The 7th Aldermanic District has a pretty obvious property flipping problem going on: anyone out there paying attention?
And if it's going on in the 7th District, it is probably going on all over the city. Property flipping is a disease, leading to boarded-up buildings, high foreclosure rates, and handsome payoffs for the second-to-the last property owner.
Last week, curious about property values in the central city, I compared the 7th District residential sales prices and volume in the first five months of 2006 to the first five months of 2007. I chose the 7th District for no particular reason other than much of it is in the central city.
Afterwards, I thought it would be interesting to see how much prices changed for the same property. Wow. I thought there would be a clear downward trend, but on the contrary, prices of most of the homes climbed rather dramatically and suspiciously.
When 110-year-old house that sold for $16,500 in October sells for $40,000 in November, something's amiss. That property, now assessed at $29,000, has since been foreclosed upon.
Another property that sold for $30,000 sold for $90,000 five months later. The owner is the defendant in multiple foreclosure actions in civil court.
In yet another instance, the price of a 900-square-foot cottage soared from $20,000 to $65,000 in the same month. It is assessed at $21,200. That property owner, too, was a defendant in multiple foreclosure cases.
These cases weren't isolated. A house in the 3400 blok of N. 45th St sold for $80,000, then $110,000 -- in the same month.
There were 58 properties that were sold twice during the time period considered -- basically from the beginning of 2006 until May of 2007. Let's not include the two properties with price increases of more than 1,000% and the couple of properties where it could not be determined whether the higher price was the first or second sale. Even with those allowances, the average price increase was 84%. Perhaps major improvements were made, but a quick check of 12 of the properties showed that permits weren't pulled for anything that would justify such price increases.
And remember, these increases occurred as average sales prices in the district were declining. There is no doubt that dubious sales are disguising the full extent of the drop in central city real estate prices. So the questions are: how bad is it out there? When will we find out?
And then what?