Illinois Real Estate Market Trends & Analysis

The Illinois real estate market hasn’t managed to keep pace with national appreciation rates in recent history, which suggests the state has yet to address several issues. Contrary to national trends, Illinois has seen a slight decline in sales activity. On an annual basis, the latest dip in both inventory and sales volume are telling of a market that is unable to satiate demand in today’s active climate.

There’s almost no doubt prospective buyers are ready to make the move to homeownership, but there’s simply not enough inventory to keep up with demand, which is working against real estate in Illinois. On top of that, exorbitantly high property taxes have made the idea of homeownership a losing proposition for some. The unique combination of factors has caused the local market to slow down, which has led to Illinois having one of the highest foreclosure rates in the country over the first half of 2019.

Despite the uphill battle, however, real estate in Illinois is relatively affordable, and actually presents an opportunity for investors looking to acquire distressed or discounted properties. In addition to everything that has transpired in the last year, the Illinois economy has made improvements—modest improvements, but improvements nonetheless.

The Top Illinois Real Estate Markets

While the best real estate market in Illinois is up for debate, here’s a list of the cities investors may want to pay special considerations to:

• Aurora

• Chicago

• Naperville

• Peoria

• Rockford

Illinois Real Estate Fees & Regulations

Real Estate

Closing Conducted by:	Title Companies, Lenders, Attorneys
Conveyance:	Warranty Deed

Foreclosure Procedure

Primary Foreclosure Method:	Judicial
Process Period:	7 - 10 months
Notice of Sale:	Court
Redemption Period:	None

Taxes

Income Tax:	3.75%
Corporate Tax:	9.50%
Sales Tax:	6.25%
Estate Tax:	16% maximum
Inheritance Tax:	No
Median Property Tax:	1.73%
Property Taxes by County:	http://www.tax-rates.org/illinois/property-tax#Counties

Average Transactional Costs

Closing Cost:	$2,481.00
Transfer Fee:	Transfer 0.1%; County 0.05%; Chicago 1.05%
Origination Fee:	$1,841.00

Illinois Housing Market Overview

• Median Home Value: $182,600

• 1-Year Appreciation Rate: +3.9%

• Median Home Value (1-Year Forecast): +1.3%

• Median Rent Price: $1,650

• Price-To-Rent Ratio: 9.22

• Average Days On Market: 78

• Percent With Negative Equity: 14.8%

• Unemployment Rate: 4.2% (latest estimate by the Bureau Of Labor Statistics)

• Population: 12,741,080 (latest estimate by the U.S. Census Bureau)

• Median Household Income: $61,229 (latest estimate by the U.S. Census Bureau)

• Percentage Of Vacant Homes: 9.45%

• Foreclosure Rate: 1 in every 1,562

Illinois Median Home Prices

The Illinois real estate market has mirrored national trends for the better part of a decade. Nearly every market across the country, for that matter, has seen prices rise considerably in the wake of the last recession. While Illinois home values are historically high at the moment, they were considerably lower no more than seven years ago. As recently as the first quarter of 2012, in fact, real estate prices in Illinois bottomed out around $134,000. After seven consecutive years of appreciation, the median home value in Illinois is now around $182,600 — that’s an increase of 36.2%. In that time (from March 2012 to today), the median home value in the United States saw 55.0% increase.

Illinois’ real estate success over the course of the most recent recovery is directly correlated to the same factors increasing prices across the country: growing optimism in the real estate sector, a strengthening economy, and a distinct lack of available housing. If for nothing else, more buyers are able to actively participate in the market thanks to improving working conditions, opportunities and wages. Nonetheless, there simply aren’t enough homes in the state of Illinois to satiate demand; that, and the economy still has some ground to make up until it’s on a level playing field with the rest of the county.

Thanks, in large part, to a dependance on a struggling agricultural industry, Illinois has yet to experience the same economic stimulation many states across the country already have. More specifically, however, it’s the trade rift developing between the United States and China that has prevented Illinois from realizing its full potential within the agricultural industry. According to Kiplinger, “agricultural exports to China, especially of soybeans, make up a larger portion of total exports in Illinois than they do in almost any other state.” That, combined with negative net migration and uncertainty within the local business climate, has prevented Illinois from realizing its full potential.

Consequently, the housing market hasn’t been able to stretch its legs as much as residents would like to see. While prices have increased, they have trailed behind the national average, and should continue to do so for the foreseeable future. Whereas median home values across the United States are expected to increase 2.8% over the course of next year, Illinois home values are only expected to jump 1.8%.

In theory, Illinois’ current economic environment should increase home prices at a faster rate. Falling building permits, lower housing inventory and declining borrowing costs — all of which are present in Illinois — have become synonymous with higher prices. Nonetheless, Illinois has one thing working strongly against the prospect of homeownership: exorbitantly high property taxes. Taxes incurred as a result of homeownership are so high, in fact, they have all but ensured demand for homes and their respective prices won’t live up to their potential. Even willing and able buyers question the proposition of homeownership because of state’s high taxes, which have done nothing but undercut the housing market in recent history.

In the event taxes were more in line with the rest of the country, there’s a good chance demand would have kept pace with national trends. Instead, they have caused many buyers to look elsewhere, even across state lines.

Illinois Median Rent Prices

Not unlike every other market across the country, rental prices in Illinois share a direct correlation with home values. For the better part of a decade, in fact, Illinois’ rental price increases have come in the face of rising home values. Since the first quarter of 2012, all the way through to today, rental prices in Illinois have increased a relatively modest 14.1%. As a result, the median rent price in Illinois is now somewhere in the neighborhood of $1,650, according to Zillow.

For a better frame of reference, the median rent price across the entire country is about $1,700, or a mere $50 more than Illinois. It is worth pointing out, however, that despite exercising a slight advantage over Illinois rents in today’s market, U.S. rents increased nearly twice as fast as those in the state of Illinois.

Illinois has a price-to-rent ratio of about 9.22, which suggests it is more affordable to buy than rent. However, the state’s price-to-rent ratio is only applicable to the state in which it originated. While buying appears to be incredibly affordable in the Illinois real estate market, renting is, too. As a result, demand for both buying and renting has increased in recent history. More specifically, a great deal of Illinois’ residents would prefer to buy, but the state’s lack of inventory has forced many to rent. Further increasing rental demand is a high state property tax. A large contingent of residents are inclined to rent merely to avoid paying more in taxes.

Illinois Foreclosure Trends & Statistics

According to RealtyTrac, a nationally recognized real estate information company that specializes in distressed properties, Illinois is currently home to a high distribution of distressed properties. With approximately one out of every 1,409 homes in some stage of distress (default, auction or bank owned), Illinois boasts a foreclosure rate of 7.0%, which is considerably higher than the national average. At 3.9%, the national average is nearly half that of the state of Illinois.

The significantly higher foreclosure rate may be attributed to the state of Illinois’ economy, which has struggled to get its feet underneath it in recent history. With an unemployment rate of 4.2% and far too much uncertainty in the job sector, more homeowners have found themselves underwater. “In September, the number of properties that received a foreclosure filing in IL was 11% higher than the previous month and 13% higher than the same time last year,” according to RealtyTrac.

For a better idea of how the foreclosure situation in Illinois has unfolded up to this point, it is better to look at the broader picture. Since the beginning of this year, Illinois has had one of the highest foreclosure rates in the country. Only four states, in fact, had a higher foreclosure rate than Illinois in the first six months of 2019: New Jersey, Delaware, Maryland and Florida.

Chicago, in particular, was largely responsible for the inflated foreclosure rate. However, pockets of distressed assets exist across the entire state. Here’s a list of neighborhoods with the highest distribution of distressed assets:

• Mcdonough (1 in every 289)

• Whiteside (1 in every 717)

• Peoria (1 in every 761)

• Boone (1 in every 872)

• Macoupin (1 in every 984)

Tax Lien Investing

• Tax Lien or Deed: Tax Lien State

• Interest Rate: 18% for 6 Months/ 36% for 1 Year/ 24% for Farmland

• Redemption Period: 2 Years

Below you will find a list of online auctions in the state of Illinois. Click on the link to the county you would like to do research in. Illinois offers great opportunities for online tax lien investing.

• Cook County, IL - June - August

Illinois Real Estate Investing

Not unlike every other market across the United States, distressed assets have demanded the attention of Illinois real estate investors. If for nothing else, distressed assets are most likely in the possession of motivated sellers, which significantly increases the chances of investors not only securing a deal, but securing a deal with attractive profit margins. That said, Illinois’ foreclosure status has been a blessing in disguise for local real estate investors.

With one of the highest foreclosure rates in the state, Illinois awards savvy investors with plenty of opportunities to secure deals below market value. In particular, Illinois real estate investors should pay special considerations to pre-foreclosure inventory. Making up 48.5% of Illinois’ “distressed” inventory, pre-foreclosures are the most abundant assets owned by “motivated sellers.”

As their names suggest, pre-foreclosures are the assets of homeowners who have fallen behind on payments. Their inability to keep up with mortgage obligations have placed their homes at risk of falling into foreclosure. Consequently, pre-foreclosures aren’t in foreclosure, but rather at risk of it. Nonetheless, homeowners behind on payments may be more motivated to sell their homes — that, or face falling into foreclosure at a later date. Therein lies the real reason investing in Illinois real estate remains so attractive: the state’s high distribution of distressed homes suggests more homeowners will be motivated to sell. Those behind on payments are better off selling to investors than losing their properties to foreclosure.

Illinois real estate investors will want to focus marketing efforts on homeowners who have missed at least a few payments. In order to do so, they should take a trip to the local courthouse, where the information they are looking for is made available to the public. A deliberate trip through courthouse records will reveal exactly who is behind on payments. From there, investors may formulate a marketing strategy to contact the owners of said properties. It is worth noting, however, that not everyone in pre-foreclosure is willing to sell for a discount (if at all), but their current status bodes well for savvy investors.

Of course, knowing where to find real estate deals in Illinois is only going to take investors so far. Deals need to follow an exit strategy, which begs the question: What should investors do with the properties once they acquire them? Which exit strategies does the Illinois real estate market cater to the most?

Current market conditions suggest investors in Illinois may not have to choose between any of today’s three most popular exit strategies: wholesaling, rehabbing and renting. Instead, indicators lean heavily in favor of each strategy. On the one hand, real estate remains affordable; that, combined with historically low interest rates should continue to drive up demand for investors’ assets. Subsequently, supply and demand will inevitably force a great deal of residents in Illinois to turn to renting. Despite many people having the financial means to buy, a distinct lack of inventory will increase demand for rental properties. As a result, passive income investors should find vacancies easy to fill.

Summary

Thanks, in large part, to absurd property tax rates, the Illinois real estate market hasn’t been able to realize its full potential. Activity within the real estate industry just isn’t where many people would like to see it. Even buyers who can afford to purchase a home have realized that massive property taxes and low appreciation rates create a losing proposition for many. It is worth noting, however, that hope is on the horizon. Steps are being taken to address the economic issues hampering the Illinois housing market. Budget conscious buyers are starting to take notice of the state’s affordable inventory. While Illinois has a long way to go until its on the same level as the rest of the country, things are starting to look up.

Sources:

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https://www.census.gov/quickfacts/fact/table/IL/PST045218
https://www.bls.gov/regions/midwest/illinois.htm#eag
https://www.realtytrac.com/statsandtrends/foreclosuretrends/il/
https://www.realtytrac.com/statsandtrends/il/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/
https://www.zillow.com/il/home-values/
https://www.zillow.com/home-values/
https://www.attomdata.com/news/market-trends/figuresfriday/top-10-u-s-counties-with-worst-foreclosure-rates-in-august-2019/
https://www.attomdata.com/news/market-trends/mid-year-q2-2019-foreclosure-market-report/
https://www.illinoisrealtors.org/wp-content/uploads/2019/09/State_Aug2019.pdf