Why Foreclosures Are More Prevalent In Fast Growing Areas

Posted on May 15, 2007Filed under Real Estate Sales Read the complete post or link to it

According to RealtyTrac, one out of every 783 homes in the United States filed for foreclosure in April.
In the Chicagoland area, the breakdown is like this (in order):
Kendall: One home in every 257 entered foreclosure
Will: One home in every 303 entered foreclosure
McHenry: One home in every 320 entered foreclosure
Kane: One home in every 387 entered foreclosure
Cook: One home in every 410 entered foreclosure
Grundy: One home in every 430 entered foreclosure
De Kalb: One home in every 717 entered foreclosure
Du Page: One home in every 758 entered foreclosure
Don't be surprised that Kendall, Will, McHenry and Kane are topping this list; or that Kendall County homes are foreclosing more than three times as fast as Du Page.
It all comes down to growth.
As reported by the Chicago Tribune (and I can't find the original link anywhere), Kendall and Will County were both in the Top 10 counties nationwide for growth between 2000-2006.
McHenry and Kane counties -- while not as explosive -- have seen their share of growth, too. As young families leave the city in search of yards, schools and affordability, they are creating a new problem for themselves that may be a leading cause of foreclosures.
Have you seen the typical tax bill in Will County?
Chicagoland's collar counties until very recently were considered rural. The sudden influx of residents created a need for schools, infrastructure, and public services. It's typical to see a 2% property tax bill in Will and other counties, based on the value of a home.
By comparison, Cook County taxes may be 1.25%.
Another probable factor relating tax bills to foreclosure is that new construction homes don't have tax bills associated with them until 12-18 months after completion. So, homeowners that bought new construction along the I-55 Corridor in 2005 and 2006, for example, are only now getting their first real estate tax bills and -- surprise -- it's $400 per month.
Because so many homeowners are in a state of precarious balance between their monthly expenses and their monthly income, the shift in real estate tax payments can upset that balance and create financial stress, eventually leading to a complete inability to meet their monthly obligations.
If the theory proves true -- explosive growth creates larger-than-normal tax burdens for unprepared homeowners -- expect more foreclosure activity in the collar counties over the next 12-18 months.
Based on that idea, DeKalb should quickly move up the list.

Bill Vourazeris
443-618-2880