Chicago real estate market sees fluctuating growth in 2017
With the continuing deficiency of inventory driving the accumulation of demand in the residential market, multi-family luxury developments continue to attract buyers to Chicago’s core neighbourhoods
2016 was a year of uncertainty in many economic and political aspects influencing real estate market reactions throughout the United States. On one hand, 2016 saw a significant gain on the index of consumer sentiment, closing out the year at a nearly 13 year high of 98.2 and a steady decline in unemployment, motivating more Americans to buy homes. On the other hand, the residential and commercial real estate markets have been more volatile for some cities than for others. Chicago, in particular, is an example of those cities, located generally in the Midwest, where the recovery rate from the housing market crash was slower than in other regions of the country.
However, things are far from bleak for Chicago. While the growth will continue at a slower rate than in other metropolitan areas, Chicago’s residential real estate prices and sales are expected to increase throughout 2017. Moreover, the high-end residential market will continue its strong performance, with the inventory levels falling below the levels of a balanced market and plenty of demand for properties in desirable areas.
Market Reacts to New Leadership
Markets do not like ambiguity and elections are the epitome of uncertainty, with general speculators consenting that during election years, buyers are less likely to purchase high-ticket items like residential or commercial properties. Since the election however, Chicago has seen a strong uptick in residential sales with properties that lingered on the market for most of 2016 selling quickly after the election. Says Mark Icuss of Conlon Real Estate, an affiliate of Christie’s International Real Estate, “There was a distinct change in the market place the first week after the election. People just seemed to finally be ready to make decisions”.
Sluggish Recovery from Recession
The US economy experienced a decline in unemployment numbers to close out 2016 at 4.7%, with the growth in new jobs motivating home ownership. However, Chicago has been slower in recovering from the housing market crash. S&P CoreLogic Case-Shiller Index showed figures of Chicago’s home prices on average remaining around 20% below the levels seen in July of 2007. Though both prices and sales volume are expected to continue to rise throughout 2017, they will climb a modest 2%, an outcome similar to 2016. Nationally, home prices and home sales are expected to rise 3.9% and 2.6% respectively, according to
the Chicago Home Partner Real Estate Roundup.
Deficiency of Inventory
With the luxury segment of the Chicago housing market remaining more inactive than the metro housing market as a whole in 2016, the inventory for quality luxury product stayed fairly low, with more buyers than sellers vying for quality properties in desirable areas like the West Loop, Gold Coast and Lincoln Park. Though 2015 saw an appreciation of prices along with a lot of qualified buyers waiting for the right property to come on the market, the deficiency of inventory persisted in 2016. Chicago Home Partner Real Estate Roundup reports that, on a contrary to what might have been expected, the 2016 inventory number never equaled those of 2015. “If you have a resale, it is a good time to sell”, says Icuss. “There are a lot of buyers out there and they are having a hard time finding a nice product in the right neighbourhood”.
Multi-Family Developments on the Rise
A hot area for investment in Chicago over the recent years has been the multi-family residential market with a lot of buyers looking for quality assets in core neighbourhoods. “In the last five to six years, the multi-family market has been absolutely incredible”, says Icuss. “Properties have seen some historically high valuations; anything from a 6-unit to 60-70 unit building has been drawing a lot of demand”.
As all predictions point toward a strong 2017 spring and summer in the multi-family residential market, a mild slow-down is in the cards for 2018 to 2019, with the anticipation of new inventory with a few thousands of units being put out into the market to meet the current demands. Reaching completion are new ultra-luxury condominiums of Hayden West Loop, Wanda Vista Tower and 9 West Walton, with the latter property registering record pricing for the Chicago market, up to USD 1,500 per square foot. Says Icuss, “Currently, there is a lot of demand in the multi-family luxury market, with the right product, delivered and finished at the right level and priced appropriately, moving very quickly”.
This article was first published in Palace 19.