Should You Invest In Chicago Real Estate?

Should You Invest In Chicago Real Estate?

  • Zach Shepard
  • 01/4/18


Investments in single-family rental properties have good potential in the next few years, as so apartments. If you're planning to buy a home, take your time; prices will go higher but slowly. Investments in single-family rental properties have good potential in the next few years, as do investments in housing developments, especially apartments . Mortgages written now have low risk because home prices will go higher, but the risk of job losses is increasing in some manufacturing industries. Investments in the slowly growing retail sector have the best chance in Kendall County and should be avoided in DuPage.

The local economy is a mix of low growth but high wage manufacturing jobs (chemicals, metals, machinery) and higher growth but lower wage jobs in wholesale and retail trade, business services, and healthcare. The slowly shifting income of the workforce will have long-term effects on the real estate market, with less demand for single-family homes and more demand for apartments. Like many other former manufacturing cities, Chicago is becoming a regional hub of services to a large but slowly-growing population.

The population has grown at half the national rate for years, pulling home prices down well below local income levels. Prices were up in the past year but have lots of room on the upside. You can expect increases of 4 percent or so for the next few years. Home prices are a bargain right now but they will stay a bargain, so don't be pushed into buy too quickly. Prices have been strongest in Lake County.

Because home prices are so low compared to income - and to rents, single-family rentals can be a good investment, especially as more workers are unable to buy a house themselves. The returns are probably best in Will and Kendall Counties, where home prices are lowest compared to rents - but not many people rent there. On the other hand, renters are 45 percent of the population in Cook County, and returns can also be good there.

New mortgages have below-average risk because home prices will slowly but steadily increase for a good number of years. Prices right now are 25 percent below their normal level. Job prospects are a different story, with cutbacks in a number of manufacturing industries.

The metro area is growing at a slow pace and unevenly, with contraction in Kankakee and McHenry Counties and the best growth in Kendall County. Over the next three years I expect 2,800 new single-family homes built in Kendall County. In Cook County I expect 36,000 new homes and 50,000 apartments. Big projects should be built in stages because of the low growth.

Within the area, Cook County has the highest proportion of Latinos, Blacks and immigrants, DuPage has the highest proportion of Asians, college graduates, high income and high home prices. The average age is lowest in Kendall.

Growth in retail businesses has followed population growth across the area, with actual contraction in DuPage County and slow growth In Cook, Will and Kendall. The best retail growth has been in Kendall County, a modest 5 percent increase over the past two years. Compared to the other counties, DuPage is OVER-served with retail services while Kendall is under-served with restaurants.

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