The Chicago real estate market has always been one of the best places to invest in real estate, and this trend remained in 2019. But will this continue to be the case in 2020? Will buying an investment property in Chicago be a profitable real estate strategy once again? To answer these questions and many others of US real estate investors in the Windy City, let’s have a look at the Chicago real estate market forecast 2020.
What’s Driving the Chicago Housing Market 2020 for Real Estate Investments?
Before diving into the specific Chicago housing market predictions for 2020, we will highlight and analyze the main factors which impact Chicago real estate investments.
Positive Demographic Indicators
With a population exceeding 2.7 million residents, Chicago constitutes the 3rd largest US city and the most populous one in the Illinois real estate market. In addition, this population consists of many young professionals. Third, the already numerous population is growing at a faster rate than the rest of the US. Moreover, the majority of Chicago residents rent rather than own a home. These factors already suffice for an experienced real estate investor to deduce that the Chicago real estate market 2020 has a strong potential for real estate investments, especially in residential properties including traditional rentals.
A Truly Global Economy
The Chicago housing market also benefits from the fact that the Wind City has one of the most diverse economies not only in the US but also worldwide. There is no single dominant industry in Chicago as many different economic sectors provide employment and income for the large population. This is a vital factor for the stability of the Chicago real estate market 2020 and beyond as it means that even if one industry goes down, the overall impact on the economy will not be catastrophic as other growing sectors will absorb those newly unemployed.
Top Tourist Destination
Equally importantly, with over 57.6 million visitors per year, Chicago is one of the most popular tourist locations in the US in terms of both leisure visitors and business travelers. From the point of view of residential real estate investors, this indicates high potential for the 2020 Airbnb Chicago rental business.
What Are the Expected Chicago Real Estate Market Trends 2020?
This overview of the Chicago housing market forecast is based on a review of the trends expected by different experts in addition to our own real estate data and real estate market analysis at Mashvisor. Here are the most significant Chicago housing market predictions 2020:
Chicago Real Estate Market 2019 Figures
- Median Property Price: $441,700
- Price per Square Foot: $261
- Real Estate Listings: 5,134
- Days on Market: 64
- Price to Rent Ratio: 18
- Traditional Rental Income: $2,010
- Traditional Cap Rate: 0.9%
- Airbnb Rental Income: $2,870
- Airbnb Occupancy Rate: 57.5%
- Airbnb Cap Rate: 1.8%
1. Chicago Real Estate Prices Will Remain Affordable
The intensifying lack of affordability is one of the most serious challenges which both real estate investors and homebuyers face in the US housing market in 2019 and going into 2020. However, home values will not pose a challenge for property investors in the Chicago real estate market 2020. According to Mashvisor’s analysis of big data and real estate comps, the median property price of houses for sale in Chicago in Q4 2019 amounts to $441,700. While this exceeds the national median home value by 93%, Chicago homes for sale still sell for much less than properties in other hot real estate markets (such as Miami, San Francisco, San Diego, Los Angeles, and New York) and gateway markets (like Boston and Washington, DC). The median property price per square foot is $261. According to Chicago real estate experts, property prices have peaked in the local housing market, and real estate appreciation will stabilize. Affordability will not pose an issue for Chicago investment properties in 2020.
2. The Chicago Housing Market Is Becoming a Buyer’s Market
The current housing market in Chicago is rather a seller’s market. However, in line with the Chicago housing market predictions 2019, it’s been shifting towards a buyer’s market, and the forecast is that the transition will be completed in 2020. At the moment, there are 5,134 houses for sale in Chicago on Mashvisor’s platform, while Chicago real estate agents report a property inventory of 5.9 months.
Related: Will the 2020 US Housing Market Be a Seller’s Market or a Buyer’s Market?
3. Condos Will Dominate Chicago Real Estate 2020
Unlike the majority of other top places to invest in real estate, condos comprise the most numerous property type of Chicago homes for sale, with a 52% share of the market. Single family homes for sale in Chicago come second with a 28% share. If you are interested in buying a rental property in the Chicago real estate market 2020, you should keep in mind that condos are expected to be significantly more expensive than single family homes. Currently the former sell for an average of $488,000, and the latter – for $325,600. Most importantly, single family homes offer a much higher return on investment in terms of both cap rate and cash on cash return when rented out as traditional Chicago rental properties and Airbnb Chicago rentals. After all, the rate of return is the most important factor for the decision of property investors, whether in the Chicago real estate market or any other US housing market 2020.
To know what trends you can expect in other US markets next year, read US Housing Market Predictions: What’s to Come in 2020.
4. Rental Demand Will Remain Strong in the Chicago Housing Market 2020
With over 1.5 million renters, traditional rentals will be in high demand in the Wind City next year. The moderate price ratio of 18, which is forecast to remain unchanged in 2020, signifies that generally renting makes more financial sense for common people than buying a home, which is a positive indicator for real estate investors. Economic growth, job creation, and demographic in-migration are all expected to exceed the national average, which means that the Chicago real estate market trends 2020 will keep the momentum of 2019. The rising number of tourists, on the other hand, will keep pushing the demand for Airbnb Chicago rental properties. This automatically translates into high Chicago Airbnb occupancy rate. These two trends are good news for those investors who have not decided on a rental strategy yet.
5. Chicago Investment Properties Will Offer High Return on Investment
According to Mashvisor’s investment property calculator, traditional rental properties in the Chicago real estate market bring a rental income of $2,010 and a cap rate of 0.9%. Mashvisor’s Chicago real estate market analysis 2020 reveals that multi family homes and single family homes will be the most profitable traditional rental properties.
Airbnb Chicago rentals, meanwhile, generate a rental income of $2,870 and a cap rate of 1.8%. In terms of property type, Chicago vacation rental investors should consider single family homes and condos.
While this may not sound like a whole lot for investors, you should keep in mind that these are just the city averages, and some Chicago neighborhoods bring a much higher return on investment. Moreover, these profitability values exceed what many other top housing markets across the US offer.
Tip: To increase your return on investment, consider investing in a foreclosure or an off market property in Chicago.
6. Airbnb Chicago Hosts Will Continue Facing Issues
Based on Mashvisor’s real estate data, Chicago Airbnb properties perform better than traditional ones. However, before going for this rental strategy, a property investor needs to study the local Airbnb laws and regulations. Unfortunately, Chicago has joined the many US cities as well as global markets which imposed severe restrictions on short term rental properties. On 22 June 2016 the Chicago City Council passed a new Chicago Airbnb Ordinance according to which only owner-occupied short term rentals are allowed. Different Airbnb rules and regulations apply to single family homes, duplexes, triplexes, and bigger multi family homes in the Chicago housing market in terms of how many rooms can be rented out at a time and how many guests can stay in them. What this means at the end of the day is that Airbnb Chicago cannot be a full-time real estate investment strategy, and it is absolutely not feasible for out of state or long distance real estate investing. You simply cannot buy an investment property in the Chicago real estate market for the sole purpose of renting it out on Airbnb.com or similar short term rental platforms. The forecast excludes any major changes in this legislation any time soon.
To gain a comprehensive understanding of where the Chicago housing market is currently standing, read Mashvisor’s Chicago Real Estate Market Report 2019.
What Are the Best Chicago Neighborhoods for Real Estate Investing in 2020?
Based on the Chicago real estate market forecast 2020, you should feel encouraged to invest in real estate in the Wind City next year. To help you out with your real estate market analysis and property search, we will show you next the 3 best neighborhoods in Chicago for traditional, long term rentals as vacation rentals are not a viable option at this point.
1. North Austin
- Median Property Price: $208,400
- Price per Square Foot: $139
- Average Monthly Traditional Rental Income: $1,860
- Average Traditional Cap Rate: 5.9%
2. East Chatham
- Median Property Price: $114,900
- Price per Square Foot: $93
- Average Monthly Traditional Rental Income: $1,190
- Average Traditional Cap Rate: 5.1%
3. South Austin
- Median Property Price: $141,100
- Price per Square Foot: $81
- Average Monthly Traditional Rental Income: $1,370
- Average Traditional Cap Rate: 4.7%
If you are thinking of starting a real estate investing business and are still not sure where to invest, you should definitely consider the Chicago real estate market 2020. The relatively affordable prices, the strong rental demand, the good return on investment, and the multiple property listings are just some of the factors which will make this a profitable real estate strategy. All in all, the Chicago real estate market forecast 2020 is very positive. All you need to do is sign up for Mashvisor and find a top-performing investment property in a matter of minutes.