The State of The Real Estate Market – Chicago | 2019

Recent headlines would have us believing Chicago is not the place to live, or at least not the place to buy a house. But dig beyond doom and gloom headlines and you find some good indicators that long term Chicago is going to be just fine. The reality is that we are in a buyer’s market across most neighborhoods in Chicago. Inventory is reasonable in many sectors but buyers are price sensitive. Homes that are priced on target are selling with just a slight surge upward in overall market time. Homes priced unrealistically are sitting on the market, selling after one or several price reductions.

Corporations are flocking to Chicago; a trend that started about 10 years ago. Between 2010 and 2018 the city added 168,00 jobs. Companies that are expanding or relocating to Chicago include some heavy hitters. Uber Technologies is considering a lease of 450,000 square feet in the Old Post Office, the city’s latest hot spot in the commercial real estate sector. And in the past five months, 601W has confirmed leases with Ferrara Candy, ad agency AbelsonTaylor and Kroger-owned Home Chef and 84.51. Those joined a tenant list that already included Walgreens Boots Alliance and the Chicago Metropolitan Agency for Planning to bring the total to about 540,000 square-feet of confirmed leases. Tenants are expected to start moving in in September. The newest addition to the long list of tenants moving into the building is the Federal Home Loan Bank of Chicago, one of 11 federally chartered wholesale banks. FHLB is looking to lease 125,000 square feet, upsizing from their current 96,000 square feet.
And just what does all of this mean for you?

The data speaks and buyers and sellers listen…hopefully.

Inventory is up, prices are down and interest rates continue to fall. This trifecta makes for an unusually strong buyer’s market. Sourced from MRED (Midwest Real Estate Data) and InfoSparks and looking at data for all property types in Cook County from May 2018 to May 2019 the supply of homes is up 6%, median market time is up 3% and closed sale prices are down 2.7%. For a look at market data specific to your neighborhood, condo building, or zip code please visit The Dobbs Report or call me.

What’s so interesting about Interest rates?

Interest rates are driving force for first-time homebuyers. When home buyers enter the market and close that creates a domino effect upward as the seller of that home is likely buying up to the next price tier and so on… Chicago home buyers have been taking advantage of lower interest rates since early in the year. According to Wells Fargo, interest rates May of 2019 hit a beautiful low of 3.125% for a 7-year adjustable rate mortgage for a jumbo loan, almost ½ point lower than a conventional loan!

Should I buy or should I rent?

Rents in Chicago are rising and prices and interest rates are falling…ideal conditions to buy if you can afford to. I expect prices to remain flat or continue their slow decline well into the year and possibly into early 2020. Ideal conditions to make a purchase. Then there is the monthly cost to rent versus to own. My back of the napkin calculation for a mortgage is $450 per month for every $100,000 of mortgage, plus your monthly taxes, insurance, and assessments (if buying a condo). Your lender or a mortgage calculator will give you the exact number. Or you can call me.

As an example, let’s look at a $500,000 condo purchase against a 2 bedroom rental, both located in River North. Monthly rent for a unit comparable in size to the condo is $3200. Monthly cost to own the comparable condo is $3275 – $2025 for your mortgage payment, $500 for assessments and $750 for property taxes. The purchase will cost you $50,000 in downpayment and approximately $6000 in closing costs. Your accountant can calculate the tax benefit to you; interest and property taxes are deductible. Appreciation in value is a bonus, along with the pleasure and control of owning your home.

What is the outlook for the rest of 2019?

According to Zillow, “Chicago home values will rise 1.8% within the next year.” The Illinois Realtors Association reported that sales dropped 10% in January 2019 and prices overall fell 1%. They predict average homes prices will hit $241,145 by year end and sales will grow by 9.6% on an annualized basis.

I expect the trend toward a buyer’s market to continue, with just a handful of neighborhoods experiencing a seller’s market. Long term, I am bullish on Chicago.