What is Happening in Chicago's Real Estate Market?
The latest on the Chicago Real Estate Market
Contrary to what you may have heard, people are still buying condos – lots of them. In fact, buyers purchased more condos in the Chicago area in the last 12 months than they have at any point in the 10 years leading up to the pandemic.
Since the start of the pandemic, this narrative has persisted: home buyers have eschewed denser living for larger homes in the suburbs and countryside. But, it’s not true. Not exactly.
Today, we’ll talk about the huge increase in condo purchases over the last 12 months, and why you haven’t heard much about it.
A quiet run-up
You remember this part of the story: first, the world shut down. Faced with the prospect of prolonged life at home and spurred by low interest rates, about 200,000 Chicago area residents decided it was time to buy a new house.
They ran head-first into an inventory shortage brought on by a decade of under-building, creating a once-in-a-generation seller’s market. Single-family home prices skyrocketed.
However, that wave of purchases began to abate more than a year ago. An even larger increase in condo sales came in about 8 months later and has only begun to taper off.
Between March 2020 and June 2021, single family home sales increased 25.4%. They have fallen about 12.8% since then.
Between March of 2020 and March of 2022, condo sales increased an even meatier 31.2%. They matched the 25% total increase experienced by single family homes around the same time (July 2021), then kept right on trucking for another 8 months. Since March, they’ve sloughed off about 5.9%.
While SFH sales were grabbing all the headlines, condo sales increased by an even larger percentage.
Perhaps that’s because despite the increase in volume, the price increases for condos didn’t keep up with SFHs. Why not?
The Bigger Picture
Between March of 2020 and July of this year, single family home prices in Chicago have rocketed up 26.4%. Meanwhile, condo prices have increased by about half of that – 13%.
But, if we zoom out, we see there’s more to the story. Here are single family home prices over the last 10 years.
And here are condo prices over the same time period:
Single family home prices rose 53.7% between when they bottomed out in 2012 and March of 2020. Not bad. But condo prices rose about 73.3% over roughly the same period.
Now let’s throw the post-2020 appreciation back in the picture. From their bottom in 2012 to today, condo prices have increased 95.8%. Over roughly the same time period, SFH prices increased 94.3%.
In March of 2020, a Chicago area condo cost $208k, and a house cost $270k – 62k more. Today, a condo costs $235k and a house costs $340k – $100k more. Even at an inflation rate of 9%, it should have taken 5 years to close this gap. Instead it took 2.
Houses were underpriced compared to condos. Why?
Millennial Market Movers
While gen Z may have better dance moves, millennials are the biggest generation on the books. And millennials are moving out of their condo-buying years and into their house-buying years.
It’s the Chicago real estate circle of life: you graduate from a Big 10 college, then rent an apartment in Chicago. You get married, then buy a 2br/2ba condo. Your family outgrows the condo and you need cheaper schools and child care, so you sell the condo and buy a house in the ‘burbs.
We’ve talked extensively about how the pandemic fast-forwarded this process, causing a crush of buyers selling their condos and buying houses.
By this point, you know this created a huge spike in demand for houses. But it also created a lot of supply for condos. That supply has kept younger millennial home buyers from facing quite as much of an inventory shortage as their older peers, which has kept prices from increasing as quickly.
The bottom line on the Chicago condo market
Yes, people are still buying condos – the largest cohort of millennials is just now moving into their peak condo-buying years.
Condo prices have nearly doubled over the last 10 years and will probably continue to rise, although not necessarily in all sub-markets.
We must always caution you that there are geographic dynamics at play here, too. A condo in downtown Chicago is not the same as a condo in Wheaton. To find out about the condo market in your area, request a neighborhood report.
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