Mobility Magazine of Worldwide ERC, June 2016
By Kevin P. Maloney
The northeastern Illinois market is made up of Cook County, which contains the city of Chicago, and five surrounding “collar counties” of Lake, McHenry, DuPage, Kane and Will. The city of Chicago, with a population of around 2.7 million, is the area’s primary economic engine. This report focuses on Cook and DuPage counties, as they are the most populous counties and see the greatest amount of relocation activity. These two counties contain more than 6 million residents and account for around 80 percent of the population in the northeastern Illinois market.
Housing prices in the northeastern Illinois market increased from 1997 through 2007. Some areas saw market peaks in 2007, while others continued to see appreciation through the third quarter of 2008. The Great Recession hit in earnest in September 2008 and brought value declines to all markets. However, the magnitude of the decline varied significantly. The greatest percentage losses were typically seen in communities that entered the recession with a median home value that was below average for the region. Some communities began to see values move upward in 2012. However the most severely impacted areas did not see an upward trend in value until early 2014.
The rate of recovery in Cook County for detached home values varies dramatically from one area to another. High-demand areas in the city of Chicago have seen the strongest recovery. For example, the Lincoln Park neighborhood had a median detached home value of $1,425,000 in 2007. The median value in this neighborhood dropped 11 percent by 2011. However, by 2015 the median value was more than 11 percent above the prior peak in 2007. Median detached home values above the prior peak in 2007 can also be seen in other areas of the city of Chicago, such as West Town and Lincoln Square. These locations all have strong transportation links to the central business district, and residents have rising levels of disposable income. The availability of vacant land in the high-demand areas of the city of Chicago has kept additions to the detached home supply at a relatively low level, and most building is on an infill basis. The city of Chicago is seeing the greatest competition from new construction in the upper end of the market (homes priced above $1.5 million).
None of the suburban areas of Cook County have seen median home values push back up to the prior peak levels. The highest-demand areas in suburban Cook County typically remain approximately 8 percent down from the peak. The worst-hit communities often still have median home values down more than 40 percent from the peak. An example of a community that continues to be profoundly impacted by the great recession is the town of Cicero, which had a median detached home value for the year of 2015 that was 45 percent below the median value in 2007.
The DuPage County market shows the same broader pattern as Cook. Communities that entered the recession with high median home values typically saw a lower percentage drop during the recession. For example, the city of Naperville had a median detached home value of $452,000 in 2007. The median value fell 16 percent below the 2007 number by 2011 but recovered to only 9 percent below the prior peak by 2015. The village of Hanover Park, on the other hand, had a median home value of $238,000 in 2007. The median value was 46 percent below the peak by 2011 and by 2015 the median value remained 27 percent below that of 2007.
The condominium market in DuPage and Cook counties has seen appreciation flatten over the past year. Condominium construction remains limited throughout the entire market area. A large number of rental units are being built in the city of Chicago, and these units may ultimately be converted to condominiums. However, any major addition to supply will be at least three years down the road. The limited levels of new supply in most market segments should keep values stable to moderately increasing over the next 12 months. Higher-priced attached properties face the greatest downside risk, as much of the impending supply is focused at the upper end of the market.
In Cook County, distressed sales (short sales, foreclosures, and bank-owned properties) made up 42 percent of the total sales volume reported in the MLS for the year 2011. Distressed sales in Cook County for 2015 fell to 22 percent of the total sales volume. In DuPage County, 34 percent of the total sales volume consisted of distressed transactions in 2011. The number slipped to 15 percent for 2015. While the numbers above clearly show that the Chicago region is heading in the right direction, the number of distressed sales still remains drastically higher than normal.
The hope is that the dynamic growth seen in some areas of the region will exert a positive secondary impact on communities that continue to struggle. While major political and economic challenges still occur, the city of Chicago clearly remains the Midwest’s cultural and economic hub.
Kevin P. Maloney is a certified general appraiser with Maloney Appraisal, Inc., in Chicago and is a member of RAC (Relocation Appraisers & Consultants). He can be reached at +1 773 281 6013 or firstname.lastname@example.org.