market economy.

    It’s also fools talk to blame “Bush advisors” or any other item you wish to call out. For 30+ years the economy (and our collective wealth with it) has grown at a remarkable clip. The bad years that we are staring down must be taken in context with the good years that we’ve experienced. The issue at hand is what our current admin is doing about it. Given that we have mortgaged 3~4 generations of future Americans at this point, I can personally say that I am not happy with the current administration.

    Your attempt at combining the RE market and unemployment is misguided. They do not go hand in hand. It is true that rampant unemployment will stress the RE market, but rampant unemployment is not THE cause of underwater mortgages, which is what the article is about.

    If you want to blame the manufacturing industry (or Bush, etc) for leaving the USA, all you need to do is look at the operating expenses of businesses. If it’s cheaper (labor, material, environmental conditions, HC ins., et al) to make the same product elsewhere and import it into the USA, businesses will. That’s how they stay in business. If you want those businesses back, you need to figure out a way to show them that it’s a good business strategy. However, we have a mountain of doubt to climb when staring at the potential costs associated with HCR, Cap & Trade, et al. It is not a very business friendly scenario at this point in time. I believe that this is playing a huge role in the employment picture at this time. Uncertainty across the business landscape is a driving force behind the unemployed.