Chicago Foreclosure Rates Jump
While it is true that the midwest is hit less hard by the vagaries of the real estate market, we are still hit by it. In particular, even if prices go up and down more slowly here, when people use ARMs to buy beyond their means, that is small comfort. The Sun Times has a good article talking about the increasing rate of foreclosures in Chicago, as all of those ARMs come due. I honestly don’t get them at all. Sure it lets you get more for less at the beginning, but you have to know that the piper is going to come calling. And on the flip side, it seems like the banks should have a vested interest in trying to make it work out. Isn’t it better to adjust up to something that the people can pay and get something back, rather than forcing them to foreclose by squeezing a little more short term gain out of them? It’s not like you are gonna make the rest back on selling the house in this market.
On a positive note, while increase of foreclosures in Roger’s Park was quite high (70%) (pdf), we are still only in the middle of the pack in terms of absolute foreclosure rate. And good lord what happened in Portage Park? 200% increase in foreclosures?
Ohio leads in foreclosures, according to last weekend’s paper. A lot of people fall into this trap.
My impression is that there are three basic groups:
(1) People who think that they’ll move in under 5 years.
(2) People who are gambling on having a better job that pays enough to cover the new payments by the time they roll around. I feel a bit bad for these, since there are so many things which can throw off that plan, even assuming it was a realistic one.
(3) People who really can’t do math, and are convinced by these “predatory lenders” that they can do so much better, and oh, this is just a technical detail.
You might doubt the existence of group 3, but Jen and I went to one of those “first time home buyers” seminars, and oh my god, was that terrible — that was absolutely geared to sell sell sell, no money down, really, you don’t need savings, you can do it all, and your house will make you a millionaire, too! It was atrocious. It was clear that we weren’t the standard audience, since we’d actually done our homework, and we’d been trying to save up for a down payment. This was an oh-so-helpful session targetted at people who’d done neither. The people giving the presentation were as close to bandits as I’ve come.
One of the quotes I remember was, “95% of people don’t have serious problems making their mortgage payments.” What, you mean that 1 in 20 *do* have serious problems? What about minor problems? What about emergencies? Aiee.
I hope you really did say that. That would be awesome “what, you mean 1 in 20 *do* have serious problems paying?!”