Currently, the state of the housing market in Chicago is positive, with few foreclosures. However, since the start of the pandemic, many businesses have closed and employees have experienced job loss. This may leave many wondering what the future of the real estate market will hold. It’s important to find facts about foreclosure rates in order to help both homeowners and investors determine the best time to buy or sell their properties.
Chicago Foreclosures: Today
Before the pandemic, the rates of foreclosures in Chicago were climbing. Now, however, mostly due to the CARES Act (Coronavirus Aid Relief and Economic Security Act), homeowners in danger of default can apply for mortgage forbearance on government-backed loans with their lenders. This allows them to delay payments for up to two periods of six months each. According to chicagoagentmagazine.com, nationally 7.1% of all mortgages were in some state of delinquency as of June, which is 3.1 percentage points higher than one year earlier. In this case, delinquency doesn’t necessarily mean that the mortgages will go into foreclosure yet.
Chicago Foreclosures: Tomorrow
Experts project that the number of homes in foreclosure in the United States could as much as double by 2022 without additional government aid, this will particularly affect lower-income households, small business owners, and employees in industries greatly impacted by COVID-19. Along with the increase in home foreclosures, will come a big jump in commercial property foreclosures. With many businesses reducing staff sizes, transitioning to work from home models, or filing for bankruptcy, there will be quite a lot of office and commercial real estate coming on the market in the next few months and years.
One such local example of commercial foreclosure is the historic Palmer House hotel, the second-largest hotel in the city. Since travel for business and pleasure has dwindled, the lodging industry has had some major collapses. According to Chicago.suntimes.com, the owner, an affiliate of Thor Equities is being sued for defaulting on a $333.2 million mortgage. The hotel has been closed since early in the pandemic and hasn’t set a reopening date. The Hilton company, while no longer the owners of the hotel, do still operate it and will likely try to continue the hotel’s legacy even under new ownership. Not all hotels in the same situation will continue operating in the future, however, and many properties will go into foreclosure.
When to Invest in a Foreclosure
Even though the answer may seem like it should be clear-cut, it is more complicated than a simple “yes” or “no.” Investing in a foreclosure now may be the right decision since mortgage interest rates are so low (if you plan on financing any of the purchase, that is). However, the market may soon be flooded with more foreclosures and a bigger inventory of homes for sale. Waiting to purchase may benefit buyers because there will be more of a selection available. Conversely, if the investor wants to resell immediately, the market will favor buyers and there will be a lot of competition.
Overall, the question you will want to ask yourself is if you think the purchase is a good investment: is it in a desirable location? Is it the right price for your budget? Will there be a market for it at the time of your target sales date? If you are unsure about any aspect, it may be best to wait until you have more of a selection.