Foreclosures as the New Normal

From high prices to low inventory, most people want to be able to Start a business or home. But how likely is it for you to be able to afford it? Chicago was among the top major metro areas last December for completed foreclosures and foreclosure starts—a national trend of increased foreclosure in major metro areas.

Among major metropolitan areas, Chicago had the second-largest number of completed foreclosures at 194, ranking behind Detroit’s 609. New York City, Philadelphia, and San Francis complete the top five. According to Forbes, as of mid-July, Chicago metro commercial spaces have only a 53.4% occupancy rate. This shortfall in office and retail occupancy rates for Foreclosures has led to our current commercial real estate foreclosure crisis. In the consumer market, an escrow shortfall may occur when the amount of funds deposited into the escrow account, often paid along with a mortgage payment, fails to meet the obligations associated with the escrow funds, such as property taxes or homeowner’s insurance. In these cases, consumers are notified of the shortfall.

Chicago is the most expensive city, boasting a price tag of $2,100. Oak Park follows closely behind, securing the second spot with rents reaching $2,090, while Lombard takes the third position with a median rent of $2,070. These figures paint a picture of the premium real estate landscape in certain areas of the Chicago metro area.

however, others believe the foreclosures this is a good thing. As CEO Rob Barber said, “However, other external factors may be at play such as escalating interest rates, inflation, employment shifts, and other market dynamics.”

The Minimum Wage & Cost of Living the New Normal

Chicago’s minimum wage increases yearly every July 1st by the Minimum Wage in Chicago Ordinance. The minimum salary in Chicago is divided into two categories: small businesses with 4–20 employees, and large firms employing at least 21 employees. Since it reached $15 per hour in 2021, the minimum wage for larger employees has gone up yearly by the Consumer Price Index or 2.5%, whichever is lower. The lowest pay rate What do this have to do with Foreclosures? The data suggests that under current state and federal minimum wage law, it is rare for the full-time income of US minimum wage earners to cover their cost of living, especially if they’re providing for more than just themselves. So if you can’t afford to live, how can you afford to buy and pay off any property?

In 2019, the House passed a bill to raise the federal minimum wage to $15/hour by 2025; this has also been a popular speaking point for Democratic candidates in the 2020 presidential election. We are 4 years ahead of the scandal and it is still not enough we are still at a racer high for Foreclosures. It’s not like the minimum wage in Chicago is low the highest is in Washington DC. and there are only two dollars more. Buyers have been at the mercy of mortgage rates’ meteoric rise, holding on as the average 30-year fixed rate climbed from 3% to nearly 7% in 2022. In October 2023, rates topped 8% for the first time since 2000 — a surprise even many top economists didn’t predict. But throughout November, they dropped slightly, landing at an average of 7.03% for the week ending Dec. 7.

possibility and probity

Higher interest rates make it more expensive to get a mortgage or lead to Foreclosures. To put that in perspective: Let’s say you can afford $1,800 per month in principal and interest. At a 3% interest rate, you could afford to borrow $426,900. But at a 7% interest rate, you could afford to borrow only $270,600. Why? Because you’d pay a full $156,300 more in mortgage interest with the higher rate. On average the “affordability shines” in certain pockets of the metro area. Theas Gary emerges as the most budget-friendly city, offering one-bedroom rentals at an attractive $780. Waukegan claims the second spot with rents standing at $1,000, and Valparaiso takes the third position with a median rent of $1,080. Most people hope to not have to deal with a roommate after college with the fact that this is the price for one-bedrooms is not likely to happen.

By: Jada Dunkentell