Reasons foreclosures are so high in IL: (1) We're a judicial state, meaning that a judge has to be involved in the process. That slows the whole thing down compared to the non-judicial states, like California and Arizona. The foreclosure moratorium in 2011 caused a backlog that is still trying to clear.
(2) Our unemployment rate is higher than the national average--8.9%, compared to 8.3%. The longer people go without jobs, the more likely they are to lose their home.
(3) Our real estate market has been far slower to recover than that in many other parts of the country. As a result, people who've been having trouble holding on see that it will be many years before that asset (the home) will be positive again, so they let go.
Do you see any improvement right away?
Not really. We've seen some improvement in the Chicago housing market this summer, and we're waiting to see if the trend continues upward into the fall or drops again, as it has the past 3 falls in a row (and as was typical of the market even in the good years). With national uncertainty over the presidential election, continuing lags on job growth and lagging consumer confidence, there's no reason to expect a quick upturn that would make people more able to hold on.
On top of that, it's widely believed that the banks have many more homes still in the foreclosure pipeline, though numbers are hard to come by.
It might get worse in the next several months. It's a pipeline and it needs time to get cleared.
Another thing that I think is worth talking about: How does this impact a homeowner who's not facing foreclosure?
Because the foreclosures are in every neighborhood and every price range, they are your competition if you are selling. They cause downward pressure on the price you can get at sale time. And if you're not selling but refinancing to get these great interest rates, those foreclosure prices can influence the outcome of your appraisal.
Also, the idea that there are more foreclosures still to come will make some buyers stay away from the conventional homes because they're waiting for a new round of bargains to come on the market.
Apartment rental booming?
Yes, renting is booming. This isn't necessarily a direct result of the foreclosure crisis, but is another part of the larger shift in housing. Many people have seen that owning is less secure than it used to be. The value of a home is not sure to go up, so unless they know they'll be in the address for a long time, many people rent. Others who rent are those who got burned by homeownership, either selling at a big loss or being foreclosed.
Chicago has a luxury apartment building boom, with 1150 new downtown apartments opened in 2012 and 3000 more to come in 2013+2014. But we have a huge deficit in affordably priced and low-income apartments.
Help for homeowners facing foreclosure?
This is a straightforward one nowadays. The first place to go is your lender. They will try hard to help find alternatives, because they don't want any more foreclosure inventory on their hands. This is especially true if you're unemployed. You can also go to your city or county housing agency. They all now have foreclosure assistance programs, as do many community agencies. The main thing to do is: don't hide. Ask for help. There's more help out there now than there was just a few years ago.