2021 Chicago Real Estate Market Investing Forecast

Beth McCandry

Note: Our market forecast covers Chicago and local area data including Naperville, Indiana and Elgin, Wisconsin.

With nearly 2.7 million residents in 2019, Chicago is by far the most populous city in Illinois and the third most populous city in the United States. Chicago lies on the shores of Lake Michigan and was originally intended to be a port city between the Great Lakes and the Mississippi. It was first established in 1837.

Chicago is much more than a port today. A number of Fortune 500 companies are headquartered in the Chicago area, including Allstate (NYSE: ALL), Kraft-Heinz (NASDAQ: KHC), and McDonald’s (NYSE: MCD). The Chicago area is also a hub for colleges such as the University of Illinois at Chicago and Northwestern. It’s also a top tourist destination with attractions like Willis (Sears) Tower and Lincoln Park Zoo.

The state of the market

For the most part, the real estate industry in Chicago seems to follow the rest of the nation. By this we mean that the pandemic, although badly affected by the pandemic, is showing signs of recovery. Here are three trends to know before adding the Windy City to your portfolio.

Vacancies have risen while rents have fallen

As in many other large cities, there are currently vacancies in Chicago, while rents are trending downwards. However, vacancies are only up 0.8% year over year and rents are only down 2.9%, putting Chicago in a better position than other places in the country.

Hopefully, as the vaccine rollout continues and more people return to the office environment, the vacancies will fill up and rental prices can go up again.

Inventories are low but new construction is increasing

In addition, there is currently only 1.4 months of inventory in the city, which has resulted in a dramatic increase in property prices in the recent past. However, we again assume that this is a short-term problem. According to the Architectural Buildings Index and the number of single family home permits, new construction appears to be increasing, which will help alleviate the shortage of inventory.

Unemployment is still high

After all, unemployment is still high in the city. At 8.3% in February 2021, it is currently 4.5% up on the previous year. However, this measurement is a drastic improvement on the size of the pandemic. However, investors need to be aware that the unemployment rate can affect tenants’ solvency, which can lead to problems with the landlord’s mortgage compliance.

Indicators of demand for residential real estate in Chicago

All data and graphs are from Housing Tides by EnergyLogic.

Chicago housing demand indicators show higher than usual unemployment rates, rising house prices and lower rents than normal, and are in line with the trends we are seeing across the country.

Unemployment rates are high across the country due to the pandemic, and the Windy City is no exception. As of February 2021, the unemployment rate in Chicago stands at 8.3%, a value that is 4.5% up on the previous year and above the national average of 6.2%.

While that percentage seems high, it has actually made a significant recovery. When unemployment peaked in April 2020, the unemployment rate in Chicago was 16.5%, while the national average was only 14.8%.