One-fifth of Chicago mortgages underwater

Lakeshore Analytics chart of Core Logic dataHere’s some local color on today’s Core Logic report on negative equity: Chicago’s share of mortgages with negative equity actually rose (contrary to national numbers) from 22.3% last quarter to 22.7% this quarter.

An additional 5% of Chicago-area borrowers have 5% or less equity in their homes, which is essentially negative since it usually takes at least 6% in transaction costs to sell a house.

This puts us 19th out of 50 cities; however, all but four of the cities ahead of us have been associated with either radical housing booms (the Orlando and Las Vegas metro areas) or severe economic distress (the Detroit and Cleveland metro areas). We have the second-most homes in negative equity among Midwest cities.

Our region as a whole has 71% loan-to-value ratio, when you take into account all outstanding mortgages and the underlying values of the corresponding homes. This places us 24th out of the 50 cities in the CoreLogic study. (Las Vegas has an unspeakable 129% loan-to-value ratio for the whole region.)

See a chart of all 50 cities in the study, plus some more stats, at Lakeshore Analytics.

A quick search of Google news shows about half of media headlines reporting on this story are blatantly misleading, while the other half acknowledge a key truth to the numbers. The misleading (albeit strictly true) headlines say that the share of homes with negative equity is decreasing nationally. The helpful headlines point out that this is due to foreclosures, not people paying down loans or experiencing home price appreciation.

Jeff Baird is a real estate valuation consultant based in Chicago. He founded Lakeshore Analytics to bring comprehensive, understandable housing data and analysis to Chicago-area readers. The site features a blog with free market news and charts, summary data on 20 top neighborhoods, and quarterly data subscriptions.

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