Foreclosures rising in Chicago

Crain's Chicago Business reports:

Home foreclosures rose last year in middle-class and gentrifying Chicago neighborhoods, as the combination of rising interest rates and adjustable-rate loans drove a citywide increase in problem mortgages.

The highest jumps came in areas like the Near North Side (65% increase in foreclosures), Jefferson Park on the Northwest Side (89% increase), Rogers Park on the Far North Side (49% increase) and Bridgeport on the South Side (113% increase), according to a new study by the National Training and Information Center (NTIC), a Chicago fair-lending advocacy group.

To be sure, foreclosures are still far more prevalent in lower-income neighborhoods like Austin on the Far West Side, with a city-leading 492 last year. But that represented a 2.4% decline from 2004. The 10 foreclosures in Edison Park on the Far Northwest Side, by contrast, reflected a 67% jump.

The numbers lead Jack Markowski, commissioner of the Chicago Department of Housing, to believe that adjustable-rate mortgages (ARMs) with initially low pricing are playing a big role in the foreclosure surge. "We're very concerned about teaser rates and artificially low payments," he says. "I think there has to be a waking-up among the lenders — and borrowers as well."

Higher interest rates with a declining population the last 5 years are the greatest real estate fundamentals for this market.