Chicago Real Estate Lawyer - Rachell M. Horbenko

Wednesday, May 16, 2012

Illinois Third in Foreclosures Despite National Improvement

From today's Chicago Tribune.

Foreclosures starts in Illinois are on par with those in other areas but the state's court-supervised foreclosure system continues to bog down properties in the process.

Almost 7.5 percent of all one-to-four-unit mortgage loans in Illinois were in foreclosure in the first quarter, compared with a national average of 4.39 percent, according to data released Wednesday by the Mortgage Bankers Association.

"Illinois and New Jersey trail only Florida as being the worst in the country, and they're getting worse," said Jay Brinkmann, the association's chief economist. "The rate in Illinois more than twice that of California. In the judicial states the problem continues to get worse in terms of the backlog of loans in the foreclosure process."

Added Miichael Fratantoni, the association's vice president of research and economics, "This is not a case that loans are entering foreclosure at a greater extent than in nonjudicial (states). It's that they're staying in foreclosure longer."

Illinois is not alone, according to the trade group's quarterly national delinquency survey. In judicial states, the percent of loans in the foreclosure process reached an all-time high of 6.9 percent during the first quarter. That compares with a rate of 2.8 percent in non-judicial states, the lowest since early 2009.

"That difference is due entirely to the systems some states have in place that effectively block timely resolution of non-performing loans," he said. "Hard-hit markets like Arizona that have moved through their foreclosure backlog quickly are seeing home price gains this spring."

Of all loans in foreclosure nationally, 52.4 percent are centered on just five states: Illinois, Florida, California, New York and New Jersey.

The overall national picture for mortgage delinquencies showed improvement in the quarter. The combined percentage of loans in foreclosure or at least one payment past due, at 11.3 percent, was at the lowest reading since 2008. Only four states -- Maryland, Delaware, New Jersey and Washington -- saw first-quarter increases in the 90-plus day delinquency rates.

Foreclosure activity typically slows in the first three months of the year, but some of the overall improvement in delinquency rates is tied to modest gains in the job market, economists said.

"The report has some considerable good news in it in terms of where we are in the housing recovery," Brinkmann said. "The improvement does reflect a generally improving jobs picture over the last year."

Thirteen months ago, the Illinois Supreme Court formed a committee to study the state's mortgage foreclosure process and how different rules affect the proceedings here and how other states have handled an unprecedented number of foreclosure cases.

This spring, the committee made recommendations to the court. Most involved paperwork changes and giving homeowners more notice about their rights. However, the committee also recommended that the Supreme Court require that in most cases foreclosure sales be held within 45 days of the expiration of the redemption period, the date by which a homeowner can make the mortgage current and keep the property.

2:53 pm cdt

Friday, May 11, 2012

Bank of America Offers Home Loan Modification

From Wednesday's Sun-Times:

LOS ANGELES — Homeowners with a Bank of America mortgage have good reason to check their mailbox.

The lender said Tuesday it has begun mailing out letters to customers who may qualify to have their home loans reduced as part of a multistate settlement over alleged foreclosure abuses.

The company estimates that more than 200,000 customers could be in line for a reduction in the principal balance on their mortgage.

Some customers could receive letters from the bank as early as this week that invite them to provide financial information as part of a review process for the program. The bank plans to have mailed out most of the letters by the end of the third quarter.

Bank of America estimates that customers whose loans are modified will save, on average, 30 percent a month on mortgage payments.

Among the criteria to qualify, borrowers must owe more on their mortgage than the property is worth and be at least 60 days behind on payments as of Jan. 31.

Bank of America will reduce the amount owed by the homeowners by as much as $100,000 in some cases. Only mortgages owned by the company qualify.

12:56 pm cdt

Thursday, May 10, 2012

Bernanke: Even Qualified Homeowners Can't Get a Mortgage

Banks have become so restrictive in making mortgages that many worthy homebuyers are being frozen out of the U.S. housing market, and lending practices are not likely to loosen any time soon, Federal Reserve Chairman Ben Bernanke said on Thursday.

Speaking via satellite to a banking conference in Chicago, Bernanke highlighted ongoing problems in mortgage finance availability, even though banks are much healthier now as the 2007-2009 financial crisis has receded.

"To be sure, a return to pre-crisis lending standards wouldn't be appropriate," Bernanke said. "However, current standards may be limiting or preventing lending to many creditworthy borrowers."

Lax lending practices, including "liars' loans" handed out to borrowers who provided little or no documentation for jobs and incomes, have been cited as a key contributing factor in precipitating the severe financial crisis.

Bernanke implied the backlash by banks against criticism of their lending practices, which now are far tighter, might be overdone and will be extremely hard to reverse.

"Many factors suggest this situation will be difficult to turn around quickly, including the slow recovery of the economy and housing market, continued uncertainty surrounding the future of the government-sponsored enterprises, the lack of a healthy private-label securitization market, and cautious attitudes by lenders," Bernanke said.

Overall, Bernanke said, home mortgage credit outstanding at banks has contracted about 13 percent from its peak.

The government-sponsored enterprises - Fannie Mae and Freddie Mac - previously were key vehicles in home-mortgage finance because they bought mortgages originated by banks and packaged them into securities that were then resold to investors. The practice freed up funds for banks to make new mortgages.

But Fannie and Freddie had to be bailed out by the government and were taken over at the height of the crisis. The government is considering options that include possibly winding them down, leaving it unclear what type of housing-finance system eventually will emerge in future.

Bernanke said Fed surveys show that even when homebuyers can make a 20 percent down payment, banks are often reluctant to offer mortgage money to any but the best qualified.

"Most banks indicated that their reluctance to accept mortgage applications from borrowers with less-than-perfect records is related to 'putback risk' - the risk that a bank might be forced to buy back a defaulted loan if the underwriting or documentation was judged deficient in some way," he said.

Recent Fed surveys on credit conditions have found that, years after the crisis, banks remain worried about hangover from the bursting of the housing bubble and now also fear strains from the ongoing European debt crisis.

Loan officers said they were less willing now than they were five years ago to lend to anyone except those with stellar credit.

On the positive side, Bernanke said the banking system generally is in much stronger condition, with more capital on hand and ample liquidity, so that as recovery gains traction and generates more credit demand it will be in good shape to expand lending that is necessary for stronger growth.

5:59 pm cdt

Saturday, April 28, 2012

Home Buyers Shocked to See Bidding Wars are Back

From yesterday's Wall Street Journal:

A new development is catching home buyers off guard as the spring sales season gets under way: Bidding wars are back.

From California to Florida, many buyers are increasingly competing for the same house. Unlike the bidding wars that typified the go-go years and largely reflected surging sales, today's are a result of supply shortages.

Peter Earl McCollough for The Wall Street Journal

Debbie and Bill Wetherell received multiple offers for their home.

Home Builders' Health Improves

Vote and Discuss

Is it time to buy your first home?

"It's a little surprising because we thought bidding wars were done with," said Andy Aley, who is looking to buy his first home in Seattle's Beacon Hill neighborhood. The 31-year-old attorney was outbid this year when he offered up to $23,000 above the $357,000 listing price and agreed to waive inspections and other closing conditions.

Competitive bidding in the current environment isn't producing huge price increases or leaving sellers with hefty profits, as occurred during the housing boom. Still, the bidding wars caused by tight inventory provide the latest evidence that housing demand is starting to pick up after a six-year-long slump.

An index that measures the number of contracts signed to purchase previously owned homes rose in March to its highest level in nearly two years, up 12.8% from a year ago and 4.1% from February, the National Association of Realtors reported on Thursday.

"We very much believe we've hit bottom," said Ivy Zelman, chief executive of a research firm, who was among the first to warn of a downturn seven years ago. Earlier this week, she raised her home-price forecast for the year, calling for a 1% annual gain, up from a 1% decline.

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The Wall Street Journal's quarterly survey found that the inventory of homes listed for sale declined sharply in all 28 markets tracked. Real-estate agents consider a market balanced when there is a six-month supply of homes for sale. At the height of the housing crisis, in 2008, there was an 11.1-months' supply. In March, there was a 6.3-months' supply.

Inventory levels in many markets were at the lowest level in years. At the current pace of sales, it would take just 1.5 months to sell all the homes listed in Sacramento, Calif., and 2.4 months to sell all the homes listed in Phoenix. San Francisco and Washington, D.C., each have 3.4 months of supply, while Miami has 4.1 months of supply.

Other markets have plenty of homes. Chicago, for example, has 9.4 months of supply, while New York's Long Island has 16.1 months of supply. Even in those markets, the number of houses for sale is edging down.

Increased competition is frustrating buyers and their agents. "We're writing a record number of offers, but we're not seeing a record number of closings and that's because it's so competitive," said Glenn Kelman, chief executive of real-estate brokerage Redfin Corp. in Seattle with offices in 14 states.

Nearly 83% of offers that Redfin agents have made on behalf of clients in the San Francisco Bay area this year and 71% in Southern California have had competing bids. Redfin represented a buyer that made the winning bid on a Gaithersburg, Md., home earlier this month after agreeing to adopt the dog of the seller, who was relocating and looking to find a new home for "Buddy," a white toy poodle.

Inventories are declining for a number of reasons. Some sellers, unwilling to accept prices that are still down from their peak by one-third, are taking their homes off the market in anticipation of higher prices down the road. Meanwhile, investors have been outmaneuvering consumers for the best properties, often making cash offers that are quickly accepted by sellers.

In addition, some economists say that inventory levels are being held artificially low because Fannie Mae, Freddie Mac and the nation's biggest banks have been slow to list for sale hundreds of thousands of foreclosed homes they currently own. The lenders slowed down foreclosure sales and repossessions after record-keeping abuses surfaced 18 months ago.

Banks and other mortgage investors owned nearly 450,000 foreclosed properties at the end of March, and another two million mortgages were in some stage of foreclosure.

Inventories could rise, putting more pressure on prices, if the banks and other lenders step up their efforts to sell their properties. Real-estate agents say they aren't concerned. "There's an enormous appetite for foreclosures. Release the inventory. It will sell," said Richard Smith, chief executive of Realogy Corp., which owns the Coldwell Banker and Century 21 real-estate brands.

The declining inventory of older homes is spurring sales of new homes. New home sales are up 16% so far this year, compared with a year ago, while inventories of new homes fell in March to their lowest level since record keeping began in 1963.

Meritage Homes Corp., a builder based in Scottsdale, Ariz., reported Thursday a 36% increase in orders for the quarter ending in March versus the previous-year period.

Even though bidding wars are pushing prices higher, many homes are still selling for prices far lower than a few years ago. Increased demand is "entirely affordability driven, which tells me there will be strong resistance to price increases" by buyers, says Jeffrey Otteau, president of Otteau Valuation Group, an East Brunswick, N.J., appraisal firm.

Rents are rising at a time when mortgage rates have fallen to very low levels. The result is that the monthly mortgage payment on a median-priced home is lower than any time since the 1990s. Freddie Mac reported on Thursday that mortgage rates fell to 3.88% for the average 30-year fixed rate mortgage, near its lowest recorded level.

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Rates are "so low that we can afford a house that was out of our price range before," said Aarthi Srinivasan, who is looking with her husband for a home around Palo Alto, Calif., one of the country's hottest real-estate markets.

Ms. Srinivasan says she fears that prices are being bid up too quickly. She says she had her "aha moment" earlier this year while touring a 50-year-old house that needed extensive remodeling. The home, listed at $1.1 million, received nearly 10 offers and eventually went under contract for more than $1.3 million to a buyer who hadn't even viewed the property.

"There are only so many buyers who are going to be in such a hurry, so we're hoping it'll top off soon," she says. On Monday, they offered to pay more than the $1.2 million list price for a four-bedroom, bank-owned foreclosure. They haven't found out if they made the top bid.

On the other side of those transactions are sellers like Debbie and Bill Wetherell, who had 17 offers in four days for their four-bedroom home in Danville, Calif. "I was floored. It was so fast, it was surreal," says Ms. Wetherell. The home sold on Wednesday for $796,000, more than $50,000 above the asking price.

Still, the sale is for nearly $180,000 less than what they paid for the house in 2005. Ms. Wetherell's husband has commuted to Reno, Nev., for five years and they have decided to relocate.

Housing markets face other headwinds. More than 11 million homeowners owe more than their home is worth. It is a big reason that the "trade-up" market has been stalled. These homeowners can't sell their current homes, let alone come up with the down payment for their next home.

Mortgage-lending standards remain tough. Real-estate agents say an unusually high share of deals are falling apart because homes won't appraise at the price that buyers have agreed to pay sellers.

Still, borrowers with stable jobs are looking to make deals. Kelly Pajela-Fu and her husband offered to pay the asking price of $600,000 for a four-bedroom home in Marblehead, Mass., within a day of the property hitting the market.

"We just knew this house would go quickly," says Ms. Pajela-Fu, a 31-year-old doctor who had lost out on an earlier offer. Their strategy to avoid a bidding war paid off: The sellers accepted their offer before having an open house.

10:26 am cdt

Thursday, April 19, 2012

Fannie and Freddie Set Timelines for Short Sale Responses

Thanks to Garret Hiller and John Poast for providing this!

Beginning June 15, real estate agents working with distressed homeowners whose loans are backed by Fannie Mae and Freddie Mac should expect to receive a decision on a short sale offer within 30-60 days.

The GSEs issued new guidelines Tuesday that fall under the Servicing Alignment Initiative rolled out last fall and aim to bring greater transparency to the short sale process and expedite decisions related to these pre-foreclosure sales.

Not only is a short sale an effective foreclosure alternative when home retention is no longer an option, but it keeps homes occupied and helps to maintain stable communities, according to the Federal Housing Financing Agency (FHFA).

Addressing real estate practitioners’ No. 1 complaint about short sales, FHFA directed Fannie Mae and Freddie Mac to establish a new uniform set of minimum response times that servicers must follow in order to facilitate more efficient short sale transactions.

The GSEs’ new short sale timelines require servicers to make a decision within 30 days of receiving either an offer on a property under the companies’ traditional short sale programs or a completed Borrower Response Package (BRP) requesting short sale consideration, whether it’s through the federal government’s Home Affordable Foreclosure Alternative (HAFA) program or a GSE program.

If more than 30 days are needed, servicers must provide the borrower with weekly status updates and come to a decision no later than 60 days from the date the BRP or offer was received.

According to the GSEs, this 30-day add-on will provide some leeway for servicers who may need more time to obtain a broker price opinion (BPO) or a private mortgage insurer’s approval for a short sale. All decisions must be made within 60 days.

In the event a servicer makes a counteroffer, the borrower is expected to respond within five business days. The servicer must then respond within 10 business days of receiving the borrower’s response.

The GSEs plan to use the new short sale timelines to evaluate servicer compliance with the Servicing Alignment Initiative.

Edward DeMarco, acting director of the FHFA, says the GSEs new borrower communication and timeline requirements for short sales “set minimum standards and provide clear expectations regarding these important foreclosure alternatives.”

GSE servicers must comply with the new minimum communication time frames for all short sale evaluations conducted on or after June 15, 2012, although servicers are encouraged to begin implementing the new requirements sooner.

“I applaud Fannie and Freddie for finally coming out with real guidance with real world timelines for their servicers,” commented Anthony Lamacchia, broker/owner of McGeough Lamacchia Realty Inc., which specializes in short sales. “There is no question that this will help short sales and the market as a whole.”

Last year Freddie Mac completed 45,623 short sales, a 140 percent increase since 2009. Fannie Mae’s short sale completions shot up by 101 percent over the same period, totaling around 79,800 in 2011.

9:14 am cdt

Tuesday, April 17, 2012

March Housing Starts Fall But New Permits Surge

(Reuters) - Groundbreaking on homes fell unexpectedly in March but permits for future construction rose to their highest level in 3-1/2 years, giving a mixed message for one of the economy's weaker sectors.

Housing starts slipped 5.8 percent to a seasonally adjusted annual rate of 654,000 units, the Commerce Department said on Tuesday.

The long-moribund housing sector has showed signs of an incipient recovery in recent months, and homebuilding could add to economic growth this year for the first time since 2005.

Despite the drop in starts, the data suggests housing construction could still add to gross domestic product during the first quarter, said Millan Mulraine, a macro strategist at TD Securities.

But an oversupply of unsold homes is depressing prices, creating a big hurdle for the sector, said Gregory Miller, an economist at Suntrust Banks in Atlanta.

"It's going to be rocky for a while," Miller said, adding the data pointed at best to a tentative recovery.

Some analysts speculated that a mild winter in the United States led homebuilders to start new projects ahead of schedule, and that March's decline amounted to a payback.

"Weather was so mild earlier in the year we might have pulled some of the starts forward," said Mark Foster, who helps manage $500 million at Kirr Marbach & Co in Columbus, Indiana.

"But the trend looks good, it feels like the housing market is trying to form a bottom."

February's starts were revised down to a 694,000-unit pace from a previously reported 698,000 unit rate.

Economists polled by Reuters had forecast housing starts little changed at a 705,000-unit rate.

Stock futures pared gains after the data was published, while prices on government debt trimmed losses.

March's decline in housing starts was the biggest percentage drop since April of last year, although most of the fall was in the volatile multi-unit category, which declined 16.9 percent.

Starts for single-family homes eased 0.2 percent.

And brightening the report's message on the economy, new permits for home construction surged.

Permits rose 4.5 percent to a 747,000-unit pace last month, the highest since September 2008 and beating economists' expectations for a 710,000-unit pace.

"The rise in permits kind of offsets the disappointing data," said Omer Esiner, a market analyst at Commonwealth Foreign Exchange in Washington.

Sentiment among home builders ebbed in April for the first time in seven months, a survey showed on Monday.

11:11 am cdt

Friday, April 6, 2012

Rates on 30-Year Mortgage Slide to Under 4 Percent

From yesterday's Associated Press:

WASHINGTON — The average U.S. rate on the 30-year fixed mortgage dipped again this week, as the cost of home-buying and refinancing stayed near record lows.

Mortgage buyer Freddie Mac says the rate on the 30-year loan fell slightly to 3.98 percent from 3.99 percent last week. In February, the rate touched 3.87 percent, the lowest since long-term mortgages began in the 1950s.

The average rate on the 15-year fixed mortgage also fell, to 3.21 percent from 3.23 percent. That’s above the record low of 3.13 percent hit last month.

Mortgage rates have been below 4 percent for all but one week since early December. That’s helped lift the outlook for housing after four sluggish years of home sales. Still, most economists expect only modest gains.

1:18 pm cdt

Tuesday, March 27, 2012

Slowdown in Home Sales Slows Parents' Exodus to the Suburbs

From today's Chicago Crain's Business:

When Jill and Paul Syftestad's oldest daughter was ready to start school four years ago, they put their South Loop townhouse on the market and planned to move to the suburbs.

One offer fell through at the last minute and a second was well below their asking price. “We had our hearts set on moving,” says Ms. Syftestad, an IT project manager at a nursing association. “We were devastated. We pulled it off the market and decided to stay.”

The recession dramatically slowed the number of people making the trek to the suburbs for bigger houses, safer neighborhoods and better schools. Unable or unwilling to leave the city, a small but growing group of middle-class families are turning to Chicago's public and private schools, a development that holds both potential and peril for Mayor Rahm Emanuel and his efforts to improve the school system.

“I've had lots of clients who thought they would be able to sell their condo and can't. So they are now trying to make it work” in city schools, says Christine Whitley, an education consultant who helps families through the Chicago Public Schools selection process. “They bought their condo way before they had kids and didn't really factor schools into the equation. They figured they could sell and move to a better neighborhood or move to the suburbs. Now they can't sell it, so they're trying to figure out options” in the city.

This week, anxious parents will find out whether their kids will get coveted slots in the city's selective-enrollment elementary schools, a process determined by test scores, or magnet schools, determined by lottery. Selective elementary school applications have increased by 50 percent in the past four years, dwarfing the 12 percent increase in high-school applications that has sparked so much concern in the past month as the city tweaked its selection criteria.

“People are trapped,” says Tina Feldstein, a broker at Southport Sotheby's International Realty in Chicago and president of the Prairie District Neighborhood Alliance, a South Loop association. “If they sell, they'll take a major loss. They're not in a position to do it. Everyone's saying, ‘Next year, it will improve. Prices will get better.' In the meantime, they're forced to become involved in CPS schools.”

The slowdown in the decades-long procession to the suburbs provides Mr. Emanuel with the chance to bolster the city's middle class and make greater strides in improving CPS than his predecessor, Richard M. Daley.

This constituency—whether or not it wants to be in the city—has the skills and the clout to demand better schools and a personal stake in the outcome. Those factors could be game-changers in the struggle to turn around a system labeled the worst in the nation by the U.S. secretary of education in 1987.

But Mr. Emanuel will have to make hard choices at a time when resources are dwindling, and he must move quickly before the real estate market rebounds and more parents leave.

There's a huge opportunity that Rahm has to attract and keep families in the system who otherwise would have left,” says Timothy Knowles, director of the University of Chicago Urban Education Institute. “It's going to come down to strategic choices: Do you make investments in education or policing to make neighborhoods safer?”

These new families are clamoring for more investment and putting pressure on local politicians.

“It's the No. 1 issue in my ward,” says Ameya Pawar, alderman for the 47th Ward on the city's North Side. “I hear about it all the time. Parents are trying to navigate CPS and get the best education for their kids as possible. At some point the market is going to come back. We need to figure out how to keep people here and get new people moving in. We've probably got three to five years.”

The increased demands put additional pressure on a city facing a severe budget squeeze. Chicago had to close deficits of more than $500 million annually in each of the past three years. Budget gaps in the school system have ranged from $475 million to $712 million. But the heightened attention also strengthens Mr. Emanuel's hand against the teachers union as he pushes for a longer school day, closes underperforming schools and supports charter schools.

“The question is how much political will there will be and whether there's so much pushback that people get cold feet,” Mr. Knowles says. “To do it at the scale they need, they'll have to enlist civic engagement in a much more significant way.”

Mr. Emanuel declined to be interviewed about how the changes in mobility are affecting city schools. Chicago schools CEO Jean-Claude Brizard, after initially agreeing to talk, turned down multiple attempts to speak with him over two weeks.

CPS Director of Media Affairs Robyn Ziegler released a statement that the school system is laboring to increase the seats in high-performing schools, lengthen the school day, create a more rigorous curriculum and develop better training for principals.

“It is part of our mission to engage these parents in a robust and meaningful way,” wrote Ms. Ziegler. “CPS has never truly engaged parents in this way, and we are working to break away from this status quo approach that has alienated parents from the process.”

Tarrah Cooper, the mayor's press secretary, released a statement that Mr. Emanuel says learning “starts at home with a dedicated parent committed to their child's education. In order for our children to succeed, every school must have an accountable principal, dedicated teachers and active parents.”

Mr. Pawar says the city knows it has an opportunity to keep families by improving the schools. He points to a recent decision to add specialty programs in science, technology, engineering and math at five high schools, including Lake View in his ward. The city teamed up with tech giants Motorola Solutions Inc., Cisco Systems Inc., IBM Corp., Microsoft Corp. and Verizon Communications Inc. to develop the programs.

“That was a tipping point,” the alderman says. “They're looking for ways to hang on to people and give them reasons to stay.”

Rebecca Labowitz, a parent who blogs about the school system at CPSObsessed.com, points to the district's newly formed Portfolio Office, which has community liaisons work with parent groups at individual schools.

Parental involvement is particularly effective at the elementary level. Activist parents raise money, expectations and standards. Some of the best-known examples are Alexander Graham Bell, Blaine, John C. Coonley and Nettelhorst elementary schools on the North Side. Nonprofit groups such as Friends of Coonley routinely raise more than $100,000 annually for extra teachers, equipment and programs such as ecology.

“Coonley was going be a school that was going to close,” says Mr. Pawar, whose ward is home to Coonley, Bell, Waters and Audubon schools. “Now it's one of the best schools in the city.”

'STUCK IN THEIR HOMES'

The total number of people staying in the city who otherwise would have moved isn't huge: perhaps 5,000 to 10,000 a year over the past few years. But it's a big change in the trend line: CPS enrollment dropped significantly in the middle of the last decade but largely has been stable at about 400,000 since 2007-08, when the recession hit. Enrollment at the 10 largest suburban districts, which had been growing quickly, also generally has been flat since the recession began, according to data from the Illinois Board of Education.

During the last quarter-century, thousands of people flooded annually into suburban DuPage and Will counties, making them among the fastest-growing jurisdictions in the country. But when the recession hit, housing prices fell and job losses rose.

The number of people leaving Cook County for the collar counties dropped by an average of 35 percent between early 2007 and 2010, according to Internal Revenue Service data.

From the real estate market peak in 2005-06 until 2009-10, those moving from Cook to DuPage dropped by 25 percent, according to IRS data compiled for Crain's by Geoffrey Hewings and Chenxi Yu of the Regional Economics Application Laboratory at the University of Illinois at Urbana-Champaign.

Movement to Kane County dropped by 37 percent, Lake County 38 percent, Will County 53 percent, McHenry County 54 percent and Kendall County 56 percent. After nearly quadrupling from 1997 to 2007, enrollment at Plainfield Schools in Will County flattened out, then dropped the past two years.

“People still want to move” to the suburbs, says Larry Reedy, an agent at L.W. Reedy Real Estate in Elmhurst. “But there are a lot of people stuck in their homes. For a large chunk of people, they just can't bring money to the closing table” to cover the difference between their loan amount and the lower sales price on their house.

There also is an increase in residents who want to stay in the city. Chicago, like other big cities, saw its population rise from 1990 to 2000 as 20- to 29-year-olds moved in search of nightlife, jobs and short commutes. But Chicago was the only one of the 10 largest U.S. cities to see its population fall between 2000 and 2010, dropping by 6.9 percent, Brookings Institution researcher William Fry said last week. Many big urban counties in the U.S. regained momentum at the end of the decade, outgrowing nearby suburban areas as the recession hit. The same general pattern can be seen for Cook County, though suburban growth here still remained slightly higher at the end of the decade.

“I have always said we'd stay in the city so long as the schools were working,” says Julie Kraft, a banker who works downtown and lives on the North Side and whose children go to Louis J. Agassiz School in Lakeview. “At this point, I could see myself staying in the city throughout their education. We never said outright that as soon as they go to school we'd have to be in the suburbs.”

Parochial schools are benefiting, too. Enrollment at Catholic elementary schools in Chicago is up in each of the past two school years, the first time that's happened since 1965. Suburban enrollment fell by 5.3 percent over two years, according to the Archdiocese of Chicago, mirroring a national decline in Catholic school enrollment.

One of the fastest-growing schools is Old St. Mary's in the South Loop, where the Syftestads' daughter Olivia is a third-grader. She started kindergarten in a CPS school but transferred because of large class sizes, Ms. Syftestad says, highlighting one of the challenges facing the mayor.

“We're OK through elementary school. We'll stay in the city as long as we can, provided we can navigate through CPS” for high school, she says. “If not, we'll have to make the move. It's a question we talk about all the time. We have about three years to figure it out.”

Independent private schools also are growing. Median enrollments rose by 11 percent from 2007 to 2011 at the dozen independent Chicago private schools—which includes Latin School of Chicago in the Gold Coast, Francis W. Parker School in Lincoln Park and the University of Chicago Laboratory School in Hyde Park—that are part of the Independent Schools Association of the Central States. Francis Parker and Latin have seen upticks in applications in recent years even as the recession caused some students to leave.

COMPETITION

One of the most immediate effects of the slowdown in suburban flight is the soaring interest in the city's selective-enrollment schools. CPS has received 30,608 applications for 4,200 seats next year. The sharpest increase came in elementary-school programs, where 12,445 students are chasing 1,200 spots.

“The competition has really gone up,” says Christine Virgen, a North Side resident whose daughter is waiting to hear whether she'll be accepted into one of the city's selective-enrollment academic centers for seventh- and eighth-graders. “After seeing what's happened with high-school kids who didn't get into their first, second or third choice, we're worried.”

Ms. Virgen was one of 39 parents at a recent seminar held at Sulzer Regional Library in Lincoln Square by Chicago School GPS, a consulting firm launched by three North Side moms to help parents navigate Chicago's public and private schools.

Such knowledge is in higher demand than ever. Neighborhood Parents Network, which helps about 5,400 families meet the challenges of parenting in the city, says it now holds eight seminars a year about choosing public or private schools. It used to offer three.

“They fill up in about an hour,” says Sarah Cobb, executive director of the 32-year-old nonprofit.

12:05 pm cdt

Thursday, March 15, 2012

Foreclosure Filings Surge in the Last Year

From today's Chicago Tribune:

The number of homes in the Chicago metropolitan area receiving foreclosure filings fell 8.5 percent in February from January, but spiked 43.2 percent from February 2011, RealtyTrac said in a report being released Thursday.

With documentation issues that had slowed foreclosure filings here and nationally last year resolved, a continued rise in filings is forecast for this year, RealtyTrac said.

In the Chicago area, 12,587 homes received a filing last month, or one in every 302 homes. That was down from 13,750 in January and up from 8,788 in February 2011.

“Going forward I think we’re going to see more year-over-year increases in Chicago from last year,” said RealtyTrac spokesman Daren Blomquist. “That trend has started and it’s something we’ve been expecting because of what we believe were artificially low numbers last year.”

Statewide, 13,298 homes received a filing last month, down 7.32 percent from January, when 14,349 homes received a filing, and up 38.6 percent from 9,592 in February 2011. One in every 398 homes received a filing, ranking the state sixth.

Nationally, the number of homes receiving filings slid 2 percent from January to 206,900, and fell 8 percent from February 2011. But that trend isn’t expected to continue.

“February’s numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed,” RealtyTrac Chief Executive Officer Brandon Moore said in a statement. “Although national foreclosure activity was pushed lower by decreases in a handful of larger states, 21 states posted annual increases in foreclosure activity, the most states with annual increases since November 2010.”

4:12 pm cdt

Monday, March 12, 2012

Real Estate Investor Taking a Long Look at Local Market

From today's Chicago Tribune:

Take a look at the homebuilding that's going on around the Chicago area and you'll see that most of it is infill development, teardowns and multifamily construction, particularly of apartments.

Avanti Properties Group is taking a longer-term view. The Winter Park, Fla.-based real estate investment company is betting the suburban fringes will become popular again, and it's doing more than dipping its toe into the local land market.

In mid-February, Avanti acquired 497 acres at the Grand Reserve subdivision in Yorkville and plans to develop its 2,002 lots with Washington, D.C.-based Ocean Atlantic, its partner in the project. The master-planned development had been started by Moser Enterprises and Pasquinelli Development but was returned to lender Bank of America, which received $10.8 million from Avanti.

Two weeks later, Avanti announced the purchase of 680 acres and 1,665 lots at Springbank, a largely residential development in Plainfield. Ocean Atlantic will act as development partner on that project too. The project had been started by MAF Developments, a real estate subsidiary of National City Bank. Avanti paid PNC Bank, National City's successor, $12.4 million for the land.

The investments represent Avanti's entry into Illinois, a step it has mulled taking for 12 years, according to Avanti principal Marvin Shapiro. But the land deals aren't expected to translate into building permits being pulled anytime soon.

"That's really two (deals) in a 12-year period, but it looks like two in a three-week period," Shapiro said. "Our business is all about buying land that we think will mature in a three- to 10-year period. I'm bullish in Chicago, but I'm not bullish about what's going to happen in the next six months or year or two."

Avanti's playbook is to buy land from lenders or from developers whose investments are under water. In other words, they look for opportunities that are more steal than deal.

"We're countercyclical people," Shapiro said. "Usually when people are running away is the time to make your best buy, and that's the same with housing. Today, it's a great time to buy. Where else is there going to be growth?"

Plenty of investors continue to look for opportunities in the Chicago market, but several are focused on accumulating smaller projects closer to Chicago that are likely to sell and generate a profit quicker, said Dan Flanagan of Flanagan Realty.

Grand Reserve and Springbank "are probably the two biggest residential lot deals out there in the market," Flanagan said. "They're both challenging deals. They're both on the fringe of growth."

Shapiro said the firm continues to look for land in the Chicago market.

Insurance premium changes. Come April 1, homebuyers who opt for a Federal Housing Administration-backed loan may be in for a bit of sticker shock.

The agency last month announced a new premium structure as part of the effort to shore up the sagging finances of the agency, and buyers of single-family homes will foot the bill.

The FHA said that, as required by the Temporary Payroll Tax Cut Continuation Act of 2011, it will increase the annual mortgage insurance premium by 0.10 percent, beginning April 1. And for loans that are greater than $625,500, it has decided to add another 0.35 percent to that annual premium as of June 1.

Separately, the agency said it will boost the upfront mortgage insurance premium, from 1 percent of the loan amount to 1.75 percent, effective April 1. The premium still can be rolled into the loan amount.

The changes, according to the FHA, will add more than $1 billion to the agency's Mutual Mortgage Insurance Fund by the end of fiscal year 2013.

What do the increases mean for borrowers? According to an FHA analysis detailed by Inside Mortgage Finance, a trade publication, the monthly payments of borrowers who make a 3.5 percent down payment will go up by $25 a month, while closing costs will rise by almost $1,500.

"I'm torn," said Ken Perlmutter, owner of Perl Mortgage Inc. "If we want to get out of the problem loans and get this real estate back into the people's hands, anything you do to tighten up real estate doesn't help. The other argument is you need to keep the FHA solvent. If it doesn't stay solvent, you're going to go to a world where the minimum down payment is 5 percent."

11:56 am cdt

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