The average price for a home in the Chicago real estate market was $208,600 in the first quarter of 2016. That number is the result of an 8.4 percent increase over the past year. However, real estate valuation sites have tempered their expectations for the coming year. Over the next 12 months, prices are expected to remain steady, according to the National Association of Realtors. Conversely, home prices are slightly down compared to the national average of $215,767. Essentially, while Chicago has been the beneficiary of recent price gains, the rate in which homes are appreciating appears to be slowing down. While the Chicago real estate market is not as healthy as it was just three short years ago, it does favor sellers much more so than buyers. Despite its current situation, Chicago’s market is on the right track and should continue to get better.
Chicago Real Estate Market Statistics:
According to Trulia, the average Chicago home is worth about $218/sqft. That price represents an increase of six percent over the same period last year. Price appreciation and principal payments in the last three years have boosted total equity growth since the recession. Over the last three years (12 quarters), houses have appreciated 30.9 percent compared to the national average of 22.6 percent. For a more comprehensive breakdown of equity, refer to the following:
- Homes purchased in the Chicago IL housing market one year ago have appreciated, on average, by $19,331. The national average was $15,781 over the same period.
- Homes purchased in the Chicago, IL housing market three years ago have appreciated, on average, by $57,828. The national average was $49,356 over the same period.
- Homes purchased in the Chicago, IL housing market five years ago have appreciated, on average, by $65,469. The national average was $68,727 over the same period.
- Homes purchased in the Chicago, IL housing market seven years ago have appreciated, on average, by $43,288. The national average was $59,758 over the same period.
- Homes purchased in the Chicago, IL housing market nine years ago have appreciated, on average, by $24,772. The national average increased $16,435 over the same period.
Despite consecutive months of price gains, Chicago still has one major factor working in its favor: affordability. That’s right, Chicago is more affordable than most comparable markets in the country despite having appreciation levels on par with the national average. Having said that, the average homeowner in the Chicago real estate market spends about 9.1 percent of their income on monthly mortgage payments. That is a stark contrast to the 15.6 percent the rest of the country averages. The median home price to income in Chicago for the first quarter of 2016 was 1.5 compared to the national average of 2.6, and 0.4 points below its historical average.
The number of homes in Chicago in some stage of foreclosure is currently 13,657 properties. With U.S. home values having fallen drastically 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. According to Zillow, the percent of Chicago homeowners underwater on their mortgage is 20.3 percent.
Initial foreclosure filings in the Chicago area dropped significantly in 2015, falling 11 percent from the previous year. According to the Chicago Real Estate Daily, that figure is roughly 57 percent below the peak year of 2010, when there were nearly 139,000 homes in foreclosure. Chicago’s rate of foreclosures last year ranked fourth among the nation’s top 20 largest cities. The number of new foreclosure filings by foreclosure type is as follows:
- Auction homes have decreased by 12.9 percent over the past month, and 3.3 percent over the past year.
- Bank owned properties have decreased by 11.4 percent over the last month, and 43.1 percent over the past year.
That decline in activity has been accompanied by more good news – the median sales prices of distressed homes, those that were either short sales or bank-owned homes, rose 6.3 percent in 2015 from a year ago.
Eventually, the combination of a decrease in auction activity and rising distressed property values will benefit the non-distressed home sellers. It’s hard to get properties to appraise for a mortgage that would justify a market price. As the lender-mediated properties draw better prices, you’ll see better comparables. That will take some time to take hold.
Unfortunately, local employment growth is poor and needs to improve. At 6.6 percent, the current unemployment rate is worse than the national average of 5.0 percent, and 0.6 percent higher than one year ago.
Chicago, IL: Real Estate Market Summary:
- Current Median Home Price: $208,600
- 1-Year Appreciation Rate: 8.4%
- 3-Year Appreciation Rate: 30.9%
- Unemployment Rate: 6.6%
- 1-Year Job Growth Rate: 1.8%
- Population: 9,500,00
- Median Household Income: $61,598
Chicago, IL: Real Estate Market (2016) — Q1 Updates:
The first quarter of 2016 has been mildly kind to the Chicago real estate market. The median home price continues to grow relative to last year, which is now at $208,600 compared to the national average of $215,767, but home appreciation continues to be the sweet spot for homeowners as appreciation gains in Chicago increased 8.4 percent in Q1 to $19,331. The hallmark of Chicago’s real estate market is home affordability which has been historically strong. Homeowners used 8.5 percent of their income on monthly mortgage payments in the first quarter of 2016, while the national average paid 14.5 percent.
The major drawback of Chicago has been their unemployment rate, which remains worse than the national average. The currently unemployment rate is 6.6 percent, up 0.6 percent from the same period last year, and 1.6 percent higher than the national average.
On the flip side, new housing construction continues to climb as the current level of construction in Chicago is 21.2 percent above the long-term average. Construction in Chicago has increased 1.7 percent in the first quarter of 2016, which is relative to last year.
Chicago, IL: Real Estate Market Review (2015):
The Chicago real estate market started 2015 ranked number seven for year-over-year single family home sales growth among the nation’s largest metropolitan areas, according to CoreLogic. The city continued its steady improvement throughout 2015 as the median price of homes and condos sold was $175,000 in February 2015, while the median sales price ended the year at $200,000 an eight percent increase from 2014.
“While results for the first half of 2015 were a bit stronger than those for the second half, the market maintained its positive momentum right through December,” said Jim Merrion, regional director of the RE/MAX Northern Illinois real estate network. “It seems likely that 2015 sales volume was restrained by the relatively modest inventory of homes for sale, but that helped generate stronger pricing for those homes that were on the market.”
While Chicago home prices increased during 2015, so did inventory levels — reaching its highest level since 2013. Fueled by a combination of price growth and decline in appreciation, more homeowners put their house on the market as the amount of homes for sale skyrocketed more than 18 percent from the previous year.
The surge in home prices also helped reduce the number of distressed properties sold in 2015. However, sales for distressed homes still accounted for 21 percent of all sales.
Chicago, IL: Real Estate Market Review (2014):
Chicago was hit hard during the recession, much like Detroit was. At the onset of the downturn, houses and homeowners alike lost an average of $47,400. Two years later, problems continued, as the average homeowner lost $65,200 in equity. By 2011, Chicago homeowners had reestablished an average of $34,800 in equity. Home price increases in 2014 helped to pull the local market out of a state of post-recession price weakness.
According to December’s Case-Shiller Home Price Index, Chicago home prices are heading in the right direction, albeit at a very slow pace. In fact, Chicago had the lowest price gains in 2014 out of the 20 participating metros. According to the report, single-family homes in the Chicago housing market increased by a modest 1.3 percent. Condos, on the other hand, finished the year with an even smaller gain: 1.1 percent. As a comparison, San Francisco saw year-over-year gains exceed nine percent.
Nevertheless, Chicago still proved that it could make improvements to its real estate market in 2014. Perhaps even more encouraging than the gain, was the market’s consistency. For 26 consecutive months, Chicago real estate had been the beneficiary of home price increases.
While the last few years have seen a modest increase, Chicago homes increased in value significantly since they bottomed out during the recession. In fact, since they were at their lowest level, single-family home prices increased 23.6 percent, while condos surged 31 percent in 2014.
Despite having faced plenty of headwinds, Chicago real estate benefited from an improving economy. In fact, economists forecasted that the expansion of the economy should work in favor of the Chicago area for the foreseeable future. The city experienced moderate growth for at least the next year – at least according to an economic report issued by the University of Illinois’ Regional Economic Applications Laboratory.
“Overall, the index is suggesting that the Chicago economy will stay in expansion phase for a while,” the lab’s Sungyup Chung said. “There is no worry about (a) contraction phase coming unless something bad happens at the national level.”
Again, Chicago faced an uphill battle since the onset of the recession, as it lagged behind a lot of comparable metros in terms of a recovery. Chicago’s performance compared to other cities is not good, but it’s because other cities were doing well, not because Chicago was doing bad.