Small Signs Of Chicago Foreclosures Picking Back Up

Late last week ATTOM Data Solutions released their Year-End 2020 U.S. Foreclosure Market Report and updated their RealtyTrac data. As seen in the graph below both the number of foreclosure filings and the foreclosure rate for the US hit a 16 year low last year. It’s no surprise since those numbers have been coming down for several years now but, also, 2020 was helped by the foreclosure moratorium imposed to help people cope with the economic fallout from the pandemic. Nevertheless, Chicago did get special mention in this report as having the second highest foreclosure rate among large metropolitan areas and Illinois had the third highest rate among states.

US foreclosure activity and rates
2020 had the lowest foreclosure activity and rate in 16 years

Rick Sharga, Executive Vice President of RealtyTrac, commented on the impact of the moratorium and the risks of another tidal wave of foreclosures after the moratorium expires:

There is a backlog of foreclosures building up – loans that were in foreclosure prior to the moratoria; loans that would have defaulted under normal circumstances; and loans whose borrowers are in financial distress due to the pandemic. While it’s still highly unlikely that we’ll see another wave of foreclosures like the one we had during the Great Recession, we really won’t know how big that backlog is until after the government programs expire.
We ended the year with a near-record number of seriously delinquent loans, but historically low levels of foreclosure activity. The good news is that the government and mortgage industry succeeded in working together to prevent unnecessary foreclosures; the question remains how many homeowners whose finances have been affected by the pandemic will ultimately default on their loans, and whether the strength of the housing market will help cushion the fallout.

The year end report also provided an update on how long it’s taking to complete foreclosures and the answer is that it’s still a long, long time. The fourth quarter was up slightly from the previous quarter.

Average days to complete a foreclosure
The time required to complete a foreclosure rose slightly from the third quarter to the fourth quarter.

Using the updated RealtyTrac data I was able to update my Chicago graphs. It’s hard to see in the first one below but the number of defaults actually doubled from the previous month which might be an indication that new foreclosures are starting to enter the pipeline again. I’m not exactly sure where they are coming from but it sounds like there might be certain categories of defaults that are exempt from the moratorium.
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.

Chicago Shadow Inventory

The number of homes in some stage of the foreclosure pipeline continues to decline as you can see in the graph below. Before the pandemic that line was likely to flatten out as it was approaching the bottom. However, with the moratorium in place it continued to drop at the same rate at which it had been dropping. In the last month it dropped by 336 units to reach a new low of 2124 units.

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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