Chicago, IL Real Estate Market Trends & Analysis [Updated 2020]

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The Chicago real estate market has recovered at its own pace. While not on the same level as the rest of the country, the recovery of real estate in Chicago has occurred at a pace that appears very attractive to local investors. In fact, The Windy City’s unique combination of relatively low prices and demand seems to tilt the scales heavily in favor of real estate investors. While some more changes are to be expected in the wake of the Coronavirus, however, this midwestern city looks poised to weather the storm, and perhaps even come out on the other end even stronger than it went in.

Chicago Real Estate Market 2020 Overview

  • Median Home Value: $249,152

  • 1-Year Appreciation Rate: +0.6%

  • Median Home Value (1-Year Forecast): -2.3%

  • Median Rent Price: $1,761

  • Price-To-Rent Ratio: 11.79

  • Chicago-Naperville-Arlington Heights Unemployment Rate: 17.6% (latest estimate by the Bureau Of Labor Statistics)

  • City Population: 2,693,976 (latest estimate by the U.S. Census Bureau)

  • City Median Household Income: $55,198 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 13.75%

  • Foreclosure Rate: 1 in every 7,493 (1.3%)


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Chicago real estate investing

2020 Chicago Real Estate Investing

Home flipping continues to remain a viable option for investors across the country, and the Chicago real estate market is no exception. In fact, nationwide flipping rates in the first quarter of 2020 were up from the previous quarter and year-over-year. The amount of homes flipping in the first quarter of this year is the most we have seen in more than a decade.

According to Attom Data Solutions, “53,705 single-family homes and condominiums in the United States were flipped in the first quarter. That number represented 7.5 percent of all home sales in the nation during the quarter, up from 6.3 percent in the fourth quarter of 2019 and from 7.3 percent in the first quarter of last year, to the highest level since the second quarter of 2006.”

In addition to more homes being flipped across the country, investors were also able to increase their gross profits in the first quarter of 2020. “The gross profit on the typical home flip nationwide (the difference between the median sales price and the median paid by investors) also increased in the first quarter of 2020, to $62,300. That was up slightly from $62,000 in the fourth quarter of 2019 and from $60,675 in the first quarter of last year,” suggests the latest data presented by Attom Data Solutions.

While gross profits have increased in recent history, investors’ return on investment (ROI) hasn’t fared quite as well. While $62,300 is the highest gross profit the average investor saw in the first part of 2020, appreciation rates have eaten into profit margins. Making $62,300 on a successful flip, the average investor was realizing a 36.7% return on their initial investment over the first three months of 2020, according to Attom Data Solutions; that’s a decrease of 2.8% from the previous quarter and 4.2% from the same time a year ago.

Flipping remains a viable strategy across the United States, but one question remains: Is Chicago a good place to invest in real estate? The answer is simple: yes, as long as investors work within the parameters of the current market landscape. As it turns out, the Chicago real estate market appears poised to benefit both flippers and rental property owners for the foreseeable future.

It is worth noting, however, that not all markets have seen year-over-year decreases. The Chicago housing market, in fact, has seen house flipping returns rival some of the most competitive markets in the country. Qualifying “metro areas with a population of at least 1 million where returns on investment increased most year-over-year were Dallas, TX (up 38 percent); San Antonio, TX (up 36 percent); San Diego, CA (up 20 percent); Chicago, IL (up 20 percent) and Oklahoma City, OK (up 18 percent),” according to Attom Data Solutions.

There are still plenty of opportunities to flip real estate in the Chicago housing market. However, nearly a decade’s worth of appreciation is doing its best to shift the investing landscape from flipping strategies to those of a more long-term nature. More specifically, building a rental property portfolio is perhaps more attractive now than ever before, and the presence of the Coronavirus could actually work in favor of today’s Chicago real estate trends.

The Chicago real estate investing community should consider adding to a rental property portfolio for three particular reasons:

  • Interest rates on traditional loans are historically low

  • Years of cash flow can easily justify today’s higher acquisition costs

  • The price-to-rent ratio suggests housing inventory will be harder to come by

The presence of the Coronavirus has forced the Fed’s hand into keeping interest rates low. In an attempt to buoy the economy, in fact, the Federal Reserve has announced interest rates will remain low for at least the next couple of years. As of April, the average rate on a 30-year fixed-rate loan was 3.31%, according to Freddie Mac. April marked the lowest average mortgage rate for an entire month since tracking began. As a result, lower borrowing costs are helping to offset today’s higher prices in the Chicago real estate market. While it may not seem like much, investors using traditional loans may save thousands of dollars on interest over the life of a loan used to secure a rental property.

In addition to lower borrowing costs, real estate investors may be able to justify today’s higher home values with years of cash flow. In fact, years of collecting rent can simultaneously offset higher purchase prices and build equity in a physical asset with someone else’s money.

Let’s say, for example, an investor purchases a home for $249,152 (the median home value). At the same time, they put down $49,000 at the time of purchase (about 20.0%) to avoid having to pay private mortgage insurance. With an interest rate of 3.31%, the monthly mortgage payment would come out to be about $1,363 on a 30-year fixed-rate loan (after accounting for additional costs like principal, interest, property taxes, and homeowners insurance). It is worth pointing out, however, that the median rent price is $1,761, according to Zillow; that’s a difference of $398 each month. As a result, it’s entirely likely that investors will be able to pay down a newly acquired mortgage with someone else’s money, all while building equity in a physical asset.

With a price-to-rent ratio of 11.79, it is actually more affordable to buy a home than to rent one. Consequently, more people may be willing to buy, which would traditionally hurt the prospects of rental property owners. However, affordability—combined with the current pandemic—has significantly detracted from inventory levels. There simply aren’t enough listings to satiate buyer demand. As a result, many people (even those who wish to buy) are forced to rent, which bodes incredibly well for today’s investors.

The Chicago real estate investing community is lucky to have a number of viable exit strategies at its disposal, but none appear more attractive than building a proper rental property portfolio at the moment. Too many important market indicators are pointing towards becoming a buy-and-hold investor to ignore.

2020 Foreclosure Statistics In Chicago

The Windy City has a fairly high foreclosure rate. With one in every 7,493 homes in some state of distress (default, auction or bank owned), Chicago’s foreclosure rate now sits at 1.3%. To put things into perspective, however, the entire United States currently has a foreclosure rate of 0.6%.

Despite its high foreclosure rate, The Windy City has made a lot of progress in recent history. In the last year, for that matter, the city’s foreclosure rate has dropped significantly. As recently as May, “the number of properties that received a foreclosure filing in Chicago, IL was 46% lower than the previous month and 91% lower than the same time last year,” according to RealtyTrac.

Despite the recent declines, the Chicago housing market appears to have plenty of opportunities for investors, which begs the question: Where can I buy an investment property in Chicago?

Investors looking for higher profit margins will want to consider these best neighborhoods to buy in Chicago 2020, as they have the highest distributions of foreclosures:

  • 60603: 1 in every 867 homes is distressed

  • 60633: 1 in every 2,655 homes is distressed

  • 60628: 1 in every 3,182 homes is distressed/p>

  • 60619: 1 in every 3,257 homes is distressed

  • 60655: 1 in every 3,587 homes is distressed

It is worth pointing out that Chicago’s foreclosure rate—not unlike every other major metropolitan city across the country—is expected to increase as we get farther into 2020. If for nothing else, the impact of the Coronavirus on the local housing market is expected to cause an influx of foreclosures as financial hardships become more abundant. While forbearance programs will keep people in their homes for the foreseeable future, there will come a day when mortgages must be made current. Those who can’t afford to do so may find themselves filing for foreclosure.

2020 Median Home Prices In Chicago

Chicago’s median home value is $249,152, which is about right in pace with the national average. However, real estate in Chicago has taken a slightly different recovery path over the last decade. Most notably, home values didn’t start to recover from the Great Recession till the third quarter of 2012. In September of that year, the median home value bottomed out around $169,000. In nearly eight years, however, the median home value has appreciated by as much as 47.4%. Thanks—in large part— to an improving economy, increasing sentiment, and (ironically enough) a lack of inventory, home values grew for eight consecutive years.

Years of historic appreciation have made these the most expensive neighborhoods in Chicago (according to NeighborhoodScout):

  • N Rush St / E Bellevue Pl

  • N Halsted St / W Fullerton Ave

  • W Bloomingdale Ave / N Hermitage Ave

  • W Melrose St / N Hoyne Ave

  • N Cleveland Ave / W Armitage Ave

  • W Irving Park Rd / N Clark St

  • N Western Ave / W Grace St

  • Robert Morris U Illinois / S Wabash Ave

  • N Damen Ave / W Melrose St

  • N Halsted St / W Willow St

Real estate in Chicago has had an impressive run for the better part of a decade. Home values have appreciated for nearly eight consecutive years, which leaves one more important question to be answered: Is it a good time to buy property in Chicago?

It is a good time to buy property in Chicago. Local home values have been undervalued for quite some time, and the introduction of the Coronavirus may create an even better buying window.

The Coronavirus pandemic is currently threatening The Windy City from realizing a ninth consecutive year of growth. Appreciation rates have already started to temper as evidenced by the second quarter of 2020, but experts are convinced more drops will come. Over the next year, home values may experience a 2.3% decline. It is important to note that the drop will only be temporary. While it’s too soon to tell how long it will last, it’s a safe bet to assume appreciation rates will return once the dust settles. If for nothing else, the same lack of inventory that contributed to years of historic growth will be even more pronounced after months of builder inactivity.

Chicago Real Estate Market: 2018 Summary

For all intents and purposes, the Chicago housing market was about as healthy as they come in 2018. Unlike most other metropolitan areas of a similar size at the time, The Windy City stumbled across a balanced market—one that favored both buyers and sellers. At the very least, real estate in Chicago was firing on all cylinders, while still boasting a relatively low cost of living. People were willing and able to buy homes, which spelled great news for those interested in Chicago real estate investing.

Chicago Real Estate Investing 2018

The city had a median home value of $221,000 at some point in 2018, according to Zillow. Despite being one of the largest metro areas in the country and the only primary market in the Midwest, however, home values were only slightly higher than the U.S. average at the time. The median home value in the United States, also according to Zillow, was $207,600 at the same time. All things considered, homes were undervalued, which was the perfect storm for investors.

The Chicago housing market had its share of distressed properties. In fact, RealtyTrac identified some 9,275 in some state of foreclosure. That means there were close to 1,000 properties that were either in pre-foreclosure, up for auction, or had already been repossessed by the loan originator. More specifically, however, there are nearly 1,000 opportunities for investing in Chicago real estate.

At the time, distressed properties carried a median sales price of $98,000, or 44.0% below the average sales price of non-distressed homes. On average, investors could potentially save an average of $77,000 if they choose to buy distressed homes over those that were in good standing.

Chicago Real Estate Market: 2016 Summary

  • 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 Real Estate Investing 2016

Chicago was among the largest and most desirable cities in the United States in 2016. Known for its illustrious architecture and culinary dishes, The Windy City also encompassed a growing real estate market that rebounded nicely from the housing recession of 2008. The average price for a home in the first quarter of 2016 was $208,600; an increase of 8.4% from the previous year, and 2.3% better than the national average at the time.

According to Chicago real estate news in 2016, the city was a seller’s market. The average home was worth approximately $218/sq. ft., which represented a steady increase of 6.0% over the same period in 2015. However, unemployment prevented homes from reaching their true potential at the time. The unemployment rate was 6.6% compared to the national average of 5.5%.

Chicago Real Estate Market: 2014 Summary

  • 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 Real Estate Investing 2014

Real estate in Chicago was hit hard during the recession. 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, 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 a past Case-Shiller Home Price Index, Chicago had the lowest price gains in 2014 out of the 20 qualifying metros. According to the report, single-family homes in the Chicago housing market increased by a modest 1.3%. Condos, on the other hand, finished the year with an even smaller gain: 1.1%.

Nevertheless, the city 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, real estate had been the beneficiary of home price increases. 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%, while condos surged 31.0% in 2014.

Despite having faced plenty of headwinds, real estate in Chicago benefited from an improving economy. Economists forecasted that the expansion of the economy would work in favor of the area. 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.

Chicago County Map:

chicago

Chicago Real Estate Market Summary

The Chicago real estate market, much like the rest of the country, has been the beneficiary of several years of appreciation. Median home values have increased year over year since 2012, and experts are convinced the Coronavirus will only serve as a temporary obstacle. In fact, there’s a real chance real estate in Chicago comes out of the pandemic stronger than when it went in. While the unemployment rate will need to see marked improvement, a returning work force could facilitate an active second half of 2020 for local investors.

*The information contained herein was pulled from third party sites. Although this information was found from sources believed to be reliable, FortuneBuilders Inc. makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. Any reliance on this information is at your own risk. All information presented should be independently verified. FortuneBuilders Inc. assumes no liability for any damages whatsoever, including any direct, indirect, punitive, exemplary, incidental, special, or consequential damages arising out of or in any way connected with your use of the information presented.
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