9. Chicago, Ill.
Chicago is a traditionally stable market, but is currently under pressure. Its 2.3% vacancy rate isn't unmanageable, nor is its price-to-earnings ratio, which is the 12th highest nationally. Chicago's problem is a very high share of adjustable-rate mortgages (45%) and a middle-of-the-road share of mortgages with loan-to-value ratios above 90%. Having a high share of one is sustainable if there's a low share of the other, but in a scenario like this, both lenders and borrowers have elevated risk.
These numbers spell trouble for Chicago. We are in the foreclosure nightmare cross-hairs. With almost half of all mortgages as ARMs just shows that many Chicagoans could not afford the house they bought with out the teaser loan rate. Once these loans adjust, they really will not be able to afford them. Soon the loanowners will walk the keys right into foreclosure. With such high LTV, many of the foreclosures will be passed by on the action block. Crain's describes the formula quite well here:
ADDING TO GLUT
That's bad news for the city's housing market. Foreclosed properties that don't sell at auction revert back to the banks, which pass them off to a real estate agent to sell, exacerbating Chicago's glut of unsold homes and threatening to push down home values.
Ya, I'd say we are at risk, too.
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