Chicago Housing Market 2020: Is It Really Good For Investment?

Buying a property in Chicago is still considered as a good real estate investment. We’ll be discussing the latest Chicago housing market trends to find out how they can affect the investors and homebuyers in 2020. Chicago metropolitan area or Chicagoland, is an area that includes the city of Chicago and its suburbs.

Although the most expensive home in the Chicago housing market in 2020 is a $45 million single family home, located in the North Side neighborhood, there are many properties available around the median price of $247,000.

In 2018, the Chicago real estate appreciation rate was running at about half the national rate; at 3 percent range when the nation was at 6 percent. After cooling off, Chicago became the weakest housing market of 2019. The home prices grew by mere 1.5 percent, lagging behind the nation. The market is now expected to heat up in the coming months.

Chicago is still a strong renter’s market. Over 50% of the populations rents in this city. So if you buy a Chicago real estate investment to use as a rental property, you could benefit in this market. Although the recent population loss has been a concern for real estate investors, Chicago is still the most populous city in the Midwestern United States. About three million people live in Chicago and another ten million in the surrounding metro area. Chicago MSA is the third largest metropolitan area in the U.S.

It has a large population, diverse economy, and a stable market. It is home to 32 Fortune 500 companies, with a very high private sector employment. Chicago’s 58 million domestic and international visitors in 2018 made it the second most visited city in the nation, as compared with New York City’s 65 million visitors in 2018.

How is the robust housing market in Chicago shaping up in 2020 for real estate investors as well as home buyers? Well, the home prices are expected to flatten nationwide, increasing by just 0.8%, and buyers will continue to move to affordability, benefiting mid-sized markets. However, the real estate appreciation rate in Chicago in the latest quarter was around 1.29% which equates to an annual appreciation forecast of roughly between 5% to 6%.

For sellers in Chicago, a nice profit could be on the horizon. Even small changes in the appreciation rate can change the long-term value of buying considerably. Let’s learn more about the factors that make Chicago a nice place to invest in real estate.

What Makes Chicago Real Estate Market Attractive For Investment?

Chicago was ranked first in the 2018 Time Out City Life Index (Time Out Group).On the UBS list of the world’s richest cities.Often rated as having the most balanced economy in the United States.Ranked seventh in the entire world in the 2017 Global Cities Index.Home to 12 Fortune Global 500 companies and 17 Financial Times 500 companies.Third-largest gross metropolitan product in the United States.Strong Rental Market – Over 50% of the population rents.Fully renovated single family homes with great ROI.Solid blue-collar areas with high rents.High private sector employment.Major transportation hub in the United States.It has largest number of federal highways & railroads in the nation.Strong economic and job growth.Chicago tourism recorded 55 million visitors in 2017.The tourism and hospitality industries have added thousands of jobs, generating billions of dollars in direct spending by visitors.International hub for finance, culture, commerce, industry, education, technology, telecommunications, and transportation.2% increase in Chicago’s government employment between November 2018 to November 2019 (Bls.gov).

These are just some of the highlights that make Chicago a great place to live and invest in real estate. The list can go on and on. Chicago is a also a major world financial center, having the second-largest central business district in the United States. Let’s continue to explore the city’s housing market to understand what it will look like in 2020.

Real estate prices are deeply cyclical because its demand side is impacted by economic cycles, and also because demand has historically outweighed supply. Much of it is dependent on factors you can’t control. Therefore, there are many variables that can potentially impact the value of real estate in Chicago in 2020 (or any other market) and some of these variables are impossible to predict in advance.

Chicago Real Estate Market Forecast 2020 – 2021

The Chicago housing market is shaping up to continue the trend of the last few years as one of the hottest markets in the United States. It is also one of the hottest real estate markets for investing in rental properties.

What are the Chicago real estate market predictions for 2020? Let us look at the price trends recorded by Zillow over the past few years. Since 2015, the median home prices in Chicago have appreciated by roughly 20.5% from $205,000 to $246,933, according to Zillow’s data.

As you can see in the graph, the Chicago housing market was weak in 2019, essentially flat. In fact, November was the third straight month that home values grew by less than 1 percent, according to the S&P CoreLogic Case-Shiller Indices. In the November report, Chicago’s home price growth was the weakest among the 20 major U.S. cities that the index tracks.

In the last twelve months, the Chicago real estate has appreciated by 0.3%. Chicago is expected to see home prices gains in 2020, albeit at a softer pace compared to the nation’s largest markets. The latest Chicago real estate market forecast is that the home prices will rise by 3.2% – in the next twelve months.

The latest real estate data from Zillow shows that the current median home value in Chicago is $246,933. This indicates that home prices in Chicago are well above the national average for all cities and towns in the United States.

Here is a snapshot that shows the median home values in the some of the popular neighborhoods in or around Chicago.

Chicago is currently a warm seller’s real estate market. This indicates that there are more real estate buyers in the Chicago than there are sellers. When demand is higher than the supply, home prices increase, which benefits sellers. Zillow reports that 14.5% of the listings in Chicago had a price cut in Jan 2020.

Here is the Chicago real estate price appreciation graph by Zillow. It shows us the current home price appreciation forecast of 3.2% till Feb 2021.

Chicago Housing Market Forecast 2021

Here is a short and crisp Chicago housing market forecast for the 3 years ending with the 3rd Quarter of 2021. The accuracy of this forecast for Chicago is 84% and it is predicting a positive trend. The LittleBigHomes.com estimates that the probability for rising home prices in Chicago is 84% during this period. If this price forecast is correct, the Chicago home values will be higher in the 3rd Quarter of 2021 than they were in the 3rd Quarter of 2018.

Chicago Real Estate Market Trends – Prices, Inventory & Sales

Analyzing real estate data from multiple sources gives us a much broader perspective of the direction in which a market is moving. We shall now discuss some of the most recent housing trends in the Chicago area from multiple sources and compare it with past couple of years. We shall mainly discuss about median home prices, inventory, growth and neighborhoods, which will help you understand the way the local real estate market moves in this region.

Chicago is the 6th most walkable city in the nation. Chicago metro area has a population of approximately 8,865,000, a 0.03% increase from 2019. It is the most populous city in the U.S. state of Illinois, and the third-most-populous city in the United States. 

On average, homes in Chicago, IL sell after 86 days on the market. The trend for median days on market in Chicago, IL is flat since last month, and slightly up since last year.Chicago’s home resale inventories is 6,505, which is a decrease of 15% since last year, according to Movoto.com. The median list price per square foot in Chicago is $258. In March 2020 it was $259. Distressed properties such as foreclosures and short sales remained the same as a percentage of the total market in April.In terms of months of supply, the Chicago market can tip to favor buyers if the supply increases to more than six months of inventory. However, looking at the current trends, we don’t see things moving in that direction. For upcoming updates you can check visit their website. It is expected that there will be some improvement on the inventory crisis. Certain areas in the Chicago housing market would see more properties for sale on the market than other locations.

According to Neighborhoodscout.com, a real estate data provider, one and two bedroom large apartment complexes are the most common housing units in Chicago. Other types of housing that are prevalent in Chicago include single-family detached homes, duplexes, row houses and homes converted to apartments.

At the national level, the single family rental homes have grown up to 30% within the last three years. Almost all the housing demand in the US in recent years has been filled by single family rental units. With 2020 being, theoretically, in the middle of a boom, there’s still 4 years for residential construction to surge. Most likely, a housing shortage will remain in 2020, keeping home prices high.

Chicago has a mixture of owner-occupied and renter-occupied housing units. Trulia has currently 9,413 resale and new homes for sale in Chicago, IL including open houses, and homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process. The median sales price is $280,000 and homes are selling for about $235/sqft.

Currently, there are 2617 homes for sale in Chicago on Zillow, an online real estate database company. Additionally, there are 292 homes for rent. Under potential listings, there are about 257 Foreclosed and 3000 Pre-Foreclosure homes. These are the delinquent properties that may be coming to the market soon but are not yet found on a multiple listing service (MLS).

• The median list price per square foot in Chicago is $243, which is higher than the Chicago-Naperville-Elgin Metro average of $165.
• The median price of current listings is $329,000.
• The median price of homes that are sold out is $303,400.
• The median rent price in Chicago is $1,761, which is higher than the Chicago-Naperville-Elgin Metro median of $1,685.

There are currently 13,932 homes for sale and 14,751 homes for rent in Chicago, IL on Realtor.com, a real estate listings website. According to their statistics, in February 2020 the Chicago housing market was a buyer’s market, which means there were roughly more active homes for sale than there were buyers.

However, as per other real estate data companies, Chicago would fully transition into a warm seller’s market, having a positive price appreciation forecast for the next twelve months.

Ideally a buyer would prefer a sale to asking price ratio that’s closer to 90%. The sellers in Chicago have managed to hold good leverage in these negotiations in the past month. On an average, they could sell homes for 97.74% of the asking price. A seller would always prefer scenarios which can yield a ratio of 100% or higher.

• In February 2020, the median list price of homes in Chicago was $339,900, trending up 4.6% year-over-year.
• The median listing price per square foot was $233.
• The median sale price was $289,900.
• The median rent price was $1,950.

The asking price of single family homes in Chicago can start from $10,000 and can go up to $45M for a luxury property located in North Side neighborhood . There are currently 712 newly listed homes and 197 new construction houses available for sale in the Chicago housing market.

Lincoln Park has a median listing price of $675,000, making it the most expensive neighborhood in Chicago. Auburn Gresham is the most affordable neighborhood, with a median listing price of $175,000.

Homes For Sale in Chicago	13932
Homes For Rent in Chicago	14751
Median Listing Price	$339,900
Median Sale Price	$289,900
Sale to Asking Price Ratio	97.74%
Median Rent	$1,950
New Listings	712
New Construction Houses	197
Median List Price/Sq Ft	$233
Home Price Range	$10k to $45M
Most Expensive Neighborhood	Lincoln Park
Most Affordable Neighborhood	Auburn Gresham

Chicago, IL Foreclosures And Bank Owned Homes Statistics 2020

As per the Chicago foreclosure data by Zillow, the percent of delinquent mortgages in Chicago is 1.3%, which is higher than the national value of 1.1%. The percent of Chicago homeowners underwater on their mortgage is 21.4%, which is higher than Chicago-Naperville-Elgin Metro at 13.5%.

There are currently 4,445 properties in Chicago, IL that are in some stage of foreclosure (default, auction or bank owned) while the number of homes listed for sale on RealtyTrac is 5,143. In February 2020, the number of properties that received a foreclosure filing in Chicago, IL was 6% lower than the previous month and 6% lower than the same time last year.

Potential Foreclosures in Chicago	4445 (RealtyTrac)
Homes for Sale in Chicago	5143
Recently Sold	17917
Median List Price	$285,000 (2% rise vs Jan 2019)

In Chicago, the zip code with the highest foreclosure rate is 60643, where 1 in every 403 housing units is foreclosed. 60644 zip code has the lowest foreclosure rate, where 1 in every 562 housing units becomes delinquent.

Is Chicago a Good Place To Invest in Real Estate?

Now that you know where Chicago is, you probably want to know why we’re recommending it to real estate investors. Is Chicago a Good Place Real Estate Investment? Investing in real estate is touted as a great way to become wealthy. Many real estate investors have asked themselves if buying a rental property in Chicago is good investment?

You need to drill deeper into local trends if you want to know what the market holds for the year ahead. We have already discussed the Chicago housing market 2020 forecast for answers on why to put resources into this market.

Purchasing an investment property in Chicago real estate is a little different from shopping for your car or primary residence. While you still want to get the most for your money, if you are looking to make a profit, you don’t want to buy the most expensive property on the Chicago real estate market and expect to make a good profit on rents.

Perhaps you are looking for a slightly different hold-over, a turnkey investment property in Chicago that you might move into or sell at retirement in the future! Either way, knowing your profit potential and purpose is the first thing to consider.

Let’s take a look at the number of positive things going on in the Chicago real estate market which can help investors who are keen to buy an investment property in this city.

1. Strong Rental Market

What makes Chicago such a hot market for rental real estate? Over 50% of the population rents. The large population of renters means that rental income for properties is far better than you’d see if you invested elsewhere in the country. Schaumberg reported slowing sales simply due to tight supply according due to data from the Chicago Association of Realtors; this drives many people forming new households or moving into the area to rent at whatever the market will bear.

2. Luxury Rentals Are a Profitable Niche in Chicago

Many people know that there are solid blue-collar areas with high rents, but it isn’t just the working class that rents townhomes and condos. According to Crain’s, the number of upper income households in Cook County that rent has nearly doubled over the past ten years.

The Institute for Housing Studies at DePaul University found that the number of rental households among those earning at least $132,000 a year nearly doubled, while those earning $80,000 to $132,000 saw the number of renting households increase by just over 50%. Chicago has a booming supply of high end rentals, especially luxury apartments in downtown.

3. Chicago Real Estate Prices Are Reasonable

Because households at all income levels choose to rent instead of buy, they are reducing demand for houses for sale, slowing the rise in home prices. This also explains why housing prices haven’t skyrocketed despite limited supply. Chicago’s inventory of homes for sale is very tight. Both attached and detached single family home inventory has been declining since 2012.

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. This contributed to homes closing five days faster than the year before. If you start shopping for rental real estate, you could find something and rent it out.

4. Home Prices Are Appreciating

Chicago’s real estate market has been one of the slowest to recover since the housing bubble burst at the start of the Great Recession. Home prices were 19% below their pre-crash levels in 2017, and they aren’t expected to hit peak values until 2020.

This means that the Chicago real estate market is likely going to continue its slow, upward market trend. Trulia expects prices to grow about 2.5% in 2018. Trends in Chicago show a 1% year-over-year rise in median sales price and a 3% rise in median rent per month.

5. Rehabbed Homes Are Readily Available

Chicago is seeing a surge in fully renovated single family homes. The Chicago Association of Realtors’ data found that most of the strong suburbs are on the south side of Chicago, and this is where many homes are being rehabbed and sold. Calumet Heights is in this category; a quarter of properties sold were either rehabbed or candidates for rehabilitation. These properties are ideal for investors who want to buy a property to rent out.

6. Job Growth Keeps People Coming

Chicago is not only home to a number of corporate headquarters; there has been a recent trend of companies moving their headquarters to Chicago as well. The steady increase in jobs has contributed to a slow but steady increase in rents. Many businesses are attracted by Chicago’s labor pool, the largest in the nation. As these businesses move into the area and attract relocating professionals, many are forced to rent because they can’t find houses fast enough in the areas they want to live or simply choose to rent upon relocation in one of the luxury apartments downtown.

The Chicago metropolitan area is made up of four metropolitan divisions—separately identifiable employment centers within the larger metropolitan area. In the greater Chicago metropolitan area, education and health services had the largest employment gain from November 2018 to November 2019, adding 15,600 jobs. The Chicago area’s 2.1-percent rate of job growth in education and health services was lower than the nationwide advance of 2.9 percent.

Chicago’s government supersector added 10,800 jobs from November 2018 to November 2019. Local job growth was concentrated in educational services, which added 10,600 jobs. The 2.0-percent increase in Chicago’s government employment compared to a gain of 0.7 percent nationally.

7. Churn Keeps People Renting

Chicago’s unemployment rate has gone up while dropping in other cities as jobs shift from Chicago to the suburbs. This economic uncertainty keeps many who can afford to buy a home renting. It also keeps the rental market itself strong, since many want to remain free to follow their jobs as required.

8. Trump’s Tax Plan Makes Many Reluctant to Buy – Unless It Is a Rental

Uncertainty about the deductibility of hefty property tax bills is making many reluctant to buy a home, though this is less of an issue for a real estate investor who will rent out the property. Chicago and its suburbs have some of the highest property taxes in the nations. Around 12% of Chicago area homes have a tax bill of more than $10,000 a year. Yet that’s better than some of the most expensive real estate markets in the country.

For example, in New York, more than 20% of homes have a property tax bill that high. In Orange County, California, more than half would. This means that limits or the loss of property tax deductions won’t hurt Chicago as badly as it would California or New York, and if it does have an impact, it will mostly be at the higher end of the Chicago real estate market.

9. You Can Find Hot Single Family Markets with Rapid Appreciation

Home prices in the Chicago area are low compared to regional income. Yet economic uncertainty and shifts in the employment market are leaving many who want to live in a single family home unable to afford to buy one. This is causing many to rent single family homes instead.

Crain’s April real estate report found that the hottest markets for detached single family homes were in Calumet Heights, Gage Park and West Ridge. However, home prices are low compared to rents almost everywhere in the Chicago metropolitan area.

10. There Are Opportunities in Chicago Multi-Family Housing, Too

The workforce in Chicago is shifting from high paying but slow-to-no growth manufacturing jobs to lower paying and less stable retail, business services and healthcare jobs. This is causing many who would have been able to afford a middle class home to rent apartments instead. Crain’s April real estate report stated that the hottest Chicago markets for condos and townhomes were Grand Boulevard, Kenwood and Lincoln Square.

Investing in Chicago Real Estate: Advice For New Buyers

Maybe, you have done a bit of real estate investing in Chicago, IL but want to take things further and make it into more than a hobby on the side. It’s only wise to think about how you can and should be investing your money. In any property investment, cash flow is gold. Should you consider Chicago real estate investment?

In Chicago, arts and culture abound at top institutions like The Art Institute. Although the winters can test anyone’s resolve, Chicago summers are among the best in the world, with things to do every weekend, outdoor festivals, and Lake Michigan at your doorstep.

Chicago has an incredibly deep pool of potential renters at all levels of the market. A number of factors guarantee that they’re not going to turn into new home buyers any time soon. Chicago real estate market is a prime destination for investors who would like to buy where the ROI is going to be high and likely to improve over time. It won’t be long before Chicago makes you feel right at home.

A good cash flow from Chicago rental property means the investment is, needless to say, profitable. A bad cash flow, on the other hand, means you won’t have money on hand to repay your debt. Therefore, finding a best investment property in Chicago in a growing neighborhood would be a key to your success.

If you invest wisely in Chicago real estate, you could secure your future. If you are a beginner in the business of cash flow real estate investing, it very important to read good books on real estate. The less expensive the Chicago investment property is, the lower your ongoing expenses will be.

When looking for real estate investment opportunitiesin Chicago or anywhere in the country, the generally accepted standard is to purchase a property that will give you a modest but minimum 1% profit on your investment. An example would be: at $120,000 mortgage or investment cost, $1200 per month rental.

That would be the ideal equation example. Even with rent increases, buying a $500,000 investment property in Chicago is not going to get you $5000 per month on rent. When looking for the best real estate investments in Chicago, you should focus on neighborhoods with relatively high population density and employment growth.

Both of them translate into high demand for housing. If housing supply meets housing demand, real estate investors should not miss the opportunity since entry prices of homes remain affordable.

Some of the popular neighborhoods in Chicago, Illinois are Near North Side, Lakeview, West Town, Andersonville, South Loop, Bronzeville, Norridge, Logan Square, Old Town, Wicker Park, Bridgeport, Irving Park, Norwood Park, Bucktown, West Loop and Hyde Park.

Chicago’s North Side is the city’s most densely populated residential section. In the $200,000 price, you can purchase properties with one or two bedrooms and one or two baths. Chicago’s West Side is home to the University of Illinois at Chicago. With a $200,000 budget, you can buy condos that typically offer one to two bedrooms and one or two baths

You must also collaborate and learn from savvy real estate investors who have retired early on in their lives by investing in some of the best real estate markets like Chicago.

Chicago Housing Market 2020: Is It Really Good For Investment?