Chicago has one of the world’s largest and most diversified economies, with more than four million employees and an annual gross regional product (GRP) of over $609 billion. If it were a nation, it would rank 21st among the world’s largest economies, larger than Sweden, Norway or Denmark.
The city is home to more than 400 major corporate headquarters, including 36 Fortune 500 companies. Its industrial base is so diversified that no industry employs more than 12 percent of its workforce. Unemployment has been falling for years and now is exactly the same as the national rate, 3.6 percent, which is the lowest level since 1969.
So, what’s going on with its housing market?
Sales are flat, appreciation is lagging, inventories are slowly recovering
As of the third quarter of 2018, Chicago home sale prices had risen zero percent over the last 10 years. Chicago’s median home price is still 8.8 percent below its historic peak, and over the past year, Chicago’s real estate appreciation rates have trailed the rest of the nation. With that said, Chicago is still very expensive, in April, median sale prices were at $253,000 throughout the nine-county Chicago Metro, an increase of 1.2 percent from $250,000 a year ago. By comparison, the national median price in April was $267,300, up 3.6 percent from April 2018.
As of the end of April, the city’s sales volume had declined for nine consecutive months. In the opening of the 2019 spring market, sales in the city were 5.4 percent and sales in the Chicago Metro were 5.9 percent below where they were a year ago. Late winter storms drove down sales at a faster rate than normal. The city’s real estate market was so soft in the first quarter that it ranked second in the nation for discounted sales, with 82 percent of homes sold during the quarter selling at prices lower than asking price.
Short inventories of homes for sale can be partly to blame for low sales. Chicago’s inventories of both attached and detached homes have been very low but now are improving, in April inventory was up 2.1 percent on the year, closer to national levels. 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.
Economic extremes, slowly shrinking population and crime
Despite its diverse economy and low unemployment rate, Chicago’s population is slowly shrinking. The metro Chicago area lost an estimated 22,068 residents from 2017 to 2018, according to U.S. Census Bureau. That amounts to 0.23 percent of its population, more than twice New York’s 0.10 percent. Twenty years ago, Chicago’s “collar” counties grew at the expense of the city. Now their growth is slowing, and the total population in the surrounding counties actually decreased from 2017 to 2018.
Crime and poverty certainly have a negative impact on demand for housing. Chicago has a long history of crime, dating back to Prohibition years. Despite the legends of Al Capone and John Dillinger, Chicago’s streets and poorer neighborhoods are more dangerous than ever. Only eight US cities are less safe. There’s a one in 91 chance of becoming a victim of violent crime in Chicago and a one in 30 chance of becoming a victim of property crime.
The birth of a buyers’ market?
So, what does this all mean? Here’s a snapshot of what some respected voices in real estate are saying about Chicago.
“Of the 20 largest cities in America, only St. Louis is more affordable now than Chicago, according to data released this month by John Burns Real Estate. From the present through late 2021, according to the Burns forecast, the monthly payment on a median-priced Chicago home will stay in the range of 23 percent to 24 percent of the median household income. That’s considerably lower than the peak years of the housing boom, when housing costs ate up 35 percent of income, according to the Burns report,” reported Chicago Business.
“There is an affordable housing crisis in America, yet Chicago lists over 15,000 properties under $200,000. What’s the catch?” asked Bob Vila.
“The cost of buying a home in Chicago isn’t terribly expensive. This is likely due to the extreme fall of real estate prices during the market crash in 2008. Since then, however, prices have rebounded fairly well, especially by in-state standards,” said Amelia Josephson of Smart Asset.
“The Windy City is the only undervalued housing market in a survey of 20 financial centers by UBS Group AG, partly due to its widely publicized fiscal problems and rents rising faster than home prices. New York moved from affordable to overpriced in this year’s rating even as inflation-adjusted real estate prices fell 2 percent in the past four quarters, according to the (UBS) bank’s Global Real Estate Bubble Index, reported Reade Pickert of Bloomberg.
‘The real estate market in Chicago is starting to favor buyers more. Buyers today have more negotiating leverage, compared to a few years ago. Sellers are generally more motivated, due to the supply and demand situation,” concluded Brandon Cornett of the Homebuying Institute.
A local Realtor who closely follows his market put it all together in a blog post.
Are growing inventories, soft sales, and sluggish price increases signs of change? Is Chicago on the cusp of switching from a seller’s market to a buyer’s market? The big switch has been predicted by experts like CoreLogic’s Frank Martell and RE/MAX CEO Adam Contos.
If you are in the market to buy a home in Chicago this year, your timing might be perfect. Head to Homes.com where all of your buying and selling questions answered so that you can start shopping for the home of your dreams.