Zaya Nicolas maybe would have been able to save his Wonder Lake home had it not been so far underwater.
He is one of many Illinois homeowners, about 1 in 5 according to a recent survey, who owes much more money on the home than it is worth, thanks to the housing market crash that began a decade ago.
He and his wife were able to pay the mortgage on the $180,000 home before they lost their full-time jobs as an independent contractor for the Captain James A. Lovell Federal Health Care Center and a teacher with the Special Education District of McHenry County. They made plans to refinance the home in an effort to lower their payments, but were told by the bank that they would have to bring money they didn’t have to the table because of the depreciation – the home is now worth about $60,000 less.
“There’s just no way to sustain this at its current cost,” Nicolas said.
McHenry County, which at one time was one of the fastest-growing in the nation and a county in which home building helped fuel the economy, was hit hard when the housing bubble burst. But a December study of nationwide housing markets shows that being underwater in Illinois hardly is a rarity.
About 19.3 percent of Illinois mortgages, or more than half a million, have at least 25 percent more on their outstanding mortgage than the value of the home, according to the analysis by RealtyTrac.
The only state with a higher percentage of homeowners with a mortgage being “seriously” underwater by the company’s definition is Nevada, with 21.5 percent. When adjusted for all mortgages and not just those held by homeowners, Illinois comes in third behind Florida and California.
The number is not surprising to Jim Haisler, CEO of the Heartland Realtor Organization. The Crystal Lake-based group, formerly known as the McHenry County Association of Realtors, has a membership of about 1,000 real estate agents in and around the county.
McHenry County’s red-hot housing market, like those in Florida, Nevada, Arizona and elsewhere, withered with the collapse of the housing market and the Great Recession that ensued. The big boom, Haisler said, made for a bigger bust.
“I had hoped [the percentage of underwater homes] would be a little lower, but with such a housing boom in the 2005, 2006 time frame, when people bought in the peak of the market, there were so many homes purchased for such a high dollar amount, that recovery back to that point has still not fully happened,” Haisler said.
The average homeowner stays in a home for five to seven years, an average that Haisler said has increased with the housing market tumble. But even a decade after values started to fall with the popping of the housing bubble, values haven’t recovered in the McHenry County area.
There are other aggravating factors hampering recovery besides the fact that McHenry County was a boom area that went bust. A big one is the large property tax bills that come with McHenry County homes.
A study by the nonprofit Tax Foundation puts McHenry County’s property tax burden as the 29th highest by county in the nation. That same study puts Illinois’ overall burden as the second highest of all 50 states – a more recent study by another group puts Illinois at the top of the list.
Property tax bills did not decrease with home values because values dictate the owner’s share of the tax extension that each local government is entitled to. For many county homeowners, their tax bills have steadily increased at a rate far outstripping the recovery, if any, of their market value. That kind of a tax bill scares off potential buyers.
“Property taxes are a main issue, not just in McHenry County, but in northern Illinois. We are feeling that burden. Many people are reporting that their tax bill is 50 percent or more of their payment each month, which puts additional pressure on the recovery locally,” Haisler said.
Zaya Nicolas can attest to the burden – while he and his wife lost their jobs and their home value tanked, their taxing bodies have asked more and more of them. Their property tax bill last year was $5,638 for their four-bedroom, two-and-a-half-bathroom home – the bill was about $5,000 when they bought the house in 2010, according to county records.
Haisler’s advice for any underwater homeowner wanting to move is to call a real estate agent to learn the options out there based on their individual stories. The advice isn’t one of self-serving but one of expertise. About 20 percent of county home sales local real estate agents handle are for distressed properties – 15 percent are foreclosures and 6 percent are short sales.
“Unfortunately, Realtors have become very well-versed in short-sale, distressed-property situations. Contacting an agent can be a best first step,” Haisler said.
Nicolas’ predicament is more dire than most. He and his wife share the home with their two children, two granddaughters and his sister-in-law, who is fighting advanced cancer.
“Everyone has been advising me to, ‘Pack up and get out of Illinois,’ ” Nicolas said. “But where do you go with a family of eight?”