If you are looking to invest in the Chicago real estate market, you must read till the end. Chicago is currently a balanced real estate market and home prices are predicted to rise by not more than 1% in 2020. So you might want to consider making your purchase sooner rather than later, to avoid higher housing costs down the road.
Chicago metropolitan area or Chicagoland, is an area that includes the city of Chicago and its suburbs. It is the third largest metropolitan area in the U.S. Almost three million people live 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. Is Chicago going to be one of the hottest real estate markets for investors in 2020? Let’s take a deep look at the latest Chicago housing market trends to come to a conclusion. In the latest quarter, real estate appreciation rates in Chicago have been around 1.3%. If they remain steady, the annualized appreciation rate would be around 5.2%, which could trigger a massive interest in the real estate investment opportunities in Chicago.
In this article, we shall discuss some more important reasons why you may want to consider buying Chicago investment properties in 2020. Please note that there are many variables that can potentially impact the value of a home in Chicago (or any other market) and some of these variables are impossible to predict in advance.
What Makes Chicago a Hot Place For Real Estate Investment?
Chicago Real Estate Market Forecast 2020
What are the Chicago real estate market predictions for 2020? Chicago housing market 2020 is shaping up to continue the trend of the last few years as one of the hottest markets in the United States. The latest real estate data from Zillow shows that the current median home value in Chicago is $241,561. Chicago is currently a seller’s market – which means there are a lot of qualified buyers in the market place and not enough homes for sale in the market.
Looking forward in this year, the Chicago real estate market forecast is that home prices will continue to increase by 0.7%. Since 2015, the median home price in Chicago has increased from $201,000 to $241,500.
Here is the Chicago, IL real estate price appreciation graph by Zillow. It shows us the current home price appreciation forecast of 0.7% till Dec 2020.
The median list price per square foot in Chicago is $240, which is higher than the Chicago-Naperville-Elgin Metro average of $164. The median price of current listings in Chicago is $325,000 and the median price of homes that have been sold out is $270,400. The median rent price in Chicago is $1,750, which is higher than the Chicago-Naperville-Elgin Metro median of $1,695.
Zillow reports that 9.9% of the listings in Chicago had a price cut in Nov 2019, which is a good thing for buyers. It shows sellers were willing to negotiate on prices as they were finding it more and more difficult to sell homes at asking prices. The median price per square foot in Chicago in December 2019 was $240.
Chicago Housing Market Forecast 2019 – 2021
Here is a short and crisp Chicago housing market forecast for the 3 years ending with the 3rd Quarter of 2021. The accuracy of this forecast for Chicago is 84% and it is predicting a positive trend. The LittleBigHomes.com estimates that the probability for rising home prices in Chicago is 84% during this period. If this price forecast is correct, the Chicago home values will be higher in the 3rd Quarter of 2021 than they were in the 3rd Quarter of 2018.
Check this page each quarter for updates to the Chicago, IL Real Estate Market Forecast.
Chicago Real Estate Market Trends
We shall now discuss some of the latest real estate market trends in the Chicago such as median home prices, inventory, economy, growth and neighborhoods, which will help you understand the way the local real estate market moves in this region. These factors make Chicago real estate market an extremely alluring place for investment in 2020. Trulia has currently 9,902 resale and new homes for sale in Chicago, IL including open houses, and homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process. The median sales price is $280,000 and homes are selling for about $235/sqft.
As per the real estate company called Neigborhoodscout.com, the median house price in Chicago is $271,128, which indicates that home prices in Chicago are well above the national average for all cities and towns in the United States. 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 and row houses.
Currently, there are 2,875 single family homes for sale in Chicago, IL on Zillow. Additionally, there are 402 single family homes for rent in Chicago, IL. Under potential listings, there are about 244 Foreclosed and 2,860 Pre-Foreclosure homes. These are the delinquent properties that may be coming to the market soon but are not yet found on a multiple listing service (MLS).
Following the housing market decline in 2007, single family rental properties 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.
In the past month, 2301 homes have been sold in Chicago, IL on Redfin.com. In addition to houses in Chicago, there were also 5636 condos, 430 townhouses, and 1931 multi-family units for sale in Chicago last month. The median price of homes for sale is around $300,000. According their statistics, the Chicago housing market is somewhat competitive.
Homes in Chicago receive 1 offers on average and sell in around 54 days. The average sale price of a home in Chicago was $275K last month, up 10.0% since last year. The average sale price per square foot in Chicago is $182, up 8.3% since last year. A hot listing in Chicago can sell for around list price and go pending in around 19 days.
Here is the latest Chicago housing market data for the month of Dec 2019 from Redfin.com. The sale to list price ratio shows us that it was a trending more like a seller’s market in the past month.
Chicago Housing Market Trends in Dec 2019
|Median List Price||$305,000|
|Avg. Sale / List||97.0%|
|Median List $/Sq Ft||$202|
|Median Sale Price||$275,000|
|Median Sale $/Sq Ft||$182|
There are currently 13,096 homes for sale in Chicago, IL on Realtor.com. The asking price of single family homes can start from $9,900 and can go up to $45M for a luxury property located in Lincoln Park neighborhood in the city of Chicago, IL. Lincoln Park is a popular neighborhood for home buyers who can afford to buy a home in the median price range of $675K. Another most expensive neighborhood in Chicago is West Town where the median home price is over $575,000.
There are currently 540 rental properties in Chicago and their rent prices range from $892 to $18,000 per month. There are 163 new construction homes for sale in Chicago within a price range of $155,000 to $8.5M. The most affordable new construction homes are located in the Washington Heights neighborhood of Chicago, IL. According to Realtor.com, in December 2019, the Chicago housing market was a balanced market, which means there was a balance of buyers and sellers in the market.
In other words, the demand for housing met the supply. Ideally a buyer would prefer a sale to asking price ratio that’s closer to 90%. In Chicago, the sellers have held extremely good leverage in these negotiations in the past month. On an average, they could sell homes for 97.42% of the asking price. A seller would always prefer scenarios which can yield a ratio of 100% or higher. In December 2019, the median list price of homes in Chicago, IL was $321K, trending up 7% year-over-year. The median listing price per square foot was $216. The median sale price was $275K.
Analyzing real estate data from multiple sources gives us a much broader perspective of the direction in which a market is moving. The median list price in Chicago, IL is $330,000 on Movoto.com. The median list price in Chicago was less than 1% change from December to January. Chicago’s home resale inventories is 6,698, which increased 1 percent since December 2020. The median list price per square foot in Chicago is $236.
As you can see in the graph, the median price per sq ft rose to its peak value in April 2019, when it was $264. In December 2019 it was $234. Distressed properties such as foreclosures and short sales remained the same as a percentage of the total market in January.
Chicago is a fairly walkable city in Cook County. There are 81 neighborhoods in Chicago. Lincoln Park has a median listing price of $675K, making it the most expensive neighborhood. Auburn Gresham is the most affordable neighborhood, with a median listing price of $174K. 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.
If you are looking to invest in the Chicago real estate, you should that three most important factors when buying a real estate anywhere are location, location, and location. Location creates desirability. Desirability brings demand. There should be a natural and upcoming high demand for rental properties. Demand would raise the price of your Chicago investment real estate and you should be able flip it for a lump sum profit. The neighborhoods in Chicago must be safe to live in and should have a low crime rate. The neighborhoods should be close to basic amenities, public services, schools and shopping malls.
Chicago, IL Foreclosures And Bank Owned Homes Statistics
As per the Chicago foreclosure data by Zillow, the percent of delinquent mortgages in Chicago is 1.3%, which is higher than the national value of 1.1%. 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 21.4%, which is higher than Chicago-Naperville-Elgin Metro at 13.5%.
|Total No. of Foreclosures in Chicago||5084 (RealtyTrac)|
|Homes for Sale in Chicago||4603|
|Median List Price||$299,900 (0% rise vs Nov 2018)|
There are currently 5,084 properties in Chicago, IL that are in some stage of foreclosure (default, auction or bank owned) while the number of homes listed for sale on RealtyTrac is 4,603. In December 2019, the number of properties that received a foreclosure filing in Chicago, IL was 17% higher than the previous month and 8% higher than the same time last year.
Is Chicago a Good Place For Real Estate Investment?
Now that you know where Chicago is, you probably want to know why we’re recommending it to real estate investors. Is Chicago a Good Place Real Estate Investment? Investing in real estate is touted as a great way to become wealthy. Many real estate investors have asked themselves if buying a rental property in Chicago is good 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 2020 forecast for answers on why to put resources into this market.
Although, this article alone is not a comprehensive source to make a final investment decision for Chicago but we have collected ten evidence based positive things for those who are keen to invest in the Chicago rentals in 2020. Investing in Chicago rentals will fetch you good returns in the long term as the home prices in Chicago have been trending up year-over-year. Let’s now discuss state of the Chicago real estate market, which can help investors who are keen to buy an investment property in this city.
1. Rental Demand In Chicago 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.
2. 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.
3. Chicago 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.
4. Chicago 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. There Are Opportunities in Chicago 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.
Investing in Chicago Real Estate or Not: The Conclusion
Maybe, you have done a bit of real estate investing in Chicago, IL but want to take things further and make it into more than a hobby on the side. It’s only wise to think about how you can and should be investing your money. In any property investment, cash flow is gold. Should you consider Chicago real estate investment? 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. A good cash flow from Chicago investment properties 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 a good Chicago real estate investment opportunity would be a key to your success. If you invest wisely in the Chicago real estate, you could secure your future. If you are a beginner in the business of cash flow real estate investing, it very important to read good books on real estate. You must also collaborate and learn from savvy investors who have retired early on in their lives by investing locally in the Chicago real estate market. As with any real estate purchase, act wisely. Evaluate the specifics of the Chicago housing market at the time you intend to purchase.
Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. If housing supply meets housing demand, real estate investors should not miss the opportunity since entry prices of homes remain affordable. 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 area, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing and interest rates.
NORADA REAL ESTATE INVESTMENTS strives to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in the U.S. growth markets. We can help you succeed by minimizing risk and maximizing profitability.
The aim of this article was to educate investors who are keen to invest in Chicago real estate in 2020. Purchasing an investment property requires a lot of studies, planning, and budgeting. Not all deals are solid investments. We always recommend to do your own research and take help of a real estate investment counselor.
Other Best Places To Invest in Real Estate in 2020
Apart from the Chicago real estate market, you can also invest in the housing market of Minneapolis, MN. Minneapolis offers an ideal mix of a strong job market, affordable real estate, large rental market and limited housing supply. These factors will drive up property values and rental rates growing at a healthy clip for years. The Minneapolis real estate market is affordable compared to a number of booming rental markets across the country. However, the fact remains that the rental market in Minneapolis is growing.
Many would-be home buyers cannot afford to buy their first home, so they have to rent. Students who stay to work compete with economic migrants and the children of locals. Compounding the matter are the Millennials who watched parents lose homes in the 2007 housing bust and choose to rent though they could afford a home. Houses in Minnesota face an average 1.19% property tax rate. This is very close to the national average of 1.21%. Wisconsin’s tax rate is in this same range, but their higher average property values mean they pay far more in property taxes than those in the cheaper Minneapolis real estate market.
Another hot market to choose is the Austin houing market 2020. With Austin, Texas, becoming a more diverse city every year, there are plenty of opportunities to take advantage of – from buying new homes to different investing options in the Austin real estate market. Austin is a leader across the country with jobs and when you combine that with home prices not as drastically increasing, you’ll get a real estate market that many others envy.
Homes in Austin are 23% cheaper than the national average. It may be the second most expensive housing market in the state with a median home price of around $350,000, but it is still far cheaper than California or New York. Buy up condos or townhomes, and you’ll be able to see a sizable return on the investment. For example, studio apartments rent for around $780 in Austin versus the $700 national average, while an Austin 1 bedroom apartment rents for almost a $1000 though the national average is $825 a month. A three bedroom apartment in Austin rents for $1500-$1600 while the national average is closer to $1400 a month.
*Remember, caveat emptor still applies when buying a property anywhere. 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, the Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.
Crain’s April real estate report
Upper household rental rates
Housing inventory numbers
2016 to 2017 housing inventory decline data
Home price appreciation data
Labor pool stats
Trump’s Tax Plan Makes Many Reluctant to Buy
Latest Market Data, Trends and Statistics