Is Chicago in decline? (Naperville, Joliet: renter, condos, crime)

[IrishIllini]

Chicago is a HUGE region home to nearly 10,000,000 people. That's bigger than most U.S. states. That said, certain parts will always fair better than others. Chicago is not in decline, even though it's a baseless myth some like to toss around.

Truthfully I'd be concerned about managing a property nearly 2,000 miles away, but if you think you can make a buck give it a shot.

[NOLA101]

Originally Posted by IrishIllini

CChicago is not in decline, even though it's a baseless myth some like to toss around.

I don't think anyone has claimed that Chicago is in absolute decline, though I think it's very obvious it's in relative decline.

When your performance is the worst on almost every available metric (housing price appreciation, housing starts, population growth, crime, pension liabilities, finances, job growth, etc.) it's very reasonable to say the city is a relative underperformer. You take the 10 major U.S. cities, and Chicago is basically 10th out of 10 on almost any metric.

[Kamms]

No one has mentioned the foreclosures and high % of homes still underwater throughout Chicago.

On the other hand, there is a new bubble taking place. It's happening again so, like any Ponzi scheme, know when to get in and get out.

[chet everett]

Originally Posted by marothisu

Very true. The price of property isn't rising nearly as much as other places, though it is still rising in areas. This can be seen as both good and bad. But then you have large swaths of the city which aren't doing anything - where you can get an entire home for under $50,000. It's like the population thing - some areas are seeing nice growth, some aren't - and it all kind of evens out in the larger picture in the end. Relatively though, it's still pretty cheap given what the city is. You can still find 1 bedroom condos for under $300K downtown (and if you are lucky you can sometimes find a 2 bedroom condo for around that much). A friend of mine is visiting this weekend from DC and he remarked last night how he was surprised that Miami is cheap and you can get a 1 bedroom condo in a high rise there for around or under $300K. I showed him a few listings around where we were and he was a little surprised things weren't more expensive here. Again - both good and bad depending on your perspective.

On the other hand, rental prices have been on the rise for the last 5-6 years and the majority of the high rises, save for a few, going up in the downtown area are apartments, not condos.

As far as the C-S index goes, it is a good index but like any index it has its flaws. One of the major ones is that it doesn't count any properties that have undergone any major changes since the last sale (i.e. a nice renovation).

I've long said the C-S index is far from perfect -- in areas where there is are huge tracts of brand new housing springing up it is not needed -- folks don't really need to understand the dynamics of resale of existing homes in such circumstances. Thus the goal of Case-Schiller, to track resale trends of existing homes, does seem important to the broad Chicago market (which includes all kinds of towns: differences between Joliet / Naperville / Waukegan need to be accounted for but a quick look at what threads get lots of hits and which do not will soon show there's enormous bias towards areas that have more affluent / web savvy residents. Even from inside the city how many folks answer question about Dunning or Hegewisch or Roselawn? Got a question about Harvey or Calumet City? Good luck...) yet when so many home-resale-pairs in desirable parts of while region get excluded it is important to question how many tear-downs or renovations get exclude. My gut says LOTS but the C-S data is proprietary and if they start giving out too much info about their "secret recipe" it losses value...

That said, even if we try to focus on things like condos (which ought to be more fungible ...) I have no idea how C-S indexing methods would be able to capture the fact that some condo with a crummy view / noise issues might sell for a third of a similar sized unit that is way higher for nicer views and more quiet...

[Chicago60614]

Originally Posted by Kamms

No one has mentioned the foreclosures and high % of homes still underwater throughout Chicago.

On the other hand, there is a new bubble taking place. It's happening again so, like any Ponzi scheme, know when to get in and get out.

Foreclosure rate is 0.8% which basically mirrors the national rate, not much to say there...

For underwater homes Chicago is at 20% compared to national rate of 14%, so it's higher and is a reason you see fewer home sales than some other metros. It's quite regional though, places like Vegas and Florida still have very high underwater rates.

[compactspace]

Originally Posted by NOLA101

Chicago has the lowest real estate returns of any major U.S. metro, per the Case-Schiller index. You have a unique situation of stagnant population, economic troubles, and political gridlock relative to other major metros.

That said, real estate markets are intensely local, so I don't doubt there are parts of Chicagoland with very good returns, and an optimist could always reason that past performance is no guarantee of future returns. Maybe the next 10 years are different than the previous 10, who knows.

Be careful not to confuse rental ROI with capital gains. Chicago's ROI in most neighborhoods is far, far higher than either SF or NYC. Probably Boston and DC too. Its capital gains are patchy and will likely track inflation in good areas. (Case-Schiller deals with only a particular class of properties and covers the whole metro, so it's basically useless.)

[Peer79]

Originally Posted by compactspace

Be careful not to confuse rental ROI with capital gains. Chicago's ROI in most neighborhoods is far, far higher than either SF or NYC. Probably Boston and DC too. Its capital gains are patchy and will likely track inflation in good areas. (Case-Schiller deals with only a particular class of properties and covers the whole metro, so it's basically useless.)

Be careful not to confuse what you are referring to as 'capital gains' with appreciation, which I believe is what you are referring to.

[NOLA101]

Originally Posted by compactspace

Be careful not to confuse rental ROI with capital gains. Chicago's ROI in most neighborhoods is far, far higher than either SF or NYC. Probably Boston and DC too. Its capital gains are patchy and will likely track inflation in good areas. (Case-Schiller deals with only a particular class of properties and covers the whole metro, so it's basically useless.)

Wait, what?

Case Schiller only tracks ROI. Where did you come to the conclusion that Case-Schiller tracks something else? And how do you fathom that Chicago has higher ROI than other cities?

Case-Schiller is the gold standard in housing returns. Everyone uses Case-Schiller. Please don't tell me you think they're lying, or you have secret data that contradicts them.

This reminds me of the Census arguments or crime arguments. Chicago has lower-than-expected population numbers, so then always someone claims the Census is wrong or lying, and there's some secret data source out there that proves the opposite. Or the crime figures are supposedly fabricated by the feds, who are apparently out to get Chicago or something.

[Hosken Powell]

A city's "decline" is an orthogonal issue to making money with rentals. In fact, there's a lot of money to be made as a slumlord in a depressed area. So much so, that you'd be competing with well heeled private equity firms. That is another story, though.

Chicago is not a good bet for rental investment simply because there are so many properties. There's no housing crunch that "justifies" the high rents that one finds in coastal cities. A prospective renter has dozens if not hundreds of options in Chicago. Whereas in say, SF, the situation is reversed.

[ARaider08]

Originally Posted by Hosken Powell

A city's "decline" is an orthogonal issue to making money with rentals. In fact, there's a lot of money to be made as a slumlord in a depressed area. So much so, that you'd be competing with well heeled private equity firms. That is another story, though.

Chicago is not a good bet for rental investment simply because there are so many properties. There's no housing crunch that "justifies" the high rents that one finds in coastal cities. A prospective renter has dozens if not hundreds of options in Chicago. Whereas in say, SF, the situation is reversed.

I find your perspective rather intriguing because perspective on hosting in in demand areas is quite crunched.
Now, there's plenty of housing in south Shore, Englewood, garfield park and other down-trodden neighborhoods but it's rare you'll find a prospective renter interested in that housing.
What, crime and fear of crime makes about 35% of the city telly a place someone would like to rent.
There's a housing crunch, just one with a very different face I suppose.