“Any good foreclosures out there???”

This is a question I’m asked somewhat often, more from clients coming in from other parts of the country where foreclosures are more common.

My quick answer in “no”, but let me explain.

(Spoiler alert…this may be the most “quoted” post I’ve ever made)

Currently, as of today, in our central Illinois MLS, there are 112 homes listed for sale as being a foreclosure. The average price of these 112 homes is $59K. So for my clients that are usually asking about a higher price range, there really aren’t any/many, and there also won’t be any big increase coming up (keep reading to see why).

There can be a number of reasons why these are in foreclosure, all related to the buyers inability for one reason or another to keep up regular payments to the bank.

The national foreclosure crises we saw in 2008/2009/2010 however occurred for “slightly” different reasons. At the time there were many buyers and lenders willing to enter into agreements for adjustable rate mortgages, where after a teaser rate of 2-3 years, the rate would adjust upwards, to a level that the buyer was only able to pay if 1) their house value increased to the point they could refinance and pull “equity” out of their house to continue making the payments or 2) they were in a position to continue making the payments despite the increased monthly amount.

This worked out great “IF” housing values continued to increase and they never decreased. In fact it worked SO well, that many home buyers bought other homes as an “investment” because they could “always” count on home prices increasing, and the ability to either refinance was always there, or there was always a buyer for the home.

BOOM!

If/when you see the movie or read the book “The Big Short”, which you absolutely must do one or the other, it takes an amazing look at the doomsday housing prediction only a few could foresee, but now everyone could predict looking backwards at it.

When those adjustable rate mortgages came due to lock in at a higher rate, and home values had leveled out, many home owners found themselves “upside down” on their mortgages. In situations where people heavily leveraged themselves, they found it was easier to simply walk away from the home rather than be liable for right ending the ship and paying tens of thousands, or more, of payments to the bank.

And that my friends, is why we won’t see any looming (or current) foreclosure crises in central Illinois. We have, for better or worse, never had wild out of control home values-either up-or down. It has remained pretty consistent. While a “level” market may not be terribly exciting, it is highly desirable in a down market. Adjustable rate mortgages have practically vanished, as well as home equity loans. People aren’t pulling an equity out of there house that isn’t there, or rather, overly inflated. I do believe that central Illinois has the benefit of seeing a crisis coming ahead of time because we see it hit the east and west coast first, and then gradually make it’s way towards the “heartland”.

In closing..the last 150 foreclosures in central Illinois had an average listing price of $26K and an average selling price of $22K. So, if that’s a price point you are looking in for an investment, there are options. If you are looking in the higher price points, (un)fortunately, you may not find what you are looking for in central Illinois.