By S.E. Slack
Could you sell your home quickly if you want to? Homeowners across Chicago have seen home values rise nearly 10 percent over the past year, leading some to think their home will move rapidly once on the market. Slow that thinking down, say experts.
While the median home value in Chicago is $182,300, nearly 29 percent of all homeowners in the metro area are stuck with homes they can’t sell. That’s because many homeowners have little to no equity in their homes. Many even hold negative equity – a real estate term used to describe homeowners who hold mortgages worth far more than the home itself.
As a result, selling and buying a new home while covering all of the associated costs – real estate agent fees, closing costs and a new down payment – is next to impossible, says Svenja Gudell, director of economic development for real estate firm Zillow.
It is very difficult for an underwater homeowner to list their home for sale without engaging in a short sale or bringing cash to the closing table, explains Gudell. For many owners, neither option is feasible.
Despite continuing declines in negative equity, some metro areas are still experiencing abnormally high rates of home value appreciation. That’s not true in Chicago, which is moving upward at a steady but slow pace.
“Negative equity levels still remain very high and will be slow to dissipate as home value appreciation and foreclosure activity slows,” says Gudell. “Therefore, inventory will remain impacted for several years to come. This will continue to affect first time home buyers’ ability to find affordable homes. Furthermore, even if potential home buyers are able to find a house they want and in theory can afford, many of them don’t have enough equity in their current home to make the move.”
Zillow predicts that the negative equity rate among all homeowners with a mortgage will fall to at least 17 percent by the first quarter of 2015. That’s welcome news for homeowners but it still might not be enough to pull many out of the negative equity sinkhole.