CHICAGO (CN) — A report released in April by real estate data aggregator ATTOM has bestowed Chicago with a dubious honor. Amid a national surge in residential foreclosure rates, Chicagoans are currently losing their homes in greater numbers than in any other metro area in the country.
"A total of 50,759 U.S. properties started the foreclosure process in Q1 2022, up 67% from the previous quarter and up 188% from a year ago," the report stated, with Chicago alone seeing over 3,000 foreclosures in the first three months of the year.
If you interpret the numbers as a per housing unit rate, Cleveland manages to pull ahead of Chicago with almost one in every 500 homes foreclosed since the start of 2022. But by the same metric, Illinois still leads the nation on a state level - close to one out of every 800 homes. California, as the country's most populous state, wins out as the state with the highest raw numbers of foreclosed homes this year. More than 5,300 households in the Golden State had begun the foreclosure process as of April.
As shocking as this spike in home loss is, experts said it was predictable - the inevitable result of the end of the pandemic eviction moratorium. Enacted by Congress in March 2020 under former President Donald Trump and struck down in August 2021 by a supreme court ruling under current President Joe Biden, it was a national exercise in decommodified housing that staved off homelessness for an estimated 1.5 million Americans.
But now it's over.
"In great part, this is the fault of the lifting of the moratorium," said Ken Johnson, the dean of graduate studies at Florida Atlantic University's College of Business. "It's not 100% to blame, there's always a natural rate of foreclosure, but it is a major factor."
"It's the moratorium lifting," agreed professor Marie Reilly of Penn State University, who specializes in bankruptcy law. "During the moratorium people weren't eligible for mortgage mitigation... now we're seeing the market respond to that."
While agreeing on the general cause of the foreclosure wave, the pair offered differing explanations as to the granular mechanisms driving it. Reilly suggested that it may be the result of the Federal Reserve interest rate, the rate at which the Federal Open Market Committee suggests commercial banks borrow and lend money to each other.
When the rate is low, consumers can get lower rates on credit cards, loans and adjustable-rate mortgages. But at the moment it's rising, from around 0.25% in March 2020 to around 0.75% - 1% as of this May. The increasing figure reflects the 40-year high in inflation the U.S. is currently experiencing, and makes it hard for property owners without much capital to hold on to their unprofitable buildings. As the U.S. working class struggles to make ends meet, their economic hardship trickles up to the rest of society - including their landlords.
"The other thing that could be affecting [the foreclosure rate] is the Federal Reserve interest rate," Reilly said. "It could be making it harder for landlords to hold on to non-rent-paying properties."
As small landlords shed these properties, Reilly explained, larger development firms will often come in to buy them up on the cheap - sometimes with the blessings of municipalities looking to avoid the crime that comes with abandoned or vacant buildings. While large firms buying up property staves off that immediate concern, the result is usually an increase in rent or home ownership costs in the area, further driving out residents who cannot afford the rising prices. It's the economic foundations of gentrification.
"Vacant properties are not good for anyone," Reilly said. "And it's not always easy to tell if its a resident who's going to be dispossessed, or if it's a remote investor who's just abandoning the property."