Is it worth investing in the Chicago Real estate Market? Chicago is the biggest city in the state of Illinois, USA, yet the most popular one. It is ranked as the third biggest city in the country after New York City and Los Angeles. Well, even foreigners are familiar enough with the name of the city despite the fact that they may have never been there.
The popularity of the city attracts many people inside and outside the US to invest in property there. Moreover, Chicago offers many things to live in. While being one of the biggest cities in the US, Chicago is considered the easiest one among them to navigate. Thanks to the smart city plan made many decades ago.
The city is full of skyscrapers for sure. Uniquely, they are concentrated only in the metro area, known as the loop. Then, neighborhoods around it spread to the northern, southern, and western areas. Meanwhile, if you choose to travel to the eastern area, you can see the beautiful Lake Michigan.
The city also attracts people to come with many tourist attractions such as the Millennium Park, the Field Museum of Natural History, Navy Pier, Chicago Riverwalk, and many more.
Chicago is also the home of many big US companies. Well, you must have heard some of the following names like McDonald’s, Exelon, Mondelez International, and Boeing.
In addition, every year, young adults come to the city to continue their studies in universities. Some of the universities are famous and ranked as top-class universities including The University of Chicago, the University of Illinois Chicago, Loyola University, and Northwestern University.
For many facilities available in it, it is not exaggerating to say that Chicago is a dream home for many people. Well, the living cost is lower than many other big cities anyway, making it really ideal for real estate investment.
The History of the Chicago Real Estate Market
What is so important to knowing the history of the Chicago housing market? In the world of investment in general, the trend tends to continue. Therefore, analyzing the market condition today and predicting what happens tomorrow is impossible without knowing what has happened in the past.
Meanwhile, another indicator that is no less important is the level of affordability of houses in the metropolitan area. To measure those 2 essential things, you should use home investment indexes. One of them is published by Freddie Mac.
Freddie Mac publishes index reports of house prices in big cities in the US. The index is known as the Freddie Mac House Price Index (FMHPI). When reporting the trend of house prices, the index is divided into 2 types, they are the trend for the long and short terms.
In FMHPI, Chicago is included in the Chicago-Naperville-Elgin area. The house price index for April 2017 is 131.48 while the same index for the next 5 years, April 2022, is 178.78. It means that the price change in 5 Years is 35.9%, the change of price in a year is 12.5%, and the average monthly change is 1.2%.
Meanwhile, to know if Chicago is worthy of investing, investors commonly also consider the house affordability level. It is mainly if the house they invest in is later developed into a rented house. Sure, it is very important to acknowledge the possible profit to get later.
To measure the affordability level, it needs an index that compares the annual income of people to buy a house with an average price in Chicago. To calculate it, the Kiplinger report is used.
In 2022, as usual, Kiplinger published the house affordability report for the top 100 metropolitan areas in the US. The report uses a scale of 1-10 with 1 representing the most affordable market and 10 representing the most expensive one.
For Chicago, Kiplinger reports that after the peak of the real estate market cycle in May 2006, the house price in Chicago decreased by 12.4%. The bottom of the cycle happened in March 2012, and the average house price in Chicago has increased by 77.3%.
If those percentages are calculated, Chicago gains the affordability index of 5 out of 10. It means that the housing affordability of Chicago in the real estate market is in the middle-class category. It also helps explain why many people are interested in renting houses in the city.
Population and Growth in Chicago
Whether or not a city is good for real estate investment depends on the population and growth there. Yes, the bigger population means more people need to buy or rent houses. So, how are the population and growth in Chicago?
In Chicago, the population has increased by 2% over the last 10 years, since 2012. The percentage may not be that big if you compare it with other cities. However, it is quite meaningful and significant, making the city on the third rank of the biggest cities in the US in terms of population, right behind New York and Los Angeles.
Related to the price and average rent in Chicago, some suburbs report rapid population growth. In the northwest area such as Huntley and Pingree Grove, the range of population growth is from 14% to 128% in a decade. That’s reasonable. The crowd of the metro area makes people prefer the more calming suburbs.
In addition, here are some key statistics on the population in Chicago.
First of all, there live more than 2,750,000 people in the city and more than 9.6 million people are in the metropolitan area. Here is why Chicago is the densest city in Illinois and the metropolitan area ranks number 3 in the US.
Second, although the population is big, it once decreased to 1.8% in 2021. The COVID-19 pandemic becomes the main reason for it. But it will not last long as the population starts to increase in 2022.
Third, the metropolitan area in Chicago includes Lake, Cook, McHenry, Kane, Kendall, Will, and DuPage. Those districts are located in Illinois. Meanwhile, County Lake and Porter are also included in the Chicago metropolitan area but those 2 are in Indiana.
Last, it is projected that the population in Chicago will reach 10.6 million people in 2050. The projection is issued by the Chicago Metropolitan Agency of Planning (CMAP).
Current Conditions of the Chicago Real Estate Market
Along with the recovery of the world from the pandemics, many investors decide to go back to the real estate market. And Chicago becomes one of the markets demanded the most. It is seen from the lack of property supplies in 2022 while the demands are getting higher and higher.
Demands for renting are also increased. Many people who have lived in Chicago before and decided to go back to their hometowns are now coming back to Chicago. Meanwhile, many other new people also come into the city to start their new destinies.
Consequently? They must look for homes to rent first rather than buying a new one. Renting a house or a room for singles gives them chances to move in case they find it not comfortable. The phenomenon causes the increase in Chicago home prices for sure. And In the future, it seems that the phenomenon will keep continuing.
Generally, the median home price in Chicago has increased by 9% in 9 districts. Besides, there are some primary market statistics reported as follows.
First of all, the Zillow Home Value Index for Chicago in April 2022 is $315,196. There is an increase of 8.6% in the price in 2021. In addition, since 2017, the home price in the city has increased by more than 28%.
Second, the median listing price of houses in Chicago is $349,900 based on the latest report from Realtor.com. The median price per feet square house in Chicago is $264.
Third, the ratio of the selling price is 98.6%, meaning that houses in the city are sold at prices quite similar to the offers. The price itself is $365,000.
Fourth, of 78 neighborhoods in Chicago, the most expensive one is Lincoln Park with a median price of $594,900. On the other hand, the most affordable neighborhood is West Ridge with a median price of $177,500.
Fifth, for homes for rent, the median price is $2,500 per month for a house with 3 bedrooms. The price has increased by 9% from 2021. Meanwhile, for the last 3 years, the median rental price tends to be stable.
Sixth, rental houses with families are around 53% of the total of houses in the metro area.
Lastly, the most affordable neighborhoods for rental houses are New City, Brighton Park, and Pullman with a median price of $1,200 per month. On the other hand, the most expensive ones are North Side, Loop, and Near Side with a median price of at least $6,000 per month.
Chicago Real Estate Market Forecast
How is the future of the Chicago Real Estate Market Based on Chicago real estate news? It looks like the home price will continuously go up in Chicago and some areas around, at least, until the end of 2023. It is even when the interest rate reduces demands and increases the home price.
How can it be like that? Well, it is because Chicago is projected to still be a strong seller market in 2022 and 2023. Currently, there are around 5 to 10 buyers for each house. There can “only” be 3 buyers for each house. The buyers are fewer but it doesn’t influence the price that much.
Interestingly, for years after 2023, the tendency is still the same if the situation is normal. But as you know, the property market is strongly influenced by many factors from various sectors starting from the economy, politics, society, to even health.
In conclusion, is it a good idea to start investing in a home in Chicago right now? Yes, it is for sure. Chicago is generally an ideal place for property investment. As a big city, there will be many newcomers in the future who need a place to live. Something better about it is that the property price in the city is considered more affordable than in others.
Chicago Real Estate Market FAQs
- Are housing prices dropping in Chicago?
No, it is not. The average home price in Chicago even increased by 8.6% from it in 2021. When measured since 2017, the median listing price for a single-family home in the city is around $349,900. The report is based on Realtor.com for Chicago.
- Is Chicago a good place for real estate?
Yes, it is. Chicago is the third biggest city in the US after New York City and Los Angeles. Every year, many people come to it for jobs, studies, and other reasons. The city is well-known for tourism also.
In addition, the economic condition in Chicago is considered strong and there is also stable job growth, making it ideal for property investment. Interestingly, home prices in Chicago, although they are considered expensive, are still relatively more affordable than in other big cities in the US mentioned earlier.
- Is now a good time to sell a house in Chicago?
If you are interested in selling a house in Chicago, you need to hire a realtor. Yes, selling it yourself is not common in the city. Besides, you should wait for March or April for selling. Those 2 months are considered the best as the demand tends to be high. So, if you are not in a rush on selling your house, it is recommended to do it next year.
- Is it still a seller’s market in Chicago?
Yes, it is. Based on many reports about the Chicago Real Estate investment, the city is still in the strong seller market in the mid of 2022. The latest production also states that the median home price of the city will continue to increase until the end of the year or even the beginning of 2023. While it is good to sell a house, the time is not bad also to start the property investment in Chicago.