Despite positive results from the first quarter of 2010, McLean County foreclosure filings showed a depressing increase in the second quarter. Foreclosure filings rocketed up to 143 for the quarter – a full 83.3% increase over the same period in 2009. Looking at the first two quarters together, McLean County stands at 274 filings, higher than 2009 and just shy of 2008’s record total of 278 for the same period.

These results demonstrate the continued economic challenges persisting even as the country begins to flirt with economic recovery. As I have stated in the past, home foreclosures lag the overall economy in the sense that foreclosures follow job losses at a distance of some months. Foreclosures happening today are likely indicative of the job market from six to nine months in the past. Based on unemployment figures, I would expect to see a moderate-to-bad third quarter for foreclosures followed by a fairly-positive fourth. Overall, I predict that foreclosure filings will end 2010 just slightly below the 2009 figure.

Sources: McLean County Recorder’s Office, Bureau of Labor Statistics

The foreclosure situation in McLean County has gotten off to a promising start in 2010.  First quarter foreclosure data pulled from the McLean County Recorder’s Office show that there have been 131 Lis Pendens filings in the county since the start of the year.  This total is considerably less than the 172 filings reported in the same period in 2009 and the 165 filings in 2008.

With most of the bad adjustable rate mortgages worked out of the financial system by now, the key variable for home foreclosures seems to be the overall employment situation and the performance of the larger economy.  Since foreclosures are a lagging indicator of economic performance (by the logic that home loan delinquency follows job loss at a distance of some months), this decrease in home foreclosures is likely attributable to the surprisingly strong economic performance seen in the fourth quarter of 2009.  We may, however, see a spike in foreclosures in quarters two & three that mirrors the recent jump in post-holiday unemployment.

Overall, this data merits some frugal optimism about our local economy.  While I will not declare a sustained recovery until we escape from 2010 unscathed, this lower incidence of foreclosures is yet further proof that our local economy is improving incrementally.

Sources:  McLean County Recorder’s Office, Bureau of Labor Statistics

2009 finished on a negative note in terms of home foreclosures in McLean County.  While the first half of  2009 showed home foreclosure rates drop, the last two quarters reversed this trend and showed a marked increase.  Overall, McLean County had 556 home foreclosures in 2009, compared to 503 in 2008.  This amounts to an increase of 10.54 percent.  The rise of McLean County foreclosures in 2009 is very likely tied to the unemployment situation in Central Illinois.

In prior years, it was thought that the spike in foreclosures first witnessed in 2006 was due to the effects of the subprime lending phenomenon.  Many predicted that subprime foreclosures would slowly taper off as these borrowers either refinanced out of their adjustable rate mortgages (ARMs) to more stable loans or entered into the foreclosure process.  Since most ARMs reset a few years after the loan originated, borrowers were going to face the default/refinance situation fairly early into the life of their loan.  It was also assumed that new subprime lending decreased significantly after the flaws in the system became apparent – roughly in mid-2007.  By that logic, those borrowers who were going to default based on the resetting of their ARM would likely do so sometime before the end of 2008.

The week-by-week foreclosure reports in McLean County illustrate this trend.  After April 2008, the high weekly averages of foreclosures began to decrease slightly.  This easing continued into July of 2009 when the rates began to increase once again.  This new increase, however, was very likely an effect of job losses taking place around Central Illinois.

With the Great Recession in full swing, McLean County’s jobless rate climbed from 5.1 percent in September of 2008 to 7.7 percent in September 2009.  The largest two-month jump in the unemployment rate occurred between May and July, when unemployment rose from 6 percent to 7.2 percent.  Foreclosure rates began their rapid climb in early July 2009 and continued their climb throughout the remainder of the year.  If we can assume a lag time between one’s loss of employment and the prospects of foreclosure, these two curves fit together fairly well.

If my hypothesis is correct, we should once again see home foreclosures taper off in 2010 as more people return to steady work.  Assuming no new financial crises (which is a big assumption these days), I predict a decreased number of foreclosures overall in 2010, probably starting in Q3.

Sources:  McLean County Recorder’s Office, Bureau of Labor Statistics

The third quarter saw a rise in foreclosure filings in McLean County, reversing the negative year-on-year trend for 2009 seen in quarters one and two.  Total home foreclosures from 1/1/2009 to 9/30/2009 totaled 401 in McLean County, an  increase of 3.6% over the same period in 2008.

If foreclosures continue to increase throughout the 4th quarter, 2009 will mark the 6th straight year of annual increases.  Numerous possible reasons for the increase in home foreclosures exist, including the 2008-2009 recession and rising unemployment.

Source: McLean County Recorder’s Office

by Ken Springer, Project Analyst

A community can talk up its connectivity, talk up its telecommunications, talk up its workforce and talk up its incentives, but without the right real estate assets supporting business attraction, the community really doesn’t have much to say to relocating companies. 

The argument about what matters most for relocating companies has raged in the economic development industry for years.  Many people believe that the location decision comes down to incentives, while others argue that the available workforce in an area is the main driver.  I’d argue that without a reasonably-priced, high-quality piece of real estate, no company is going to even bother looking at your incentive package or workforce, or anything else in your community for that matter.  To even get the negotiations started, an economic developer must be able to point to a piece of real estate that is “in the ballpark” for a company.  Without this critical element, subsequent conversations will fail to materialize. 

Achieving this real estate readiness requires the local economic developer and the local real estate community to have an understanding about the intertwined relationship between the respective disciplines.  Fortunately, the EDC here in Bloomington-Normal has an outstanding relationship with the commercial real estate community.  With that said, we’re always looking to take this relationship to the next level.  If you know of someone with leasable commercial space or a building/site for sale, please tell that person to contact the EDC.  If you are a commercial realtor who does not regularly send the EDC your inventory, please start doing so!  We can help promote any available commercial real estate to companies from outside the community, generating new leads and possibly buyers.  Best of all, the EDC provides this service at no cost.