Chicago Foreclosure Activity Remains Depressed Despite High Delinquencies

Last week ATTOM Data Solutions released their Q3 2020 Foreclosure Market Report in addition to updating their RealtyTrac data. As has been the case for several months now foreclosure activity is pretty much at a standstill as a result of the pandemic induced foreclosure moratorium. This is true both for the city of Chicago and the nation as a whole.

Chicago Foreclosure Activity
Chicago foreclosure activity has declined dramatically since the housing crisis. However, the recent plunge is the result of the moratorium placed on foreclosures in light of the Covid-19 crisis.

The foreclosure market report also provided an update on how fast foreclosures are proceeding. As you can see in the graph below it did tick up a bit in the 3rd quarter and remains at an absurdly high level of 830 days.
Average days to complete a foreclosure
In the absence of natural foreclosure activity the real story is the high level of mortgage delinquencies. Check out the graph below from Black Knight’s August 2020 Mortgage Monitor report. The delinquency rate is barely lower than July and higher than it’s been in several years.
Black Knight Mortgage Delinquency Rate
Mortgage delinquencies are trending downward after hitting an ugly peak a couple of months ago

Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data company, commented on the low level of foreclosure activity and the implications of the high delinquency rate:

But it’s important to remember that the numbers we’re seeing today are artificially low, even as the number of seriously delinquent loans continues to increase, and that we’ll see a significant – and probably quite sudden – burst of foreclosure activity once these various government programs expire.
We’ll certainly see more repossessions by lenders once the foreclosure moratoria have ended, but maybe not as many as people might expect. Given the record amount of homeowner equity – over $6.5 trillion – it seems likely that many homeowners in financial distress will opt to take advantage of strong demand among homebuyers and sell their property rather than risk losing it to a foreclosure auction.

For what it’s worth, Black Knight echoed that sentiment about record home equity levels attenuating repossessions.

Chicago Shadow Inventory

We are still seeing a gradual decline of Chicago homes in the foreclosure process. I guess shutting off the pipeline helps a bit, though it’s not clear how these homes are leaving the pipeline. In September the pipeline shrank by an additional 242 units from August.

Chicago homes in foreclosure
The number of homes in foreclosure in Chicago continues to decline during the pandemic

#Foreclosures #ChicagoForeclosures
Gary Lucido is the President of Lucid Realty, the Chicago area’s full service real estate brokerage that offers home buyer rebates and discount commissions. If you want to keep up to date on the Chicago real estate market or get an insider’s view of the seamy underbelly of the real estate industry you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.

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