Chicago's Foreclosure auctions go silent

Crain's Chicago Business reports:

On a late June afternoon, Laurence Kallen stepped to the podium in the Randolph Street office that serves as his cramped auction house. Mr. Kallen had 11 foreclosed Chicago properties to sell and 10 bidders in attendance. The auction lasted 10 minutes. He didn't get a single bid.

"Two to three years ago I'd get up to 50 people," Mr. Kallen says, gazing at a room of mostly unoccupied folding chairs. "For a while it was like that every day. People were buying properties like mad."


Not anymore. Despite a meteoric rise in foreclosures — 17,096 Chicago-area homes were foreclosed on in the first half of this year, up 46% from 2006 — the market for investors in foreclosed homes has been in steep decline. Auctioneers and the investors themselves say slow home sales, tighter lending standards and, in a new twist, the proliferation of zero-down mortgages have made buying foreclosed properties a losing proposition.

"It's counterintuitive," says T. J. McKinney, a Chicago-based investor who also runs the subscription-based Illinois Foreclosure Listing Service Web site, which posts foreclosed properties in the greater Chicago area. "To be honest with you, there's less deals than there used to be."

ADDING TO GLUT

That's bad news for the city's housing market. Foreclosed properties that don't sell at auction revert back to the banks, which pass them off to a real estate agent to sell, exacerbating Chicago's glut of unsold homes and threatening to push down home values.

You might say real estate isn't the market that it was to 2 years ago.Tighter credit standards and more supply.