Chicago for sale: Breaking down the Real Estate Market

photo by Luisa Pimentel and Eddie Cruz-Tello Chicago Skyline

By Eddie Cruz-Tello and Luisa Pimentel

Chicago is the third biggest city in the United States that many people wish to visit to see the many touristy spots and attractions available.

However, many may not want to consider this city for a permanent stay. Current residents believe that residing in Chicago may be far from obtainable for some, since they have experienced 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. Lately, the beauty of the buildings and home structures of the city are the least of its residents concerns in the process of buying or renting homes in Chicago.

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.

Teresa Córdova, 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 says:

“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.”

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.”

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. There is no doubt that the real estate market has been suffering and so are the Chicago residents. But the problem is not as black and white as many believe.

Full audio interview with Dr. Córdova

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

The study found a total of 16 submarkets in the city of Chicago and 17 in Cook County. It states that a submarket while in relative spatial proximity to another may have vastly different price tags attached. The biggest take away 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 to reside in, 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 another study in April 2018 that indicated that the affordability gap has shrunk from 2015 to 2016. Córdova shared her view of 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 your debt burden, and more likely than not doubling up on roommates to be able to afford housing.

Fears rise in residents that live in neighborhoods that are being rehabbed to appeal to more renters or buyers. 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, explains 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.

photo by Luisa Pimentel and Eddie Cruz-Tello Homes in Back of the Yards neighborhood. Third house on the right is of Torres’ new home.

“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.”

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