The astronomic climb in new foreclosures in the Chicagoland area is becoming the focus of news headlines in Illinois and much discussed topic from local coffee shops all the way to the steps of capital hill. Many Chicago Area real estate investors are seeking information, attending foreclosure seminars and classes to capitalize on what is perceived as an opportunity to profit from the foreclosure boom. The true foreclosure statistics shed some light on the current foreclosure market and what is truly driving the market, and where the opportunities for the investor may lie.
The previous two months of October and November of 2007 have brought a total of almost 9000 new foreclosure filings compared to around 6500 over the same period in 2006 in the Chicagoland Area, an increase of around 40%. But there is another interesting statistic: Of the 9000 foreclosed mortgages 7500 have 2004-2007 mortgages. In other words 83% of new foreclosure filings come from homes purchased or refinanced in the last 3 years!
From the perspective of the would be foreclosure investor the above statistic reveals a couple of things about the state of the foreclosure market:
1. With 83% of new foreclosures having mortgages originated in the last 3 years or homes purchased in the real estate boom of the past three years, there is a likelihood that this 83% of homeowners have little or no equity.
2. Simple math would then indicate that the potential number of foreclosures with 'equity' and therefore attractive to the homebuyer/investor looking for the deal is 17% of the new foreclosures. (Not the potential booming market from the perspective of the investor as many would have you believe)
The reality of the current Chicagoland foreclosure market is that the sheer numbers of filings have increased significantly, 35-40%, from previous years, however the number of 'good deals' in the foreclosure market hasn't really increased at all (remember that 83% probable have little or no equity.) This is not to say one cannot make money in the current market, however you definetely want to do your homework and learn as much as you can from local foreclosure investors and not get caught up in the hype.
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