Is Chicago on the Verge of a Housing Crisis? New Data Suggests Yes

Chicago's housing market is showing signs of trouble.

Although the housing crisis of 2008 is now drifting into history, the impact of the crash is still being felt by many Americans. The U.S., in general, has recovered from the burst of the housing bubble. However, many cities and housing markets have not.

In several American cities, there are now some unsettling signs of a new, looming housing crisis, according to a study from GOBankingRates. The study analyzed the country’s largest cities and looked at the percentage of mortgages that have negative equity — meaning the home is actually worth less than the total cost of the mortgage, also called being “underwater” on your mortgage — as well as vacancy and delinquency rates. Although the study analyzed 54 U.S. cities, the city that stands out most is the No. 2 city most in danger of a housing crisis: Chicago. America’s third-largest city has some serious housing issues to deal with.

Read on to find out why Chicago is facing a potentially dangerous housing crisis.

Click to See the Full Study: Cities in Danger of a Housing Crisis — Is Yours on the List?

Many Homeowners in Chicago’s Housing Market Have Negative Equity and Underwater Mortgages

The Chicago housing market is plagued by homes with underwater mortgages. What’s especially concerning is Chicago’s sheer size. The No. 1 city in danger of a housing crisis was Newark, New Jersey, and it has a population of only of 285,154, according to the U.S. Census Bureau. Meanwhile, the population of Chicago is over 2.7 million.

When GOBankingRates conducted its study of cities in the most danger of a housing crisis, Zillow’s negative equity data dated from first quarter 2017. At that time, 22.9 percent of Chicago homes with a mortgage were in negative equity.

A year later, the share of homes with negative equity barely budged. As of June 30, 2018, the national average for homes with negative equity is 8.2 percent, according to Zillow’s latest data. In the Chicago metro area, the rate is 13.5 percent. And for the city proper, 21.4 percent — or more than a fifth — of its homes have negative equity.

Below you’ll see that several sizable cities in the Chicago metro area are also running high with negative equity:

  • Aurora: 11.8 percent of homes have negative equity
  • Elgin: 11.9 percent of have negative equity
  • Joliet: 15.5 percent of homes have negative equity

Learn More: What Is an Underwater Mortgage?

Chicago Also Has High Foreclosure Rates and Vacancy Rates

Foreclosures are also a problem in Chicago. Where the U.S. foreclosure rate is one home in every 2,348, Chicago’s foreclosure rate is significantly higher at one in every 1,486 homes, according to RealtyTrac.

More concerning is how high the foreclosure rate gets on the ZIP code level. For example, ZIP codes 60628, 60652 and 60636 — all on the South Side of Chicago — have foreclosure rates of one in every 447 homes, 419 homes and 416 homes, respectively. Each of those ZIP codes has a foreclosure rate that’s more than five times the U.S. rate, while Chicago’s is more than one-and-a-half times the national rate.

Vacancies are higher than average in Chicago as well. According to the U.S. Census Bureau’s 2017 American Community Survey, 12.8 percent of all homes in Chicago are vacant, compared to 12.2 percent for the U.S. overall. Chicago also has a greater percentage of homes that are for rent and vacant, as well as homes that are sold and vacant.

Click to See: The Foreclosure Crisis Is Still Hitting These State States Hard

What to Do If Your City Is Facing a Housing Crisis

Solutions are hard to come by. For instance, selling your home and moving out isn’t always an option. According to Crain’s Chicago Business, negative equity is such a problem for homeowners in the Chicago area that selling wouldn’t cover the cost of buying and moving to their next home.

But if your mortgage is underwater, there are some steps you can take. For example, you might want to consider refinancing your mortgage loan, or make an attempt to short sale your home. Or, maybe you can find a way to keep up with your mortgage payments and stay in your home until the market improves. If you’re unsure, reach out to your lender or a professional financial planner or advisor for help.

Click through to see which cities now have more affordable homes.

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Methodology: GOBankingRates determined which places are most in danger of a housing crisis based on three factors: (1) percentage of homes with mortgage in negative equity (also called “underwater”), (2) total number of homes underwater, (3) number of homes at least 90 days late on mortgage payment, (4) negative equity delinquency rate, all sourced from Zillow; (5) homeowner vacancy rate, and (6) rental vacancy rate, both sourced from the U.S. Census Bureau.