The Chicago real estate market had a busy start to 2015.
The picture painted by the Chicago real estate market in Q1 2015 is a mixed bag, with encouraging signs bolstered by a few straws in the wind. Chicago is notorious for its patchwork quilt of neighborhoods, each one either stable or changing. We’ll summarize some of the current trends in Chicagoland’s residential and commercial real estate environment, which looks cautiously positive for the remainder of the year.
Residential Real Estate Trends
According to Core Logic, a consulting firm, Chicago ranked No. 7 in January 2015 for year-over-year single-family home sales growth among the nation’s larger metropolitan areas. Excluding distressed housing, sales of single-family homes in Chicago grew 4.8 percent, which beat the sales growth rates of the metro areas for New York City, Phoenix and Washington D.C. If you factor in distressed properties, the figure rises to 4.9 percent. The same consultancy is generally upbeat regarding all 2015 home sales, seeing an annual gain of about 5 to 6 percent nationwide, and Chicago should get its fair share. Spurring on the housing market is a projected 3 percent growth in the nation’s economy for 2015.
The 0.5 percent cut in FHA insurance premiums for new mortgages, announced by the President in early January, is bound to have a stimulating effect upon residential housing. Indeed, the Mortgage Bankers Association has seen a spike in mortgage applications in the first quarter and forecasts higher mortgage origin rates in Q2.
Chicago still suffers from a large backlog of underwater homes (in which the mortgage exceeds the home’s value), but the number dipped below 20 percent as we entered the first quarter. Chicago is still in the top five markets with the highest percentage of underwater homes.
Condos are Popular
The popularity of condo housing is rising as the millennial generation comes of age. Folks in the 25 to 35 age group are ready for a starter home, and the hot choice appears to be condominiums. The average sale time for a condo right now is approximately half of that for a detached house.
Condos are available throughout the city, and you can also find several in the suburbs of Evanston and Wilmette. While many condos are gleaming and new, there are also plenty of pre-WWII units available that may be very attractive investments for renovators and flippers.
Commercial Real Estate Trends
Retail space in the Loop is white hot right now, sending rents skyrocketing as new restaurants and stores vie for space. Vacancy rates for Loop retail space entered 2015 below 11 percent, a tight market. Chicago skyscrapers are changing hands at record prices. Blackstone Group is acquiring the Willis Tower (formerly the Sears Tower) for $1.3 billion, the most for a U.S. office building outside of Manhattan.
With Google planning on opening a new regional headquarters at 1000 W. Fulton, it’s no secret that the West Loop is hot. While Oprah Winfrey is shuttering her studio facilities in the, Chicago real estate industry insiders are eager to see what plans new owner Sterling Bay has for the complex. Sterling Bay is on a hot streak in the West Loop; they’re currently selling a 102-year-old office building at 111 N. Canal for more than triple what it paid for it a little over two years ago.
The suburban market also appears to be on the right track, as the suburban Chicago office vacancy rate has fallen to its lowest level in more than seven years. While the Lake County vacancy rate actually rose, that’s due to Motorola Mobility moving its campus from Libertyville to the Merchandise Mart in Chicago last year. In other suburban real estate news, Chicago-based Event Creative has purchased the Berto Center (the former practice facility of the Chicago Bulls) in Deerfield for $4 million, and plans to turn it into a venue for weddings, bar mitzvahs and corporate meetings.