Illinois Real Estate Market Trends & Analysis


The Illinois real estate market hasn’t managed to keep pace with many national trends in recent history, which suggests the state has more pressing issues than its counterparts. In particular, Illinois has seen a slight decline in sales activity. On an annual basis, the latest dip in inventory and sales volume tells of a market that cannot 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 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.

However, despite the uphill battle, real estate in Illinois is relatively affordable and presents an opportunity for investors looking to acquire distressed or discounted properties. In addition to everything that has transpired, the Illinois economy has made modest improvements. As a result, Illinois may present real estate investors with an attractive proposition.

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: $243,355

  • 1-Year Appreciation Rate: +13.6%

  • Median Sales Price: $249,000 (+6.0% year over year)

  • Closed Sales: 16,782 (-6.7% year over year)

  • Inventory Of Homes For Sale: 31,049 (-27.8% year over year)

  • Average Days On Market: 25 (-44.4% year over year)

  • Median Rent Price: $1,141 (+11.6% year over year)

  • Price-To-Rent Ratio: 17.77

  • Unemployment Rate: 6.8% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 12,671,821 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $65,886 (latest estimate by the U.S. Census Bureau)

  • Total Foreclosure Filings (Q3): 3,659 (+151.3% year over year)

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 significantly lower no more than nine years ago. As recently as the first quarter of 2012, real estate prices in Illinois bottomed out at around $134,000. After nine consecutive years of appreciation, the median home value in Illinois is now around $243,355 — that’s an increase of 81.6%. In that time (from March 2012 to today), the median home value in the United States saw a 91.8% increase.

It should be noted that home values in Illinois have appreciated at a faster rate than usual during the pandemic. Consequently, the median home value in Illinois has increased about 17.5% since the impact of the Coronavirus on the real estate market was initially felt. In the two years before, local homes only increased by about 3.5%. All things considered, the pandemic served as a catalyst for activity and appreciation.

The unique convergence of historically low borrowing costs, larger savings accounts built up by government stimuli, and a distinct lack of inventory have created a seller's market. In response to the fabricated demand, homeowners have been able to increase asking prices in the Illinois housing market accordingly.

Despite the latest increases, local home values are poised to increase even more in the coming year. Appreciation will continue as long a supply and demand remain lopsided. That said, the Illinois housing market may have trouble keeping pace with the rest of the country. If for nothing else, the state 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.

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

Illinois Median Rent Prices


Average rent prices across the entire state have increased alongside their home value counterparts. If for nothing else, higher home values and a lack of listings have prevented a large population of prospective buyers from actually buying. As a result, many people want to buy but can’t, which lends itself to another issue: the same supply and demand crisis facing would-be buyers is impacting renters.

Since more people are priced out of the buying market, we see more renters than average competing over fewer available properties. Landlords have found themselves in a position of power in Illinois, and their asking prices reflect as much.

According to the latest data released by Apartment List, the median rent in Illinois has increased 11.6% in the last year and now sits around $1,141. The latest increase in rents has lagged behind home value appreciation over the last year, but only marginally. As a result, there's a good chance rent will increase at a faster pace in the near future. For now, renters can expect to pay the following in rents (on average):

  • Studio: $938

  • 1-Bedroom: $987

  • 2-Bedroom: $1,150

  • 3-Bedroom: $1,347

  • 4-Bedroom: $1,598


For context, the national average rent price is about $1,302, or 14.1% lower than the average renter pays in the Illinois housing market. The difference is modest, but it's safe to assume rents in Illinois will increase sooner rather than later. As long as inventory remains tight, landlords will be able to justify rent increases. That said, the Illinois real estate investing community still has time to get into the long-term rental space.

Illinois Foreclosure Trends & Statistics


According to ATTOM Data Solutions’ Q3 2021 U.S. Foreclosure Market Report, "there were a total of 45,517 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — up 34 percent from the previous quarter and 68 percent from a year ago."

There's no doubt about it: foreclosures are on the rise. The recent expiration of government assistance and forbearance programs made the increase in filings almost inevitable. If for nothing else, there were so few foreclosures across the country, delinquencies only had one way to go: up.

While still relatively low, the increase is starting to gain traction in some states more than others. "States that posted the greatest number of foreclosure starts in Q3 2021, included California (3,434 foreclosure starts); Texas (2,827 foreclosure starts); Florida (2,546 foreclosure starts); New York (1,363 foreclosure starts); and Illinois (1,362 foreclosure starts)," said the Foreclosure Market Report.

With 1,362 homes entering the foreclosure process, one in every 1,465 homes in the Illinois real estate market is considered delinquent. At that rate, Illinois has the second worst foreclosure rate in the country, behind only Nevada.

In addition to posting the second-worst foreclosure rate in the United States, the Illinois housing market also completed the most foreclosures in the third quarter. In all, 965 homes became real estate owned. As a result, real estate in Illinois is not only going delinquent at a fast rate, but banks are repossessing the homes faster than anywhere else.

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 excellent opportunities for online tax lien investing.

Illinois Real Estate Investing


Not unlike every other market across the United States, distressed assets have demanded the attention of Illinois real estate investors. At the very least, distressed assets are most likely in the possession of motivated sellers, which significantly increases the chances of investors securing a deal and securing a deal with attractive profit margins. That said, Illinois’ foreclosure status has helped local real estate investors.

With one of the highest foreclosure rates in the country, Illinois awards savvy investors with plenty of opportunities to secure deals below market value. As a result, Illinois remains a great place to rehab and flip real estate. Profit margins still exist, whereas most states have seen appreciation alter the investing landscape.

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 relatively affordable compared to the rest of the country; that, combined with historically low interest rates, should continue to drive up demand for investors’ assets. Subsequently, supply and demand will inevitably force many 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.

Illinois Housing Market Predictions


Predicting the housing market without an inherent degree of error is impossible. There isn’t a single investor who can predict exactly what will happen in a given market. Nonetheless, it has become good practice to try and anticipate the market based on the current data at hand. Investors with their fingers on the pulse of their industry will have the upper hand. So long as they realize nothing is ever guaranteed, making educated guesses about what is most likely to happen can award savvy investors with a significant advantage over reactionary competitors.

If, however, you aren’t comfortable making some predictions of your own, here’s a small list of the events most likely to unfold in the Illinois real estate market over the next year:

  • Demand will continue to drive prices higher: With inventory down nearly thirty percent year over year and homes selling faster than ever, it's evident that competition is fiercer than ever. There aren't enough homes to keep up with the demand created by bigger savings accounts and historically low interest rates. As a result, sellers hold most of the power and will continue to increase prices as long as the market allows them.

  • Flipping will remain a popular exit strategy: Whereas profit margins in most states have gotten smaller in the shadow of record appreciation rates, the Illinois housing market still seems to offer plenty of deals with upside. The state's high foreclosure rate should continue to allow investors to flip real estate and still make attractive profits.

  • Prohibitive taxes will continue to hurt the local market: The Illinois housing market has one of the strictest tax codes in the country. Severe tax penalties have hurt the housing sector in the past, and it will continue to be hurt by them in the future. The penalties for owning a home in Illinois are steep and prevent many people from even wanting to buy.

Summary


Thanks, in large part, to exorbitant property tax rates, the Illinois real estate market hasn’t been able to realize its full potential. Activity within the real estate industry isn’t where many people would like to see it. Even buyers who can afford 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 it's on the same level as the rest of the country, things are starting to look up.

Sources:



https://www.zillow.com/il/home-values/
https://www.zillow.com/home-values/
https://www.illinoisrealtors.org/wp-content/uploads/2021/10/State_September2021.pdf
https://www.illinoisrealtors.org/wp-content/uploads/2021/11/MSA_IL_Q4_11.1.2021.pdf
http://www.freddiemac.com/pmms/pmms30.html
https://www.bls.gov/regions/midwest/illinois.htm#eag
https://www.apartmentlist.com/research/category/data-rent-estimates
https://www.census.gov/quickfacts/fact/table/IL/PST045219
https://www.attomdata.com/news/market-trends/foreclosures/attom-september-and-q3-2021-u-s-foreclosure-market-report/

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