Gauging the Impact of Home Foreclosure on Neighborhood Property Values

Improving Assessments to Help Struggling Homeowners

Who is Terrance Harrington Real Estate Consulting?

Independent research and consulting firm focused on the housing We help Investors, Builders/Developers, and Lenders make smart decisions Our research clients receive: Monthly reports Survey Results Insight from the Experts Webinars White Papers Introductions And much more

Todays Agenda
1. Why Real Estate Matters 2. When Real Estate Markets Dont Work 3. North Lawndale Real Estate Market 4. An Overview of Foreclosures in Cook County 5. Conclusion and Recommendations

Why Should We Care?

In there basic use, homes provide shelter and are the places where your familys memories are made.

So, why should you care about the housing in your community?

Why Should We Care?

The Tax System Mediates the Role of Housing in Neighborhoods, Markets, and Local Government

Real Estate Matters

Housing Defines Our Communities

Real Estate Matters

Breakdown of Net Worth by Asset, 2002
(Top Asset Classes; Outliers Excluded)
70% 60% 50% 40% 30% 20%
11.4%

53.8% 41.7% Home Equity Stocks 401K Bank Savings

8.2% 7.4% 7.9% 2.6% 6.3%

10% 0%

All Households

Lower Income Households

Source: Net worth and the assets of households, US Census Bureau 2002.

Housing Builds Individual Wealth

Real Estate Matters

Source: US Census Bureau

Housing Supports Government

Todays Agenda
1. Why Real Estate Matters 2. When Real Estate Markets Dont Work 3. North Lawndale Real Estate Market 4. An Overview of Foreclosures in Cook County 5. Conclusion and Recommendations

When Real Estate Markets dont Work...

Housing Bubble Aftermath: One in Four Homes Are Now Underwater

Bad Things Happen to Our Cities

The Devastating Impact of Foreclosures

Source: Center for Responsible Lending Press Release, May 2009

Community Impact
Loss of property value Increased crime, vandalism and fire Increased strain on municipal services coupled with declining tax base Increasing homeless population Negative effects on children Environmental hazards Loss of local businesses and services Increasing unemployment Abandoned pets

Greatest Impact in Low Income Neighborhoods

Data: HUD, Neighborhood Stabilization Program

Todays Agenda
1. Why Real Estate Matters 2. When Real Estate Markets Dont Work 3. North Lawndale Real Estate Market 4. An Overview of Foreclosures in Cook County 5. Conclusion and Recommendations

15

North Lawndale Real Estate Market

242,000

38,000

Volume Has Dropped by 84.3% Between the Peak in 2006 and 2011

North Lawndale Real Estate Market

Volume Has Increased by 1.3% Since This Time Last Year

North Lawndale Real Estate Market

Week Ending 8/24/2011

Average Listing Price For Homes In North Lawndale was $131,130 Average Listing Price For Chicago $379,427

North Lawndale Real Estate Market

Listing Price Dropped 5.1% From The Week Ending 8/17/2011

North Lawndale Real Estate Market

Average Price Per Sqft For Homes In North Lawndale $30 Average Price Per Sqft For Chicago $147

Todays Agenda
1. Why Real Estate Matters 2. When Real Estate Markets Dont Work 3. North Lawndale Real Estate Market 4. An Overview of Foreclosures in Cook County 5. Conclusion and Recommendations

21

Foreclosure Overview in Cook County

Chicago Community Areas With Highest Foreclosure Rates Jan. 2010 Mar. 2011

Chicago has suffered over 36,400 foreclosures since the beginning of 2010 impacting nearly 50,000 housing units citywide. Foreclosures make up a significant portion of properties on the Citys vacant buildings index. There were 18,320 properties on the Citys vacant buildings index as of September 2010. There were 1,896 red flag properties on the Citys vacant buildings index where there was a foreclosure filing with no subsequent outcome. Red flag foreclosures are disproportionately concentrated in Chicagos African American communities. Over 71 percent of red flag homes are located in highly African-American communities, compared to only 6.5 percent in predominantly white communities.

Foreclosure Overview in Cook County

Chicago Community Areas With Highest Foreclosure Rates Jan. 2010 Mar. 2011

African-American communities are 11 times more likely to have a red flag home than are white communities, while they are 3 times more likely to have a foreclosed property and 6 times more likely to have a vacant building. There are 2,558 lender-owned single family homes that are likely vacant but not registered with the City of Chicago.

These homes are likely not secured and maintained to the standards required by the City of Chicago and may be in an advanced state of disrepair.

Chicago Community Area Foreclosures

North Lawndale: Foreclosures Started 543 North Lawndale: Housing Units in Foreclosure 1,026 North Lawndale: REO Property 262 North Lawndale: REO Housing Units 480 Chicago Community Areas With Highest Foreclosure Rates Jan. 2010 Mar. 2011

Foreclosure Overview in Cook County

Chicago Community Areas With Highest Foreclosure Rates Jan. 2010 Mar. 2011

With foreclosed homes in Cook County currently selling at 49% the price as non-foreclosure home sales, the geographic concentration of foreclosures and REO property suggests there will be further severe decreases in home values and homeowner wealth in Chicago's African-American and Latino neighborhoods. Neither the economy nor the job market in Illinois can fully recover until the foreclosure crisis is solved.

Todays Agenda
1. Why Real Estate Matters 2. When Real Estate Markets Dont Work 3. North Lawndale Real Estate Market 4. An Overview of Foreclosures in Cook County 5. Conclusion and Recommendations

26

Conclusion & Recommendations

27

Recommendations
Community and faith-based organizations can partner and perform the following tasks: 1. Map vacant properties and conduct research to refine redevelopment focus areas. 2. Establish purchase and sales agreements for Real Estate Owned (REO) properties. 3. Conduct feasibility analysis; choose properties; purchase properties. 4. Leverage funds, resources and partners to create housing, jobs, stabilization. 5. Market the properties; offer financing options; support sales or rental of finished units. 6. Monitor and evaluate the program.

North Lawndale Can Recover

North Lawndale Can Recover

North Lawndale Can Recover

North Lawndale Can Recover

North Lawndale Can Recover

North Lawndale Can Recover

North Lawndale Can Recover

North Lawndale Can Recover

North Lawndale Can Recover

North Lawndale Can Recover

Make great decisions with great analysis

Terrance Harrington terrance@realtyproschicago.com (773) 426-7728