We'll discuss the latest trends and projections for the Chicago housing market. Is the Chicago-area housing market vulnerable to a recession? Home prices are expected to decline slightly over the next twelve months but the forecast for the fourth quarter of 2022 is still positive (+4.5%). The forecasts also indicate positive annual growth for the state as a whole with no decline in home values.
The median home sale price in the Chicago Metro Area in October 2022 was $300,000, up 3.2 percent as compared to last year. In the nine-county Chicago Metro Area, 7,645 homes (single-family and condominiums) were sold last month, a 32.4 percent decrease from the 11,303 homes sold in October 2021.
The median price of a home in the city of Chicago in October 2022 was $320,000, an increase of 2.2 percent from $313,000 in October 2021. In Chicago, home sales (single-family and condominiums) in October 2022 totaled 1,709 homes sold, a 30.8 percent decrease from October 2021 sales of 2,469 homes.
<<<READ: Illinois Housing Market Forecast>>>
The annual home price growth in the United States is forecasted to be slower than in 2021, but still, be strong by historical standards. So, what are the projections for the state of Illinois in 2022? Well, according to the housing forecast published by the Illinois Association of Realtors and presented by the Regional Economics Applications Laboratory, Institute of Government and Public Affairs University of Illinois, in 2022, median prices are expected to grow continuously within a narrower and lower range than in 2021 (source).
In the last twelve months, median prices maintained positive annual growth in each month while sales experienced a more mixed trend. The median sale prices in both Illinois and the Chicago PMSA generally experienced a lower than-forecasted annual growth rate at the beginning and end of the year while the growth rate was higher than forecasted in midyear.
Actual sales in both Illinois and the Chicago PMSA experienced similar or higher annual growth rates than forecasted. In 2022, median prices are expected to rise steadily in a lower and narrower range than in 2021. Year over year, these gains will range from 2.0% to 7.9% in Illinois and from 1.4% to 7.7% in the Chicago PMSA.
By December 2022, the median price of homes is forecasted to be $261,561 in Illinois and $306,134 in Chicago PMSA, respectively 7.9% and 7.6% higher on an annual basis. Sales are forecasted to experience overall negative gains in 2022 for both Illinois and the Chicago area. The annual growth in monthly sales is forecasted to range from -4.1% to 11.5% for Illinois, with negative gains for most months. The comparative range for the Chicago PMSA is from -11.0% to -5.0%, with negative gains for all months.
Chicago Housing Market Trends
Below is the latest report on the “Chicago Housing Market.” The source of this report is the Illinois REALTORS® and the counties included are Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry, and Will. The report compares the Chicago metro and the city's housing metrics from October 2022 to October 2021.
In the nine-county Chicago Metro Area, 7,645 homes (single-family and condominium) were sold in October, a 32.4 percent decrease from the 11,303 homes sold last year. The median home sale price in the Chicago Metropolitan Area was $300,000, up 3.5 percent from $289,745 in October 2021.
- Closed Sales were down -32.4% year-over-year.
- The previous month's closed sales were 9,323.
- The median sales price rose from $289,745 to $300,000, a growth of 3.5%.
- The median sales price of single-family homes was $330,000, up 4.1%.
- The median sales price of condos was $240,000, up 4.4%.
- The inventory of available homes decreased by 16 percent year-over-year, from 22,974 to 19,299 units for sale.
- The Days on the Market Until Sale remained unchanged at 26.
Is Chicago a Buyers or Sellers Market?
The following Chicago housing market trends are based on single-family, condo, and townhome properties listed for sale on realtor.com. Land, multi-unit, and other property types are excluded. This data is provided as an informational resource only. Chicago is a balanced's market, which means that the supply and demand of homes are about the same.
In October 2022, the median list price of homes in Chicago, IL was $349.9K, trending up 1.7% year over year. It seems like the housing boom is losing steam in Chicago due to rising interest rates. The median price per square foot for listings was $245. The median price of a home sold was $320,000.
The sale-to-List Price Ratio was almost 98.36%, which shows that homes sold 1.64% below the asking price on average. Chicago has 78 distinct neighborhoods. As the most expensive neighborhood, Lincoln Park boasts a median listing price of $675,000. A median listing price of $165K in Roseland makes it the most affordable neighborhood in the city.
City of Chicago Housing Trends for October 2022
According to Illinois REALTORS®, sales of single-family and condominium homes in the city of Chicago reached 1,709 units in Oct 2022, representing a 30.8 percent decrease over the previous Oct's total of 2,469 units. Home Prices are rising moderately in Chicago. The median price of a home in Chicago in Oct 2022 was $320,000, representing a 2.2 percent increase over the previous year's median price.
- Closed sales in the City of Chicago decreased by 30.8 percent year on year.
- The median sales price was $320,000, representing a 2.2 percent increase over the previous year.
- The median sales price of single-family homes was $306,000, up 5.6%.
- The median sales price of condos was $330,000, down 4.3%.
- The inventory of available homes decreased by 18.7 percent.
- The Days on the Market Until Sale decreased from 35 to 34 days.
Chicago Rent Prices 2022
The Zumper Chicago Metro Area Report analyzed active listings last month across the metro cities to show the most and least expensive cities and cities with the fastest growing rents. The Illinois one bedroom median rent was $1,289 last month. Chicago was the most expensive city with one bedroom priced at $1,830 while Gary was the most affordable city with rent at $740.
The Fastest Growing Cities For Rents in Chicago Metro Area (Y/Y%)
- Chicago had the fastest growing rent, up 22% since this time last year.
- Aurora saw rent climb 21.6%, making it the second fastest growing.
- Oak Park was third with rent increasing 17.4%.
The Fastest Growing Cities For Rents in Chicago Metro Area (M/M%)
- Aurora had the largest monthly rental growth rate, up 6%.
- Oak Park & Palatine were tied for second with rents both climbing 5.9%.
- Naperville was third with rent rising 5.1% last month.
Chicago Real Estate Market Forecast 2022 and 2023
The Chicago housing market is shaping up to continue the trend of the last few years as one of the hottest markets in the United States. It is also one of the hottest real estate markets for investing in rental properties. What are the Chicago real estate market predictions for 2023? NeighborhoodScout.com's data shows that over the last ten years the Chicago annual appreciation rate has been averaging 5.37%.
The cumulative appreciation rate over the ten years has been 68.79%. Over the last twelve months, from 2021 Q2 – 2022 Q2, Chicago's appreciation rate has been 9.59%, which is lower than appreciation rates in most communities in America. Between 2022 Q1 – 2022 Q2, the house appreciation rates in Chicago were at 2.59%, which equates to an annual appreciation rate of 10.78%.
Let us look at the price trends recorded by Zillow over the past year. Since the last October, Chicago metro home values have increased by around 9.6% (Current Zillow Home Value Index = $311,225). Here is Zillow's housing forecast for Chicago MSA.
- Chicago-Naperville-Elgin Metro home values have gone up 9.6% over the past year.
- Zillow predicts that home values in Chicago MSA may drop by 1.4% between Oct 2022 to Oct 2023.
The sales forecast presented by UIC Stuart Handler Department of Real Estate to Illinois Realtors for November, December, and January suggests a decrease on a yearly and monthly basis for both Illinois and the Chicago PMSA.
- Annually for Illinois, the three-month average forecasts point to a decrease in the range of -19.2% to -26.0%.
- The comparative figures for the Chicago PMSA are a decrease in the range of -28.3% to -38.3%.
- On a monthly basis, the three-month average sales are forecast to decrease in the range of -7.4% to -10.1% for Illinois and decrease in the range of -11.0% to -14.9% for the Chicago PMSA.
The median price forecast indicates positive annual growth for November, December, and January in both Illinois and the Chicago PMSA.
- In Illinois, the median price is forecast to change by 0.1% in November, 1.6% in December, and 2.1% in January 2023.
- For the Chicago PMSA, the comparable figures are 3.4% in November, 3.2% in December, and 3.6% in January 2023.
These numbers can be positive or negative depending on which side of the fence you are — Buyer or Seller? In a balanced real estate market, it would take about five to six months for the supply to dwindle to zero. In terms of months of supply, Chicago can become a buyer’s real estate market if the supply increases to more than five months of inventory.
And that’s quite unlikely to happen. This housing market is skewed to sellers due to a big imbalance in supply and demand. Real estate market forecasts given in this article are just educated guesses and should not be considered financial advice. Many variables such as mortgage rate trends in 2023 could potentially impact the value of a home in Chicago (or any other market) and some of these variables are impossible to predict in advance. Real estate prices are deeply cyclical and much of it is dependent on factors you can’t control.
Chicago Real Estate Investment Overview
Is Chicago a Good Place Real Estate Investment? You need to drill deeper into local trends if you want to know what the market holds for the year ahead. We have already discussed the Chicago housing market forecast for answers on why to put resources into this market. Chicago is a strong renter market. Over 50% of the population rents in this city. Chicago is the 6th most walkable city in the nation. Chicago metro area has a population of approximately 8,865,000, a 0.03% increase from 2019. It is the most populous city in the U.S. state of Illinois, and the third-most-populous city in the United States.
Chicago has a mixture of owner-occupied and renter-occupied housing units. According to Neighborhoodscout.com, a real estate data provider, one and two-bedroom large apartment complexes are the most common housing units in Chicago. Other types of housing that are prevalent in Chicago include single-family detached homes, duplexes, rowhouses, and homes converted to apartments. Single-family detached homes account for roughly 25.98% of Chicago's housing units.
Chicago has been one of the hottest real estate markets in the country for many years. In the past ten years, the annual Chicago real estate appreciation rate has amounted to 4.88%, according to NeighborhoodScout.com. Chicago metropolitan area or Chicagoland is an area that includes the city of Chicago and its suburbs. So if you buy a Chicago real estate investment to use as a rental property, you could benefit in this market.
Although the recent population loss has been a concern for real estate investors, Chicago is still the most populous city in the Midwestern United States. About three million people live in Chicago and another ten million in the surrounding metro area. Chicago MSA is the third-largest metropolitan area in the U.S. It has a large population, a diverse economy, and a stable market. It is home to 32 Fortune 500 companies, with very high private sector employment.
Chicago's 58 million domestic and international visitors in 2018 made it the second most visited city in the nation, as compared with New York City's 65 million visitors in 2018. These are just some of the highlights that make Chicago a great place to live and invest in real estate. The list can go on and on. Chicago is also a major world financial center, having the second-largest central business district in the United States.
| Top Reasons To Invest In The Chicago Real Estate Market? | |
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Let’s take a look at the number of positive things going on in the Chicago real estate market which can help investors who are keen to buy an investment property in this city.
Chicago Rental Market Is Very Strong
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. 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 downtown. 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 last year's April report found that the hottest areas 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.
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 last year's April report stated that the hottest Chicago markets for condos and townhomes were Grand Boulevard, Kenwood, and Lincoln Square.
Chicago Rental Prices Trends
As of November 27, 2022, the average rent for a 1-bedroom apartment in Chicago, IL is currently $1,800. This is an 18% increase compared to the previous year. Over the past month, the average rent for a studio apartment in Chicago increased by 4% to $1,350. The average rent for a 1-bedroom apartment decreased by -3% to $1,800, and the average rent for a 2-bedroom apartment remained flat.
- Two-bedroom apartment rents average $2,200 (a 23% increase from last year).
- Three-bedroom apartment rents average $2,595 (a 30% increase from last year).
- Four-bedroom apartment rents average $2,900 (a 9% increase from last year).
53% of the households in Chicago, IL are renter-occupied while 48% are owner-occupied. The most expensive neighborhoods in Chicago are River West, Streeterville, and River North.
Chicago Real Estate 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 the 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.
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 yet. This means that the Chicago real estate market is likely going to continue its slow, upward market trend.
Chicago 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.
Chicago's Job Growth Keeps People Coming
Chicago is not only home to several 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 in or simply choose to rent upon relocation in one of the luxury apartments downtown.
The Chicago metropolitan area is made up of four metropolitan divisions—separately identifiable employment centers within the larger metropolitan area. The current economic uncertainty and inflation keep 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.
Where to Invest in Chicago Real Estate Market?
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. Several factors guarantee that they’re not going to turn into new home buyers any time soon.
Chicago real estate market is a prime destination 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. Good cash flow from Chicago rental property means the investment is, needless to say, profitable. A bad cash flow, on the other hand, means you won’t have money on hand to repay your debt. Therefore, finding the best investment property in Chicago in a growing neighborhood would be key to your success.
When looking for the best real estate investments in Chicago, you should focus on neighborhoods with relatively high population density and employment growth. Both of them translate into high demand for housing. If the housing supply meets housing demand, real estate investors should not miss the opportunity since entry prices of homes remain affordable.
The neighborhoods should be close to basic amenities, public services, schools, and shopping malls. A cheaper neighborhood in Chicago might not be the best place to live in. A cheaper neighborhood should be determined by these factors – Overall Cost Of Living, Rent To Income Ratio, and Median Home Value To Income Ratio. It depends on how much you are looking to spend and if you are wanting smaller investment properties or larger deals in Class A neighborhoods.
There are 76 neighborhoods in Chicago. Lincoln Park has a median listing price of $649.9K, making it the most expensive neighborhood. Auburn Gresham is the most affordable neighborhood, with a median listing price of $189.9K (on Realtor.com).
Some of the popular neighborhoods in Chicago, Illinois are Near North Side, Lakeview, West Town, Andersonville, South Loop, Bronzeville, Norridge, Logan Square, Old Town, Wicker Park, Bridgeport, Irving Park, Norwood Park, Bucktown, West Loop, and Hyde Park.
Chicago's North Side is the city's most densely populated residential section. For $200,000 price, you can purchase properties with one or two bedrooms and one or two baths. Chicago's West Side is home to the University of Illinois at Chicago. With a $200,000 budget, you can buy condos that typically offer one to two bedrooms and one or two baths.
You can buy Chicago investment properties in the Pilsen neighborhood. Pilsen is a great area for those who want a diverse portfolio of investment properties without having to run all over the city. Pilsen is located on Chicago’s Lower West Side. It features a mix of condos, apartment buildings, and single-family homes. The area is suburban enough to attract families. Its schools are a C+, which is close to the Chicago average. Parks and other amenities explain why Niche.com gave the area a B- for families.
CHECK OUT → Some Good Neighborhoods in Chicago Where You Can Buy Investment Properties.
Humboldt Park is another good neighborhood to buy investment properties in Chicago. The home prices in Humboldt Park peaked in 2006 but fell dramatically during the Great Recession. Home prices here hit a record low in 2012. Humboldt’s housing prices are on the rise again, though they remain below their 2006 peak. The average home price is around 300,000 dollars, while rents are around 1700 dollars a month. The area is notable for the number of foreclosed and distressed properties available to investors, and this helps pull the average rental rate down.
Highest Appreciating Chicago Neighborhoods Since 2000 (By Neighborhoodscout.com)
- W Wabansia Ave / N Whipple St
- W Cortland St / N Mozart St
- W Wabansia Ave / N Francisco Ave
- Humboldt Park Northeast
- Logan Square East
- Palmer Square East
- Palmer Square
- Logan Square West
- Logan Square Northwest
- W Cortland St / N Albany Ave
Illinois is in the midwestern United States. Surrounding states are Wisconsin to the north, Iowa and Missouri to the west, Kentucky to the south, and Indiana to the east. Illinois also borders Michigan, but only via a northeastern water boundary in Lake Michigan.
Apart from the Chicago real estate market, you can also invest in the housing market of Indianapolis. The median sales price in Indiana saw a year-over-year increase of 9.7 percent to $170,000. Not surprising is the fact that Indianapolis house prices are also on the rise in the year 2020. Demand is still outpacing the supply, the new construction is slow, and competition for quality homes remains tough.
Like most cities nationwide, Indianapolis has experienced real estate appreciation over the last couple of years. The real estate appreciation rate in Indianapolis in the last quarter was around 0.81%, which amounts to an annual rate of 3.3%. However, it is quite unclear whether the rate of appreciation would remain steady or not due to the short-term effects of the ongoing pandemic.
Economic uncertainty might hold back sales volume for a short period in 2020. Most housing analysts expect Indianapolis house prices to remain flat or drop by a small fraction for the remainder of the year 2020.
If you head towards the west of Illinois, you should consider investing in Kansas City, MO. There is probably no hotter market right now than Kansas City, Missouri. A large, prosperous, self-sufficient, and culturally rich city, it is no wonder why it has seen a continuous rise in its employment, directly impacting the local real estate.
The Kansas City real estate market is very hot and in many ways the envy of housing pundits on both coasts. It is the largest city in the U.S. state of Missouri, famous for its distinct barbeque cuisine and jazz heritage. Also nicknamed the City of Fountains, Kansas City is now emerging as a growing market for real estate investments. High demand and low inventory are driving up both home prices and the speed of home sales in the Kansas City Housing Market.
Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.
NORADA REAL ESTATE INVESTMENTS has extensive experience investing in turnkey real estate and cash-flow properties. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in many other growth markets in the United States. We can help you succeed by minimizing risk and maximizing the profitability of your investment property in Chicago.
Consult with one of the investment counselors who can help build you a custom portfolio of Chicago turnkey properties. These are “Cash-Flow Rental Properties” located in some of the best neighborhoods of Chicago.
Not just limited to Chicago or Illinois but you can also invest in some of the best real estate markets in the United States. All you have to do is fill up this form and schedule a consultation at your convenience. We’re standing by to help you take the guesswork out of real estate investing. By researching and structuring complete Chicago turnkey real estate investments, we help you succeed by minimizing risk and maximizing profitability.
Let us know which real estate markets in the United States you consider best for real estate investing!
Remember, caveat emptor still applies when buying a property anywhere. Some of 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 through the references given below. As a general policy, Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.
REFERENCES
Market Prices, Trends & Forecasts
https://www.illinoisrealtors.org/marketstats/
https://www.zillow.com/chicago-il/home-values
https://www.illinoisrealtors.org/wp-content/uploads/2021/11/Annual_forecast_2022.pdf
https://www.neighborhoodscout.com/il/chicago/real-estate
https://www.realtor.com/realestateandhomes-search/Chicago_IL/overview
https://www.forbes.com/sites/ingowinzer/2016/05/25/should-you-invest-in-chicago-real-estate/#64c07e3c2ad1
http://www.chicagobusiness.com/realestate/20171221/CRED0701/171229976/2018-real-estate-forecast-foggy-lukewarm
Housing Price Forecasts Illinois and Chicago PMSA, August 2020
https://www.illinoisrealtors.org/wp-content/uploads/2020/08/Forecasts_August_2020.pdf
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
Labor pool stats
https://www.homeunion.com/real-estate-investment-locations/chicago-illinois/
Trump’s Tax Plan Makes Many Reluctant to Buy
http://www.chicagobusiness.com/realestate/20171221/CRED0701/171229976/2018-real-estate-forecast-foggy-lukewarm
Foreclosures
https://www.realtytrac.com/statsandtrends/il/cook-county/chicago/
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
