2017 Market Overview
Located in northeastern Illinois on the southwestern shores of Lake Michigan, Chicago is the third-most populous city in the United States and the fifth-most populous city in North America. Although the city has been called by many nicknames, it is most widely known as the Windy City.
More To Love About Chicago:
- Chicago has the third-largest gross metropolitan product in the United States—about $630.3 billion according to 2014–2016 estimates. The city has also been rated as having the most balanced economy in the United States, due to its high level of diversification.
- According to World Business Chicago, the Chicago metro is also home to more than 400 major corporate headquarters, including 31 Fortune 500 HQs and 300 corporate R&D facilities. Some of the most well known Chicago HQs are Walgreens, Boeing, and Sears Holdings Corp.
- Today, the Windy City is recognized as the fourth-most important business center in the world (according to the MasterCard Worldwide Centers of Commerce Index). The Chicago metro also contains the third-largest labor pool in the United States with about 4.48 million workers (as of 2014).
Median Household Income:
Median Home Price*:
Median Monthly Rent*:
Estimated Monthly Cash Flow:
Why Invest Here?Real estate prices have soared within Chicago's city limits causing people to move out of the city and into the suburbs. As a result, prices in some Chicago neighborhoods have increased by over 14% this year alone and yet overall, real estate in the area is still undervalued. All of these factors indicate that Chicago’s real estate market offers both cash flow and appreciation opportunities for investors in 2017.
Chicago Trends & Statistics 2017-2018
With higher real estate prices and lower-than-average job and population growth, the Windy City may not seem like a “good” place to invest in real estate. That being said, it is one of the few cities in the nation where housing prices still haven’t risen above their 2006 levels. In some neighborhoods, it’s still possible to find homes for sale for around $160,000 (and sometimes much less) that will rent for just about 1% of the purchase price every month.
All of this is good news for investors, especially those who are comfortable with a slightly larger initial investment in exchange for strong monthly cash flow and a good chance for equity growth. Explore Chicago’s housing market, population, and employment trends in the next tabs to learn more.
Chicago Real Estate Prices are Still Affordable
- In January 2017, the median purchase price of three bedroom single family homes in the Chicago metro area was $176,000. This is 5.88% less than the national average of $187,000 for three bedroom homes.
- The median purchase price of three bedroom single family homes in January 2017 in the neighborhoods where RWN members invest, however, was only $166,111, which is 11.17% more affordable than the national average.
- This shows us that real estate in Chicago is still more affordable than many other areas in the United States today. In the neighborhoods where Real Wealth Network members are investing, property values are even more affordable.
Chicago Rental Income is Strong
- In January 2017, the median monthly rent for three bedroom homes in Chicago was $1,654, which is 0.94% of the purchase price of $176,000. This is higher than the national price-to-rent ratio of 0.74%.
- In the neighborhoods where RWN members invest, three bedroom homes rent for a median of $1,647 per month, which is 0.99% of the $166,111 median purchase price.
- This shows us that Chicago offers investors a strong opportunity to generate passive monthly income at a significantly higher price-to-rent ratio than most cities across the nation today.
Chicago Homes Have Good Equity Growth Potential
- In January 2012, the median price of three bedroom homes in Chicago was $149,000. Over the past five years (Jan. 2012 to Jan. 2017), three bedroom homes in Chicago have appreciated by 18.12%. During the same period, nationally, three bedroom home values appreciated by 28.97%.
- This shows us that Chicago home prices have been rising more slowly than other U.S. cities. Nationally, home prices returned to 2006 levels in 2016, meaning the country’s housing market is back to its pre-crash health. According to the S&P CoreLogic Case-Shiller home price index, home values in the Chicago area are still about 19% below where they were before the crash. This is a good sign for real estate investors interested in equity growth.
Chicago Rents Have Been Rising Consistently
- Over the past five years (Jan 2012 to Jan 2017), the median monthly rent for three bedroom homes in Chicago increased by 19.77%. During the same period, rents for three bedroom homes increased by 17.55%.
- This shows us that Chicago offers investors an opportunity to make passive monthly income.
Chicago is Not Experiencing Significant Population Growth
- Between January 2010 and January 2016, Chicago’s population increased by 0.44%. During the same period the national population grew by 4.45%.
- The graph pictured above shows that Chicago’s growth is declining; in fact, growth is declining in the entire state of Illinois. According to U.S. census data, 2016 marked the third year in a row that Illinois lost more residents than any other state. The state’s population is now at the lowest it has been in nearly a decade.
- Why are people leaving Illinois? The Chicago Tribune recently surveyed dozens of former Illinois residents who have left the area within the last five years. They found that the top reasons why people left were: high taxes, the state budget stalemate, crime, the unemployment rate, and the weather.
Chicago Job Creation is Lower Than Other U.S. Cities
- In the past year, Chicago added 30,400 new jobs to their economy – an annual growth rate of 0.68%. This is below the U.S. annual job growth rate of 2.31%.
- According to Michael Lucci, Vice President of Policy at the right-leaning Illinois Policy Institute, neighboring states offer stronger job and business opportunities than Illinois today. This is especially true for younger, working-age adults, who make up some of the largest groups leaving the state.
- While this may seem like bad news for real estate investors interested in Chicago, there is some good news. The Chicago metro is still home to more than 400 major corporate headquarters, including 31 Fortune 500 HQs and 300 corporate R&D facilities. Some of the most well known Chicago HQs are Walgreens, Boeing, and Sears Holdings Corp.
- In terms of wealth and economy, Chicago is also recognized as the fourth-most important business center in the world (according to the MasterCard Worldwide Centers of Commerce Index).
Chicago is Still Affordable
- The median purchase price of three bedroom single family homes was only $166,111 in January 2017. This is 11.17% more affordable than the national average, which shows us there are still affordable investment properties to be found in the Chicago metro area.
Chicago Rents are Strong
- In the neighborhoods where RWN members invest, three bedroom homes rent for a median $1,647 per month, which is 0.99% of the $166,111 median purchase price. This shows us that there is a strong opportunity to generate passive monthly income in Chicago.
Chicago Offers Equity Growth Potential
- Home prices across the nation returned to 2006 levels in 2016, which means the national housing market has returned to its pre-crash health. In Chicago, however, home values are still about 19% lower than where they were before the crash. This shows us that Chicago offers investors a good chance for equity growth.
Chicago is Still Growing (in some areas)
- More people are leaving Illinois than any other state in the nation, many of them are Chicago residents. However, some Chicago suburbs continue to be quite popular, especially areas that have quick access to downtown via public transit and are located near neighborhoods that are appreciating greatly. This shows us that while overall growth in Chicago is declining, there are still areas where growth is on the rise. This means there are still good investment opportunities in Chicago, if you know where to look.
August 29, 2017
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