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Top 10 Reasons To Invest In Chicago Real Estate Market In 2018

Chicago Real Estate

Chicago is the third largest metropolitan area in the U.S, almost three million in Chicago and another ten million in the surrounding metro area. Chicago has a large population, diverse economy, and a stable market. It is home to 32 Fortune 500 companies. It has high private sector employment. And due to a number of factors, Chicago Real Estate Market is one of the best rental real estate markets in the US.

In this blog, we will share with you the latest Chicago, IL real estate market trend. For example, the average price per square foot for Chicago properties was $221 in 2017, an increase of 1% compared to the same period in 2016. We will also share with you the top 10 reasons to invest in the Chicago real estate in 2018.

chicago real estate market

Chicago Real Estate – Market Trend & Forecast 2018

According to Zillow.com, the median home value in Chicago is $225,900. Chicago home values have gone up 3.0% over the past year and Zillow predicts they will rise 5.2% within the next year. The median list price per square foot in Chicago is $242, which is higher than the Chicago Metro average of $163. The median price of homes currently listed in Chicago is $324,900 while the median price of homes that sold is $309,300. The median rent price in Chicago is $1,755, which is higher than the Chicago Metro median of $1,695.

The percent of delinquent mortgages in Chicago is 2.0%, which is higher than the national value of 1.6%. With U.S. home values having fallen by more than 20% nationally from their peak in 2007 until their trough in late 2011, many homeowners are now underwater on their mortgages, meaning they owe more than their home is worth. The percent of Chicago homeowners underwater on their mortgage is 22.9%, which is higher than Chicago Metro at 16.4%.

Chicago Housing Market Forecast 2018

The Zillow Home Value Index is the median Zestimate valuation for a given geographic area on a given day. The Zillow Home Value Index for Chicago properties for April 2018 was $225,900. Zillow predicts that it would increase by 5.2% in 1-year to $237,000 in April 2019. In April 2018, the median listing price was $324,900 and the median sale price was $309,300.

The Zillow Rent Index is the median Rent Zestimate valuation for a given geographic area on a given day. In April 2018 the median rent in Chicago was $1,648/mo.

 

Chicago real estate price forecast

Graph Courtesy – Zillow.com

According to Trulia.com, Chicago real estate market trends indicate an increase of $2,500 (1%) in median home sales over the past year. The average price per square foot for this same period rose to $221, up from $219. The median rent for all rental properties in Chicago in April 2018 was $1,650, and it increased to $1,700 in May 2018.

Chicago housing prices chart

Graph Courtesy – Trulia.com

The median sales price for homes in Chicago real estate market for Mar 1 to May 30 was $277,500 based on 5,053 home sales. The median rent per month for apartments in Chicago for Apr 28 to May 28 was $1,700. Average price per square foot for Chicago was $221, an increase of 1% compared to the same period last year.

Top 10 Reasons To Invest In Chicago Real Estate Market In 2018

Here are top 10 reasons to invest in Chicago real estate market in 2018:

Rental Demand Is High – and So Are Rents

What makes Chicago such a hot market for rental real estate? Over 50% of the population rents. The large population of renters means that rental income for properties is far better than you’d see if you invested elsewhere in the country. Schaumberg reported slowing sales simply due to tight supply according due to data from the Chicago Association of Realtors; this drives many people forming new households or moving into the area to rent at whatever the market will bear.

Luxury Rentals Are a Profitable Niche in Chicago

Many people know that there are solid blue-collar areas with high rents, but it isn’t just the working class that rents townhomes and condos. According to Crain’s, the number of upper income households in Cook County that rent has nearly doubled over the past ten years. The Institute for Housing Studies at DePaul University found that the number of rental households among those earning at least $132,000 a year nearly doubled, while those earning $80,000 to $132,000 saw the number of renting households increase by just over 50%. Chicago has a booming supply of high end rentals, especially luxury apartments in downtown.

Home Prices Are Reasonable

Because households at all income levels choose to rent instead of buy, they are reducing demand for houses for sale, slowing the rise in home prices. This also explains why housing prices haven’t skyrocketed despite limited supply. Chicago’s inventory of homes for sale is very tight. Both attached and detached single family home inventory has been declining since 2012. At the end of 2017, potential buyers in Chicago had about five thousand fewer properties on the market to select from than if they’d been shopping at the end of 2016. This contributed to homes closing five days faster than the year before. If you start shopping for rental real estate, you could find something and rent it out.

Home Prices Are Appreciating

Chicago’s real estate market has been one of the slowest to recover since the housing bubble burst at the start of the Great Recession. Home prices were 19% below their pre-crash levels in 2017, and they aren’t expected to hit peak values until 2020. This means that the Chicago real estate market is likely going to continue its slow, upward market trend. Trulia expects prices to grow about 2.5% in 2018. Trends in Chicago show a 1% year-over-year rise in median sales price and a 3% rise in median rent per month.

Rehabbed Homes Are Readily Available

Chicago is seeing a surge in fully renovated single family homes. The Chicago Association of Realtors’ data found that most of the strong suburbs are on the south side of Chicago, and this is where many homes are being rehabbed and sold. Calumet Heights is in this category; a quarter of properties sold were either rehabbed or candidates for rehabilitation. These properties are ideal for investors who want to buy a property to rent out.

Job Growth Keeps People Coming

Chicago is not only home to a number of corporate headquarters; there has been a recent trend of companies moving their headquarters to Chicago as well. The steady increase in jobs has contributed to a slow but steady increase in rents. Many businesses are attracted by Chicago’s labor pool, the largest in the nation. As these businesses move into the area and attract relocating professionals, many are forced to rent because they can’t find houses fast enough in the areas they want to live or simply choose to rent upon relocation in one of the luxury apartments downtown.

Churn Keeps People Renting

Chicago’s unemployment rate has gone up while dropping in other cities as jobs shift from Chicago to the suburbs. This economic uncertainty keeps many who can afford to buy a home renting. It also keeps the rental market itself strong, since many want to remain free to follow their jobs as required.

Trump’s Tax Plan Makes Many Reluctant to Buy – Unless It Is a Rental

Uncertainty about the deductibility of hefty property tax bills is making many reluctant to buy a home, though this is less of an issue for a real estate investor who will rent out the property. Chicago and its suburbs have some of the highest property taxes in the nations. Around 12% of Chicago area homes have a tax bill of more than $10,000 a year. Yet that’s better than some of the most expensive real estate markets in the country. For example, in New York, more than 20% of homes have a property tax bill that high. In Orange County, California, more than half would. This means that limits or the loss of property tax deductions won’t hurt Chicago as badly as it would California or New York, and if it does have an impact, it will mostly be at the higher end of the Chicago real estate market.

You Can Find Hot Single Family Markets with Rapid Appreciation

Home prices in the Chicago area are low compared to regional income. Yet economic uncertainty and shifts in the employment market are leaving many who want to live in a single family home unable to afford to buy one. This is causing many to rent single family homes instead. Crain’s April real estate report found that the hottest markets for detached single family homes were in Calumet Heights, Gage Park and West Ridge. However, home prices are low compared to rents almost everywhere in the Chicago metropolitan area.

There Are Opportunities in Multi-Family Housing, Too

The workforce in Chicago is shifting from high paying but slow-to-no growth manufacturing jobs to lower paying and less stable retail, business services and healthcare jobs. This is causing many who would have been able to afford a middle class home to rent apartments instead. Crain’s April real estate report stated that the hottest Chicago markets for condos and townhomes were Grand Boulevard, Kenwood and Lincoln Square.

Should You Invest In Chicago Real Estate – The Verdict

In Chicago, arts and culture abound at top institutions like The Art Institute. Although the winters can test anyone’s resolve, Chicago summers are among the best in the world, with things to do every weekend, outdoor festivals, and Lake Michigan at your doorstep. Chicago has an incredibly deep pool of potential renters at all levels of the market. A number of factors guarantee that they’re not going to turn into new home buyers any time soon. Chicago real estate market is a prime market for investors who would like to buy where the ROI is going to be high and likely to improve over time. It won’t be long before Chicago makes you feel right at home.

If you are new to real estate investing, it very important to read good real estate books and learn from the savvy investors who have made fortunes by investing in some of the best real estate markets like Birmingham AL real estate market. We recommend 8 other hottest US real estate markets for investors looking to build their portfolio of single family rental homes. Following the housing market decline in 2007, single family rental homes became favorable options for investors, saving in construction or refurbishment prices. The quick turnaround for an owner to rent out their property means cash flow is almost immediate. Single family rental homes have grown up to 30% within the last three years. Almost all the housing demand in the US in recent years has been filled by single family rental units.

 

REFERENCES:

Crain’s April real estate report
http://www.chicagobusiness.com/realestate/20180419/CRED0701/180419837/heres-where-the-real-estate-market-has-been-hottest-in-2018

Upper household rental rates
http://www.chicagobusiness.com/realestate/20180411/CRED0701/180419970/more-upper-income-households-renting-in-chicago-area

Housing inventory numbers
http://www.chicagonow.com/getting-real/2018/04/chicago-real-estate-market-worst-home-sales-decline-in-20-months/

2016 to 2017 housing inventory decline data
http://www.chicagotribune.com/business/ct-biz-chicago-home-sales-supply-20180124-story.html

Home price appreciation data
https://www.biggerpockets.com/blogs/1781/67452-chicago-real-estate-investing-forecast-for-2018

Labor pool stats                                                                                                              https://www.homeunion.com/real-estate-investment-locations/chicago-illinois/

Trulia price appreciation data
http://www.chicagobusiness.com/realestate/20171221/CRED0701/171229976/2018-real-estate-forecast-foggy-lukewarm

Trump’s Tax Plan Makes Many Reluctant to Buy
http://www.chicagobusiness.com/realestate/20171221/CRED0701/171229976/2018-real-estate-forecast-foggy-lukewarm

Workforce shift from high wage manufacturing to retail driving demand for apartments and rented single family homes
https://www.forbes.com/sites/ingowinzer/2016/05/25/should-you-invest-in-chicago-real-estate/#64c07e3c2ad1

*The information contained in this article was pulled from third party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified.


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