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HOME OWNERSHIP AT RISK IN ROGERS PARK - By Peter Fugiel

Posted on February 08, 2011

As much as Rogers Park is a rental community, condo ownership came on strong in the past decade. A record number of conversions added to the ownership profile here and in West Ridge. Now with the real estate bubble burst, the banks unable to dispose of all their distressed home properties, there is an increased interest in protecting rental assets for the affordable housing they provide. In Rogers Park that is critical.

Still, it would be a mistake not to treat the ownership problem as equal to the rental housing challenge. In a recent survey I conducted on Chicago metro foreclosure filings, using numbers released by the Woodstock Institute, Rogers Park is among the top 20% of communities impacted by the problem. In the past five years, this community has experienced nearly 1,500 foreclosure filings, meaning lenders have taken legal steps to foreclose. Considering we have somewhere between five thousand and six thousand ownership units, our distressed rate is somewhere between one-quarter to one-third of all the ownership units in the community! In normal times, foreclosures are usually less than one half of one percent of all mortgaged properties. So this problem is fifty to a hundred times worse than in a ‘typical’ recession.

To provide some background to our dilemma, Rogers Park has had one of the lowest owner-occupancy rates in the City, similar to that of Woodlawn and Lawndale. Lower incomes here have kept ownership rates low, since converting rental buildings to condo units has been a fairly recent innovation on the upper lakefront. As will all the newer condo markets, unit prices in the past decade soared as unregulated lenders and loan ‘packagers’ swarmed into areas where conversions made ownership a possibility. Prices in Rogers Park in past decade rose from $130,000 to over $200,000. West Ridge prices increased dramatically as well.

Condo prices are back at 2001 levels. As lenders have gotten prohibitively tough on credit scores, and while lenders still hold a huge number of late loans, there is virtually no market support for better prices. Without new buyers, and with banks waiting to dispose of yet more units into the market, there is tremendous downward pressure on area prices. The one program that made a difference, the federal tax credit, was cancelled.

Recent real estate sales statistics provide an interesting insight into our problem locally. In the past year, there were 340 condo sales in Rogers Park, with an average price of $137,000. However, for the 190 units there were distressed unit sales, the average price was $85,000. In West Ridge, distressed unit sales are even more pervasive, with a general market sales price of $89,000, contrasted with the distressed unit price of $66,000! The federal program to encourage distressed owners to re-finance is not possible with markets prices more than 60% off their 2007 levels.

In a word, our local ownership markets came late to the financing game. Units were frequently purchased at market highs. By now it is not only individual units that are at risk, but whole condo associations, as late member payments, empty units, and low unit prices put associations at severe financial risk.

There has not been a homeownership crisis like this in the US since the 1930’s. But this may also be a new era in the crucial role communities will play in shaping policy. There is nothing more powerful that a self-respecting community. We can make a difference here, and now. 


Pete Fugiel holds a PhD in government from N.I.U. and was the senior housing analyst at a Chicago asset management company for twenty years. He writes a housing column for a top municipal bond research website, muninet.guide. Pete resides with his family in southeast Rogers Park. His consulting specialty is called Metrometrics.

 

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