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Chicago real estate infographic
 (Graphic/Eddie Cruz-Tello and Luisa Pimentel)

Chicago for Sale: Breaking Down Today's Real Estate Market

By Eddie Cruz-Tello and Luisa Pimentel 
@RedLineProject

Posted: Friday, May 17, 2019

Chicago is the third largest city in the United States, and many people visit to see the many touristy spots and attractions available.

However, many may not want to consider this city for a permanent stay. Many current residents interviewed believe that living in Chicago may be far from obtainable for some, since they have suffered the hardships of living in the city.

The city has always commanded the world’s attention because it is known as an architectural creative hub. 

According to IllinoisPolicy.org, residents in the age group of 25-54 are moving out of the state faster than people are buying or renting homes. Seeing how this is a huge part of the demographic for working Americans it is interesting to see how this affects Chicago’s housing market. Some census data indicates that Chicago's decreasing population could soon make it the country's fourth-largest city, dropping behind Houston.

Teresa Córdova is the director of the Great Cities Institute, practicing professor at the University of Illinois at Chicago’s College of Urban Planning and Public Affairs (CUPPA) and an affiliate faculty of UIC’s Departments of Sociology; Gender and Women's Studies  and Latino and Latin American Studies.  

“It is definitely tied to the issue of cost of living--- The fact that so many young people who may be in the position to be able to get into the housing market don’t because of student debt. So the issue of student debt is one that really affects the economy and by extension the housing market.” -- Cordova

Mercedes Diaz, a 25-year-old graduate student at the University of Illinois at Chicago, said,

“Having to pay off my student debt from undergraduate school, in addition to personal expenses, such as transportation, made it more difficult for me to find a place that was within my budget and in a nice area,” Diaz said

After exhaustively being on the hunt for an apartment to rent, Diaz found a place in Bridgeport.

“It took me about two months before I was able to find an apartment.” Diaz said. “Landlords wouldn't respond to me.  It wasn’t until I was able to get a male friend that I got responses. Once I was able to get into some apartment showings, I was constantly being beat to the deposit. Perhaps because I was looking into a popular neighborhood.”  

According to the 2019 forecast by Realtor.com, Chicago-Naperville-Elgin are expected to decrease sales by 7.9 percent and decrease 1.9 percent price growth. But experts say the problem is not as black and white as many believe.

When looking at the market, in Chicago especially, it is important to break down the city by neighborhoods. The city's market as a whole may show a downward trend,  the submarkets show a different picture. The Institute for Housing Studies at DePaul University conducted a study in October 2017 on submarkets in Chicago and found 16 submarkets in the city and 17 in Cook County.

The study says that a submarket, while in relative spatial proximity to another, may have vastly different price tags attached. The biggest takeaway is that there are rapidly appreciating submarkets called “hot spots.”

How does the location of the  “hotspots,” affect the surrounding submarkets? Córdova offered a reason.

“The areas around downtown is where we’re really seeing the growth, and that's also where you see the concentration of jobs.” Córdova said. “So that's one of the biggest impacts you're not seeing the investments in other neighborhoods because they get concentrated in the downtown area.”

Many residents may be living in their ideal neighborhood and home size they desire, but that doesn't mean they can afford it. This phenomenon is known as the affordability gap. When the price of a home is valued above the median household income of purchasers who can afford to pay for them.

The Institute for Housing Studies at DePaul University conducted a study in April 2018 that indicated that the affordability gap has shrunk from 2015 to 2016. Córdova has a theory on what this might indicate for Chicago’s real estate market.

“Some of this might be recovery from the (2007) depression,” Córdova said.  “I think there are more people renting. By extension, it would suggest that there is less availability of affordable homes. There is a relationship between supply and demand. The fewer houses you have at a certain cost (affordable) what you're going to end up with is higher prices.”

While this might be great news to realtors and people with stable jobs, what this means for students and lower-income households is increasing debt burden, and more likely than not doubling up on roommates to be able to afford housing.

Fears rise among residents that live in neighborhoods that are being rehabbed to appeal to more renters or buyers, experts say. This practice in turn rises the appreciation of the submarket possibly pushing out residents that have lived here for decades. In the context of searching for homes it is important that potential home buyers stay within homes available in their budgets.

Samuel Torres, a first time home owner, explained his struggle of finding a home that fit his budget.  

“I love Chicago, but let me tell you, it’s expensive,” Torres said. “I had been renting to avoid the commitment of having a house mortgage, but I decided it was time to give my children a stable place they can call home.”

Torres closed the deal on a “fixer upper” property in Back of the Yards because it was cheaper for him, but also because he was able to customize it to his taste.

Back of the Yards Real Estate

Torres' property. (Photo/Eddie Cruz-Tello)

“The renovation is still going, but this is what I can afford in my city and maybe in the future I can invest on another home in a better neighborhood,” Torres said.

As of March 2019, the median property home value in Chicago was $230,000, according to Zillow. For Torres, the cost of his home in Back of the Yards was $50,000 with renovations that will cost about $45,000, which summed up is less than the median property value.

This is just one of the many cases of residents in the city who struggle to find their ideal place to live. When asked about rehabbed homes and resident’s fears of displacement Córdova said,

“Development without displacement is really key. Generally speaking, you want rehabbed homes because rehabbed homes help preserve your housing stock. We don't want to lose these homes, a lot of homes it has been lost to demolitions because there hasn't been the upkeep.”

On rehabbing sites, and or creating new housing structures Córdova advises that impact assessments need to be completed in order to know how developments affect the area.

“There are a lot of people in this city who are feeling very concerned,” Córdova said. “We need to really think about what those [impacts] are realistically and juxtapose those with what the negative impacts are going to be. Because it always comes down to who pays and who benefits."

Chicago real estate infographic

 

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