Chicago Housing Market

The Chicago area housing market is quite fascinating. According to the OFHEO 1Q 2006 Report the 5 year price appreciation for homes in the Chicago area was 51% and the one year rate stood at 10.5%. Chicago's price appreciation rate is strong but not stratospheric like many metro areas in California or Florida. Like many other parts of the country job and wage growth over the past five years has been anemic (weak). The Chicago area economy has been stronger in then other large Midwestern cities like Cleveland or Detroit. In the Chicagoland area, as some call it, the price appreciation rate is quite varied depending on the neighborhood and type of property.

Chicago-area sales of existing homes and condos fell 14.5 percent in July compared to the same month last year, but median prices rose 2.6 percent, according to the Illinois Association of Realtors.

Nevertheless, single-family home sales in the Chicago area fell by 18.6 percent in July compared to last year at this time.

Even with the Chicago-area single-family home sales falling, median prices rose 4.2 percent, to $285,000. (Daily Herald 8/24/06)

Recent condo conversion, Barry Place in the Lakeview neighborhood.

So what will happen with housing prices during the coming years?

Overall I do not think the Chicago metro area is a bubble market. The typical housing unit is unlikely to decline in price by 20% in real dollars during from its peak price within 3 years of peak price. However, condos especially in the city itself are likely to fall by over 20% in real dollars. Certain 'hot' neighborhoods that have experienced very strong price appreciation may fall more then 20% in real dollars over the course of 3 years. Chicago, is certainly not bubblicious like San Diego, nevertheless declining real dollar prices will be a reality for the Chicago metro area in the coming years.