Chicago’s Slow Foreclosure Process Distresses the Local Housing Market

A recent study conducted by analysts at the Federal Reserve Bank of Chicago compared foreclosure rates in their own city with those in four other major Midwestern metropolitan areas: Des Moines, Milwaukee, Detroit, and Indianapolis. While Chicago had an overall foreclosure rate similar to that of the other cities (except Des Moines, which came in with a significantly lower rate), underwater homes in Chicago stay in foreclosure longer than anywhere else. Analysts suggest this trend is bringing down the whole local housing market.

Researchers Look at Potential Causes of Delay

The study looked in particular at the month of June. In Cook County, where Chicago is located, only five percent of distressed homes “transitioned” out of foreclosure. Meanwhile, 7.8 percent transitioned in Indianapolis, 10 percent in Milwaukee, and 20.7 percent in Detroit. Analysts believe that the exceptionally slow transition time in Cook County is why their foreclosure rate appears so high and why the housing market in Chicago remains particularly strained.

Earlier in 2011, the Chicago News Coop reported that Chicago is home to the largest backlog of unsold foreclosures, which, until it is resolved, will continue to drag down the rest of the market. The study also suggests that Chicago may continue to see trouble, since forecasters predict that even more foreclosures may be down the road.

While there is no conclusive evidence as to the cause of the delay, researchers point to banking policies, the availability of mediation services, and high house prices as all potentially culpable.