Foreclosure sales still dominate local market

Foreclosure home sales in Kane County accounted for more than 45 percent of the county's overall real estate market sales during the first quarter of this year, with an average discount of about 45 percent, according to data released today by RealtyTrac Inc.

Kane County's average cost for a foreclosed home was about $137,500, compared to averages of $133,590 in Illinois and $171,971 nationwide, RealtyTrac said.

The Irvine, Calif., research firm's report showed that foreclosed home sales continue to dominate the overall market in many states, as well as in Chicago and surrounding counties.

"With about 7 million distressed owners nationwide and another 11 million "underwater" (and therefore at risk of foreclosure), this problem is not going anywhere anytime soon," said Phil Ashton, assistant professor of urban planning and policy at the University of Illinois at Chicago. "In fact, homeowners in distress now have few options absent foreclosure, as buyers are drawn toward deals in the impacted segment of the market. There are already signs that the market is further contracting, with some distressing recent data on new home sales and the ending of the homebuyer tax credit both confirming parts of the story told by the RealtyTrac numbers."

RealtyTrac released its first U.S. Foreclosure Sales Report for the first quarter, looking at the number of foreclosed home sales, percent changes from the previous quarter and year-ago quarter, average sale prices for those foreclosed homes and how much they were discounted either as a foreclosure or for a short sale.

On a local level, the study showed double-digit percentages in area counties. For example, McHenry County had foreclosed home sales accounting for 42 percent of its real estate market sales, and those homes had an average discount of about 18 percent, the report said.

Lake County rivaled Cook County (including Chicago and surrounding suburbs) with 39 percent of foreclosed homes sales. Lake County homes were discounted about 44 percent, while Cook County discounted homes a whopping 53 percent, all on average.

Those double digit figures reflect how unhealthy the real estate market continues to be and likely will continue for a couple of more years, experts said. In a typical, healthy market in Illinois, foreclosure sales would have made up about 1 percent of total real estate sales, according to RealtyTrac spokesman Daren Blomquist.

"There's still a high inventory of foreclosed homes that is still being worked through," said RealtyTrac spokesman Daren Blomquist.

Still, the price discount figure does not capture how much the foreclosed home is discounted to get someone to buy it, said Ashton.

"To figure that out, we'd need to compare Multiple Listing Service data on list price against final sales price," said Ashton. "RealtyTrac appears to lump together all sales in the state and compares average prices. North Shore mansions against South Side bungalows. It's hard to see how those comparisons are useful, and that's essentially what the data are comparing when you drill down into the prevalence of foreclosures. They don't even use the word 'median,' which worries me even further. A few mansions in Lincoln Park could easily make the difference in average prices seem larger than it really is."

Studies were not immediately available to compare sales prices of homes versus foreclosures on a closer level. Also some related studies often use different formulas.

Last week, for example, the National Association of Realtors released its monthly report, which said that the nationwide median (not average) price for existing-homes of all types was $179,600 in May, up 2.7 percent from a year ago.

Distressed homes slipped to 31 percent of sales last month, compared with 33 percent in April. It was also 33 percent in May 2009, the realty group said.