The current state of the Chicago housing market reflects balanced dynamics between buyers and sellers. Despite a modest increase in year-over-year home sales, there's a noticeable decline in housing inventory, signaling a challenge for buyers. While reduced inventory poses challenges for buyers, the rising prices indicate potential opportunities for sellers. The Chicago housing market is navigating these complexities, presenting a balanced landscape for both buyers and sellers in the ever-evolving real estate scenario.
How is the Chicago Housing Market Doing?
Illinois REALTORS® data reveals a modest uptick in year-over-year home sales in January, defying the challenges posed by a persistently sparse housing inventory. In the expansive nine-county Chicago Metro Area, a total of 4,538 homes (comprising single-family and condominiums) were sold, marking a 1.3 percent increase from the previous year's figure of 4,478 homes.
However, this growth transpired amidst a concerning backdrop of dwindling housing supply, with only 9,663 homes available in January 2024—a significant 28.3 percent decrease from the 13,471 homes listed in the same month of 2023.
The median price of a home in the Chicago Metro Area during January 2024 climbed to $315,000, reflecting a substantial 10.1 percent increase from the previous year's median of $286,000. This surge in median price signals a market characterized by resilience and an ongoing trend of elevated property values.
Dr. Daniel McMillen, a distinguished professor of real estate and associate dean for faculty affairs at the University of Illinois-Chicago College of Business Administration, offered insights into the current housing market dynamics. Despite the prevailing narrative of low sales and relatively high prices, Dr. McMillen noted a notable uptick in consumer confidence. He anticipates a significant boost in sales during the upcoming spring months, driven by favorable trends such as lower inflation rates, interest rates, and unemployment rates.
“The housing market is continuing its long-running trend of low sales and relatively high prices,” remarked Dr. McMillen. “However, consumer confidence has turned up markedly, and sales traditionally increase significantly in spring. We expect the recent trends toward lower inflation rates, interest rates, and unemployment rates to lead to a rebound in the housing market in the coming months.”
City of Chicago: January 2024 Snapshot
In contrast to the broader Metro Area, the city of Chicago experienced a 3.4 percent year-over-year decrease in home sales for January 2024, with 1,059 homes sold—down from 1,096 in January 2023. The city also witnessed a substantial 28.1 percent decline in housing inventory, with only 3,829 homes listed in January 2024 compared to 5,329 homes in the same month of the previous year.
Despite the dip in sales volume, the median price of a home in the city of Chicago saw a 6.3 percent increase from January 2023, reaching $315,000 compared to $296,408. Drussy Hernandez, president of the Chicago Association of REALTORS® and vice president of brokerage services for Coldwell Banker Realty in Chicago, interpreted this as a positive sign.
“In January, an increase in median sales price and a decrease in inventory are indicative of a steady drive in homebuyers,” highlighted Drussy Hernandez. “The notable surge in single family sales price in a pinched inventory market demonstrates buyers’ commitment to making homeownership a reality.”
Looking Ahead
The intricate interplay of market forces in Chicago's housing sector, as reflected in the January 2024 data, suggests a resilient market navigating challenges with determination. As consumers exhibit growing confidence and with the spring season traditionally driving increased real estate activity, the city's housing market appears poised for a rebound in the coming months.
ALSO READ: Illinois Housing Market Forecast
Chicago Rent Price Trends
Chicago, a vibrant metropolis known for its diverse neighborhoods, has been a focal point for the Zumper Chicago Metro Area Report, which delves into the nuances of rent price trends across the metro cities. Understanding the dynamics of rent prices is crucial for both residents and investors. Let's navigate through the data to uncover the most and least expensive cities, as well as those experiencing the fastest-growing rents.
The Most Expensive Cities
- Lombard: Securing the top spot as the most expensive city, with one-bedroom rentals priced at $2,190.
- Chicago: Following closely, Chicago claims the second position with rents reaching $2,170.
- Downers Grove: Ranking third, Downers Grove features a median rent of $1,830 for one-bedroom apartments.
The Least Expensive Cities
- Gary: Earning the title of the most affordable city, Gary boasts a remarkably low rent of $790.
- Waukegan: Securing the second spot among the least expensive, Waukegan offers one-bedroom rentals at $1,000.
- Merrillville: Taking the third position, Merrillville presents a median rent of $1,230 for one-bedroom units.
The Fastest Growing Rents (Year-over-Year)
- Aurora: Leading the pack in annual growth, Aurora experienced a remarkable 22% increase in rent compared to the previous year.
- Lombard: Following closely, Lombard achieved the second-highest growth with rents climbing 17.1%.
- Chicago: Securing the third position, Chicago witnessed a significant 16.7% increase in rents year-over-year.
The Fastest Growing Rents (Month-over-Month)
- Lombard: Demonstrating the highest monthly rental growth rate, Lombard experienced a notable 5.8% increase.
- Skokie: Securing the second position in monthly growth, Skokie saw rents climb by 4.1%.
- Chicago: Claiming the third spot, Chicago reported a 3.3% increase in rents month-over-month.
Chicago Housing Market Forecast for 2024 and 2025
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 2024?
According to the market forecast presented by Stuart Handler from the Department of Real Estate at the University of Illinois Chicago, the housing price forecasts for February 2024 in Illinois and the Chicago PMSA paint a promising picture of growth and resilience. The positive trajectory in median prices, coupled with a surge in monthly sales, presents an evolving landscape that demands attention.
Overview of Median Home Price Forecasts
February: The real estate landscape in Illinois and the Chicago Primary Metropolitan Statistical Area (PMSA) is poised for positive growth, as indicated by the median price forecasts. In February, Illinois is expected to experience a substantial 9.0% increase in median prices, with the Chicago PMSA outpacing it at 9.9%. This surge sets an optimistic tone for the real estate market, reflecting a buoyant economic climate.
March: The momentum in median price growth continues into March, with Illinois forecasted to see an 8.6% uptick, while the Chicago PMSA anticipates an 8.9% increase. These projections underscore the resilience and attractiveness of the real estate sector in the region, drawing attention from potential investors seeking profitable opportunities.
April: As we transition to April, the positive trajectory persists. Illinois is projected to experience a 7.8% rise in median prices, closely followed by the Chicago PMSA with a robust 9.8% increase. These figures not only highlight the sustained growth but also indicate a healthy and competitive real estate market in the coming months.
Sales Forecast Analysis
Annual Perspective: Despite the promising median price forecasts, the sales outlook for February, March, and April presents a nuanced picture. On an annual basis, both Illinois and the Chicago PMSA are expected to witness a decrease, ranging from -1.2% to -1.7% for Illinois and -3.2% to -4.3% for the Chicago PMSA. This suggests a cautious approach from prospective buyers amidst broader economic considerations.
Monthly Dynamics: However, a closer look at the monthly trends reveals a more optimistic scenario. The three-month average sales forecast indicates a notable increase on a monthly basis. For Illinois, sales are anticipated to surge between 17.0% and 23.0%, while the Chicago PMSA is poised for an increase ranging from 18.3% to 24.7%. These robust monthly projections signify a positive shift in buyer behavior and a potential rebound in demand.
Chicago Home Values Forecast
1. Average Home Value: According to Zillow, the average home value in the Chicago-Naperville-Elgin area stands at $300,906, reflecting a significant 5.9% increase over the past year. Homes in this market typically go pending in a swift 18 days, showcasing the area's brisk real estate activity. (Data through January 31, 2024)
2. 1-Year Market Forecast: Zillow's market forecast for the next year predicts a 3.1% increase in home values, providing insights into the region's anticipated growth as of January 31, 2024.
3. For Sale Inventory: As of January 31, 2024, the housing market boasts a robust 19,075 properties available for sale, indicating a diverse range of options for potential homebuyers.
4. New Listings: In January 2024, 5,325 new listings entered the market, contributing to the overall vibrancy and activity within the real estate landscape.
5. Median Sale to List Ratio: The median sale to list ratio, as of December 31, 2023, is an impressive 0.997, underlining the efficiency of the pricing strategies employed in the Chicago housing market.
6. Median Sale Price: The median sale price for homes in the area, recorded as of December 31, 2023, stands at $287,667, providing a benchmark for potential homebuyers and sellers alike.
7. Median List Price: As of January 31, 2024, the median list price has been reported at $321,633, offering valuable insights into the expectations of sellers in the current market.
8. Percent of Sales Over/Under List Price: In December 2023, 35.9% of sales were recorded over the list price, while 49.2% were under the list price, showcasing the diverse pricing dynamics within the Chicago housing market.
The Chicago-Naperville-Elgin MSA encompasses a vast geographical region, serving as a key economic and cultural hub. It includes the city of Chicago and surrounding areas, forming a cohesive urban and suburban landscape. The MSA covers several counties, including Cook County, DuPage County, Lake County, Will County, and more. Each county contributes to the overall dynamics of the housing market, showcasing a diverse range of neighborhoods and communities.
The housing market in the Chicago-Naperville-Elgin area is substantial, with a wide range of properties available for sale. The $300,906 average home value reflects the economic strength and demand within this market. With a significant 19,075 properties currently for sale, the Chicago housing market provides ample opportunities for both buyers and sellers to engage in a dynamic and evolving real estate landscape.
Is Chicago a Buyer's or Seller's Housing Market?
The current state of the Chicago-Naperville-Elgin housing market suggests a balanced scenario, offering advantages to both buyers and sellers. The 1-year market forecast of +3.1% in home values indicates a positive trajectory, attracting sellers looking to capitalize on potential appreciation. Simultaneously, the robust inventory of 19,075 properties provides buyers with a diverse selection and room for negotiation. It can be characterized as a market where both buyers and sellers can find opportunities that align with their respective goals and preferences.
Are Home Prices Dropping in Chicago?
As of the latest data available, there is no evidence to suggest a decline in home prices in the Chicago-Naperville-Elgin area. The average home value has experienced a 5.9% increase over the past year, indicating a trend of appreciation rather than depreciation. The stable market conditions, coupled with the positive forecast, provide assurance that home prices are not currently on a downward trajectory.
Will the Chicago Housing Market Crash?
There is no indication of an impending housing market crash in the Chicago-Naperville-Elgin area. The market's resilience is evident in the positive 1-year forecast of +3.1%, suggesting a healthy and sustainable growth pattern. Factors such as the diverse inventory, efficient pricing strategies (as reflected in the median sale to list ratio of 0.997), and the overall stability of the real estate landscape contribute to a sense of confidence in the market's long-term viability.
Is Now a Good Time to Buy a House in Chicago?
Considering the current state of the housing market in the Chicago-Naperville-Elgin area, it can be deemed a favorable time for prospective buyers. The average home value of $300,906 presents a reasonable entry point, especially with the forecasted 3.1% increase in values over the next year. Additionally, the substantial inventory of 19,075 properties provides buyers with ample choices. While market conditions may favor both buyers and sellers, those looking to enter the market should find favorable opportunities in the present landscape.
Is Chicago a Good Place for Real Estate Investment?
Population Growth and Trends
Chicago, known for its diverse neighborhoods and rich history, has been experiencing steady population growth over the years. The city's population growth is driven by factors such as employment opportunities, higher education institutions, and cultural attractions. The diverse demographic makeup of Chicago provides a broad tenant pool for real estate investors, making it an attractive market.
- Diverse Demographics: Chicago's diverse population ensures a wide range of tenant preferences and needs, reducing the risk of high vacancy rates.
- Steady Growth: The city's population growth indicates a consistent demand for housing, especially in well-located neighborhoods.
Rehabbed Homes Fix and Flip Opportunities
Chicago's real estate market offers lucrative opportunities for fix and flip investors. Many older properties in desirable neighborhoods are prime candidates for rehabilitation and resale. This segment of the market can yield significant profits for investors with the right skills and resources.
- Older Properties: Chicago has a substantial inventory of older homes that can be acquired at competitive prices and then renovated for profit.
- Increasing Demand: Renovated homes in sought-after neighborhoods are in high demand, allowing for premium pricing.
Economy and Jobs
The strength of the local economy plays a crucial role in real estate market stability. Chicago's diverse economy is bolstered by various industries, including finance, technology, manufacturing, and healthcare. The city offers a robust job market, which is attractive to both renters and potential buyers.
- Diverse Economy: A mix of industries reduces the risk associated with economic downturns in a specific sector.
- Job Opportunities: A strong job market ensures a constant influx of renters and potential homebuyers.
Livability and Other Factors
Chicago's livability is a key factor for real estate investors. The city's vibrant cultural scene, excellent public transportation, and diverse dining options contribute to its appeal. Additionally, the city's commitment to infrastructure and public services further enhances its livability.
- Cultural Attractions: Chicago offers world-class cultural experiences, attracting residents and tourists alike.
- Public Transportation: An extensive public transit system makes it convenient for residents to commute, reducing the importance of owning a car.
Chicago Rental Property Market Size and Growth
The size and growth of the Chicago rental property market are promising for investors. The city's diverse neighborhoods and housing options cater to a wide range of tenant preferences. This, coupled with population growth, ensures a robust and expanding rental market.
- Diverse Neighborhoods: Chicago's neighborhoods offer various housing options, from apartments to single-family homes, appealing to a wide range of renters.
- Growth Potential: With a growing population, the demand for rental properties is likely to continue to rise.
Other Factors Related to Real Estate Investing
When considering real estate investment in Chicago, it's essential to account for various other factors:
- Local Regulations: Familiarize yourself with Chicago's property regulations and tax laws to ensure compliance and maximize returns.
- Market Research: Thoroughly research neighborhoods and property types to identify areas with growth potential.
- Property Management: Whether you plan to manage properties yourself or hire a management company, effective property management is vital for success.
Investing in the Chicago real estate market offers numerous advantages. The city's population growth, diverse demographics, job opportunities, and livability make it an attractive destination for real estate investors. Additionally, the fix and flip opportunities, the size and growth of the rental market, and other related factors provide a solid foundation for potential returns on investment. However, it's crucial to conduct thorough research, stay informed about local regulations, and manage properties effectively to maximize the benefits of investing in Chicago's real estate market.
Highest Appreciating Chicago Neighborhoods
Chicago has witnessed significant changes in its neighborhoods since the year 2000. Here are the neighborhoods that have experienced the highest appreciation in terms of property values, according to Neighborhoodscout.
W Wabansia Ave / N Whipple St
Located in the heart of Chicago, the W Wabansia Ave / N Whipple St neighborhood has seen remarkable property value appreciation. This area's proximity to various amenities and its strong community appeal have contributed to its growth.
Humboldt Park Northeast
The Humboldt Park Northeast neighborhood has seen a steady increase in property values since 2000. The neighborhood's green spaces, cultural attractions, and improving infrastructure have made it an attractive destination for homebuyers and investors.
W Wabansia Ave / N Kimball Ave
This neighborhood, situated near W Wabansia Ave and N Kimball Ave, has experienced substantial property value appreciation. The presence of local businesses, parks, and good public transportation options has boosted its desirability among residents and investors.
Palmer Square East
Palmer Square East is another neighborhood that has seen significant appreciation in property values. Its charming streets, proximity to parks, and vibrant local scene have made it a sought-after area for both residents and real estate investors.
W Wabansia Ave / N Francisco Ave
The W Wabansia Ave / N Francisco Ave neighborhood has been on an upward trajectory in terms of property values. Its location and access to various amenities have attracted homebuyers and investors looking for long-term growth.
Logan Square Northwest
Logan Square Northwest is known for its thriving arts and dining scene. The neighborhood's cultural appeal, coupled with improved public services and transportation, has contributed to its property value appreciation.
W Cortland St / N Mozart St
W Cortland St / N Mozart St is a neighborhood that has experienced remarkable growth in property values. Its accessibility to urban conveniences and a sense of community have made it a desirable place to live and invest.
Palmer Square
Palmer Square, located in Chicago, has seen substantial property value appreciation. The neighborhood's green spaces, historic architecture, and community activities have made it a popular choice for homeowners and real estate investors.
Humboldt Park North
Humboldt Park North, with its green expanses and recreational opportunities, has seen a consistent increase in property values since 2000. The neighborhood's combination of natural beauty and urban amenities has attracted both residents and investors.
W Cortland St / N Albany Ave
W Cortland St / N Albany Ave is another Chicago neighborhood that has experienced substantial appreciation in property values. Its accessibility to city amenities and transportation options have bolstered its appeal to homebuyers and real estate investors.
These neighborhoods have not only appreciated in property values but also offer various amenities, community vibes, and urban conveniences, making them attractive options for both residents and real estate investors seeking long-term growth and value appreciation in Chicago.
References:
- https://www.illinoisrealtors.org/marketstats/
- https://www.zillow.com/chicago-il/home-values
- https://www.neighborhoodscout.com/il/chicago/real-estate
- https://www.realtor.com/realestateandhomes-search/Chicago_IL/overview