Is Chicago in decline? (Cicero: sale, real estate market, apartments)

[Perma Bear]

Is it risky to buy there for a rental property? I live in the Bay Area at home and I'd love to buy a place to rent in a nice neighborhood. I know the city has been shrinking since 1950. Is the city's best days behind it?

[compactspace]

You can certainly make decent money by renting out a place in Chicago. Note, however:

* You could get better returns elsewhere
* It's risky to buy anything until next year's tax bills are out. The city has pension bills to pay
* SF-style capital gains aren't going to happen

If you like the city and know it then that's as good a reason as any to invest in its property. I'd suggest spending some time in AirBNB places in appealing neighborhoods to see what they're like 'on the ground'.

Just be clear-headed about things and it'll probably be a successful venture, if not as profitable as other places might be. Look at school boundaries, distance to El stops, parking availability, distance to the loop, the kind of housing stock that's nearby. The usual stuff.

The city's in turbulence. It's a fantastic place with a lot of history, a lot of culture, a lot of talent and a lot of industry. Its 'global' areas are always going to do well, and there are a number of neighborhoods that are gentrifying... slowly. It's very liberal, if that's your thing.

But then, it has a lot of political, policing, financial and school-related problems. There's a lot to worry about. You'll need to accept some rough waters ahead if you want to buy in.

Hope that helped.

[knitgirl]

Risky to buy a long distance rental property. By the time you add in management fees I doubt you'll be making any money.

[chicagobear]

Actually, a lot of areas are doing really well (ie the largely white areas of the northside and adjacent neighborhoods), but the black and Hispanic areas are plagued by the drug violence that you see on the news. Prices don't seem cheap to me though. There were lots of deals in 2008 and maybe that time will come again.

[Perma Bear]

Originally Posted by knitgirl

Risky to buy a long distance rental property. By the time you add in management fees I doubt you'll be making any money.

Every property North, East, or South of my current location (or any combo of the above) out to about 50 miles each way costs 500000 or more. To the west is ocean. The only place that starts to become affordable is the central valley which is neither close nor a good place to rent unless you have the ability to control tweakers and other criminals with your mind. It's probably not even worth buying property really. Should just stick with stock as always.

[marothisu]

Originally Posted by chicagobear

Actually, a lot of areas are doing really well (ie the largely white areas of the northside and adjacent neighborhoods), but the black and Hispanic areas are plagued by the drug violence that you see on the news. Prices don't seem cheap to me though. There were lots of deals in 2008 and maybe that time will come again.

This is true, but I have to say that prices on average right now to buy are lower than they were in 2007 or 2008 on average, though definitely rising in certain areas still. At the same time though, rental prices have been going up in certain areas at a decent rate since about 2009 or 2010.


As far as what the OP asked - I don't think it's necessarily in decline. Depends on how you look at it - it is growing slower than other cities in population, the city finances have been mismanaged over the last while, and the public school system is declining. On the other hand, other metrics it is definitely improving on (income levels, education levels, average life expectancy, etc). While the city population is lower than its peak (as is Boston and DC), the metro area population has never declined. The metro area population now is nearly 3 million people greater than it was in 1970. It also still has the 2nd highest amount of Fortune 500 HQs of any metro area in the US and companies are still choosing to relocate there. And of course, like any other place, there's definitely the not so good sides of it like the poster I'm quoted very very lightly touched on. Guess it depends on how you look at it, but I wouldn't say it's necessarily in decline in and of itself.

[pvande55]

I don't think so. I was in River North and there were buildings going up all over. However, for an investor in apartment buildings, maybe. When all the new buildings come on the market, downward pressure on rents.

[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.

[RememberMee]

Сhicago is such a wonderful place everybody say, but I get freaking depressed (for real) each infrequent time I drive Cicero Ave, Lake St., anything in that area. Sheer poorly kept ugliness of the buildings, dust/mud, garbage here and there, high traffic and human misery walking sidewalks and roadways or begging amalgamate into immediate mini depression. The question, "is it all to life" jumps right into my head. I guess one needs to live in Chicago to appreciate it. Btw, watch your car and things, Chicago police doesnt dispatch anybody to non violent crime scene if the loss is less than certain amount.

[marothisu]

Originally Posted by NOLA101

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.

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).