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Many Chicago Area Homeowners Still Underwater On Mortgages

Many Chicago Area Homeowners Still Underwater On Mortgages

Last week ATTOM data solutions, the parent of RealtyTrac, came out with their Q2 2017 U.S. Home Equity & Underwater Report that looks at how well the nation's homeowners are doing with respect to the equity in their homes. As you no doubt know home equity is a substantial portion of the net worth of the average American and during the housing crisis it largely got wiped out. In fact, a huge percentage of homeowners ended up underwater on their mortgages - i.e. owing more than their home was worth - i.e. having negative equity. Ever since it's been a favorite pastime to monitor how all those homeowners are doing.

ATTOM's report zeroes in on two types of homeowners: 1) seriously underwater, which means the homeowner owes at least 25% more than the home is worth and 2) equity rich, where the homeowner owes no more than 50% of the value of the home. Their graph below shows the trends in both kinds of homeowners - both in absolute numbers and as a percentage of homes with a mortgage. Unfortunately, the underwater graph only begins in 2012, which may in fact be the peak of the problem but I can't be sure, and the equity rich graph doesn't begin until the end of 2013.

US Home Equity Wealth Building Over Time

At the end of the 2nd quarter of 2017 "only" 9.5% of mortgages were seriously underwater, compared to 11.9% a year ago, which is clearly the lowest percentage since the beginning of the time series. Conversely, a record 24.6% of mortgages were equity rich, which was up from 22.1% a year ago.

Daren Blomquist, senior vice president at ATTOM Data Solutions, makes a few interesting observations about the data and about changes in the behavior of homeowners since the crisis:

An increasing number of U.S. homeowners are amassing impressive stockpiles of home equity wealth, enjoying the benefits of rapidly rising home prices while staying conservative when it comes to cashing out on their equity — homeowners are staying in their homes nearly twice as long before selling as they were prior to the Great Recession, and the volume of home equity lines of credit are running about one-third of the level they were at during the last housing boom. However, this home equity wealth is unevenly distributed across different geographies, value ranges, occupancy statuses and lengths of ownership [that one's kinda obvious, right?] , with a disproportionately high equity rich share among high-end properties, investor-owned properties and properties owned for more than 20 years.

To David's point about geographical differences, the Chicago area is not doing nearly as well as the national averages, with only 15.0% of mortgages equity rich (well below the national average) and 17.2% underwater (well above the average). Crain's obtained more detailed information from ATTOM and observed that "Among the nation's 20 largest metropolitan areas, Chicago has both the smallest share of homeowners who have a healthy equity stake and the largest share who are deep underwater on their mortgage". In addition, within the Chicago area the picture varies greatly by zip code, which correlates with price ranges.:

Of the five Chicago-area Zip codes with the highest concentrations of equity-rich homeowners, four are in hot North Side neighborhoods popular with younger buyers...The Zips are 60647 in Logan Square (26.9 percent "equity rich" homeowners), 60618 in Avondale and North Center (26.1 percent), 60641 in Old Irving Park (24.2 percent) and 60630 in North Mayfair and Jefferson Park (23.9 percent).

Ranking above all of those is Zip 60523 in Oak Brook, where 27.7 percent of homeowners with a mortgage are equity-rich.

Apparently two dozen of the Chicago area's zip codes ended up on ATTOM's list of the 100 most underwater zip codes, almost all of which were on the south side or in the south suburbs. Park Forest was the worst in the area, and coming in third place across the nation, with 68% of its mortgages seriously underwater.

ATTOM also provided a graph that showed how the equity position of homes dramatically varies as a function of price range and, as you might guess, the higher end homes are doing way better than the lower end homes.

Home Equity Percent Vs. Value Of Home

#RealEstate #ChicagoRealEstate #HomeEquity

Gary Lucido is the President of Lucid Realty, the Chicago area's full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider's view of the seamy underbelly of the real estate industry, or you just think he's the next Kurt Vonnegut 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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