Chicago’s housing market is a sharp contrast to that of the nation’s…Realtor.com, the official website of the National Association of Realtors, predicts that Chicago’s home prices will rise just 1.95% this year whereas predictions for home prices nationally will average a 3.9% rise. Jonathan Smoke, economist with Realtor.com, says that Chicago’s home prices will be the lowest in the country of the 100 largest metro areas. S&P CoreLogic Case-Shiller underlines these gloomy predictions for Chicago by reporting that the Windy City’s housing market remains 19% below where it was prior to the 2006 crash.
Why all this doom and gloom? Chicago’s unemployment rate (5.9%) is higher than the nation’s (4.5%) and Chicago’s African American unemployment rate (14.2%) is the highest in the country (8.4%). It is also one of the worst cities for homeowners whose homes are underwater (12.2%). The only cities in worse shape than Chicago in this underwater category, according to CoreLogic, are Miami and Las Vegas. Smoke of Realtor.com says that Chicago’s limited job growth also contributes to dour predictions for the Windy City. New residents who are potential home buyers have no reason, no job to move to. And, potential new residents aside, long standing residents have little if any confidence in the state’s and local government’s abilities to deal with pension problems and long term budget projections. Jim Kinney, a real estate agent with Baird and Warner, says that this pervasive skepticism and uncertainty about the state not being able to solve problems are especially evident in the luxury market and the suburbs. “People figure this (inability) will lead to higher state taxes and property taxes.”
All this being said about Chicago’s suffering housing market, there are some neighborhoods experiencing a boom in home values. The Institute of Housing Studies at De Paul University cites Lincoln Park, an historically stable area, as one such neighborhood. Lincoln Park’s median home price was $1.9M in the 3rd Quarter ,2016, up from $1.4M at the pre-crash peak in 2006. Also on the North Side, Logan Square is up 61% since 2012 and its median home price is now up 3% above the prior 2006 peak.
Other neighborhoods appearing to be hot and primed for appreciation are Bridgeport/Brighton Park. Prices are up 50% over the last ten years but still 30% below what they were at the ’06 peak. Humboldt and Garfield Park prices bottomed out in 2012 but have seen a 15% increase yearly.
Still, don’t be seduced into thinking that these neighborhoods having quick access to downtown via public transportation and proximity to areas that are appreciating and becoming gentrified quickly will experience the same kick that Logan Square has. Geoffrey Hewings, the director of Regional Economics Applications Laboratory at the University of Illinois, believes that it will take a good 1.5 – 2 years for these “coming” neighborhoods to reach 2006 peak values. “Buyers have to be patient and able to tolerate risk.”
Neighborhoods like South Chicago and West Pullman have different stories to tell, however. Their median sales values have dropped by 45% and remain 50% below the 2006 peak. Additionally, older, long time employers and local businesses that hired and serviced the people living in these neighborhoods have left.
Yes, there are pockets of improving home values within Chicago’s neighborhoods. But these neighborhoods tell at least two tales, if not three or four about this city. Much needs to be done over the long haul to enable all of Chicago’s residents to become neighbors.