Is Change Going to Blow Through the Windy City's Housing Market?
LOS ANGELES, Nov. 26, 2012 /PRNewswire-iReach/ -- If you're an investor in Chicago real estate, you're probably ready for 2012 to be over. After all, this year hasn't been a particularly good one in the Windy City. As dismal as the national numbers have been, Chicago's have been worse. By the end of September, 8% of the city's home loans were delinquent. By the end of October, another 3.6% loans were added to that total. Right now, there are 18% more foreclosures in Chicago than there were this time last year – a much faster rate than the rest of the country is seeing as a whole. In fact, Illinois as a whole has been hit especially hard by foreclosures in 2012. Adding to the problems in Chicago is that Illinois has a particularly slow judicial process. It takes years and years for homes here to officially go from "delinquent" to "foreclosed" – meaning the "shadow inventory" in the Windy City could wind up being much larger here than in other parts of the country. (The "shadow inventory" is the number of homes that have been foreclosed, but haven't actually been listed for sale yet.) There's also another big problem for Chicago's homeowners – negative equity. Chicago has one of the biggest "underwater mortgage" problems in the country, meaning that people owe more on their mortgages than their homes are actually worth. In fact, it has been estimated that Chicago homeowners have lost more than $51 billion dollars' worth of equity.
So, is there any reason to believe that change is going to blow through the Windy City's housing market anytime soon? One thing homeowners are happy about right now is selling prices. Chicago houses that are selling the ol' fashioned way are selling at better prices than they have been in awhile. In fact, according to October sales numbers, the median selling price in Chicago was $153,000, compared to $149,900 this time last year. That's a big change from February, when the median sales price was $135,000 – the lowest price on record! Another thing experts are smiling about right now is the downtown rental market. That's because it's on fire! In fact, landlords are seeing a demand for the so-called "A" buildings (the newer buildings that have more amenities) that they haven't seen in awhile.
The only problem? All of that demand is causing landlords to raise their rent prices. Like most other cities around the country, Chicago rent prices are sky-high. In fact, according to Appraisal Research Counselors in Chicago, downtown rent prices in the "A" buildings is up 7.6%, compared to this time last year. There is an upside, though. All of that demand has started spurring new development. In 2013, there will be about 3,000 new downtown apartments that are ready to be moved into. Another couple thousand are scheduled to be finished in 2014. That's more than the area has seen in the past few years. Outside of the downtown area, there is a little bit of construction going on, but not a whole lot. That's because the suburban Chicago housing market is especially-dependent on the job market. When jobs aren't being added, fewer people move to the suburbs. So, until the Chicago-area job market starts to pick up, don't count on a lot of development popping up in the suburbs. Instead, it's going to be concentrated downtown – where developers can charge more once it's finished. After all, the current housing market in Chicago is all about taking what you can get!