Chicago Rental Market 2023

[Kmanshouse]

right. We moved in here in mid-2019. At the time, the rent seemed fair. We've had one small increase so far, though we are up for renewal here in a couple of months, and I assume it will go up again.

With our place in particular, what keeps the rent down, IMO, is that from the outside, the house looks like it's in bad need of repairs. The place needs new siding (windows are good), and the porch wood has rotting spots. These are expensive fixes and he'll have to shell out thousands....so as long as he's not doing that (believe me, we've asked), it's hard for him to justify a huge increase. It's also between two MUCH nicer looking homes.

The inside is 90% fine though - renovated in 2016, good electrical, trim, etc. He also had the roof replaced last year, which helped the eye test a little bit. Kitchen is above average. Bathrooms are like 1990s dated, but okay.

We're approaching being "done" living in a place that looks like this, despite the 2000 square feet and great location in the SE part of Lincoln Square. Our income, age, and life position warrants a higher-end dwelling at this point, and we're treating this place as the spacious, perfectly located entry-level Chicago rental that it is.

We could do another year here, of course, but we'll be a bit frustrated. Not the end of the world, but definitely looking pretty hard at this point, and realize we may have to overpay a bit. But we have our limits on how much overpay we'll tolerate.

[dtcbnd03]

I recommend staying put in your current place for another year.

Here's how I see the rental market going in 2023:
- Fed funds rates will continue to rise to 6% until Fed reaches a restrictive rate (currently at 4.50% to 4.75%).
- As a result 30 year fixed mortgage rates will rise to 8-9% (currently 7%).
- Buyers will NOT pay up at current price levels with 8-9% rates and Sellers will not give up 3-4% locked rates.
- Therefore, most property owners will continue to rent and jack up rental prices as much as possible.
- Homebuilders pause / delay many projects due to the higher lending costs, limiting supply and leading to higher rents.
- Once the Fed reaches a restrictive rate in late 2023 things will start to break after 1 year + of Fed rapid tightening.
- Job losses will go from a trickle to a sizable loss and renters will be maxed out or simply be evicted.
- Economy is in medium recession in late 2023 to 2024 (no soft landing...but certainly not a 2008 financial crisis).
- In 2024 Landlords will decrease rental prices due to above looking to secure higher quality renters with jobs / incomes.

[ChiGuy2.5]

Originally Posted by Kmanshouse

right. We moved in here in mid-2019. At the time, the rent seemed fair. We've had one small increase so far, though we are up for renewal here in a couple of months, and I assume it will go up again.

With our place in particular, what keeps the rent down, IMO, is that from the outside, the house looks like it's in bad need of repairs. The place needs new siding (windows are good), and the porch wood has rotting spots. These are expensive fixes and he'll have to shell out thousands....so as long as he's not doing that (believe me, we've asked), it's hard for him to justify a huge increase. It's also between two MUCH nicer looking homes.

The inside is 90% fine though - renovated in 2016, good electrical, trim, etc. He also had the roof replaced last year, which helped the eye test a little bit. Kitchen is above average. Bathrooms are like 1990s dated, but okay.

We're approaching being "done" living in a place that looks like this, despite the 2000 square feet and great location in the SE part of Lincoln Square. Our income, age, and life position warrants a higher-end dwelling at this point, and we're treating this place as the spacious, perfectly located entry-level Chicago rental that it is.

We could do another year here, of course, but we'll be a bit frustrated. Not the end of the world, but definitely looking pretty hard at this point, and realize we may have to overpay a bit. But we have our limits on how much overpay we'll tolerate.

It sounds like you're in a predicament similar to someone asking if they should keep driving around their reliable 14 year old car or buy new. Obviously, it's your decision at the end of the day to weigh.

Personally, I would keep renting if you're getting such a good deal. It doesn't sound like you need more space, rather you're just looking for a nicer place. I wouldn't be willing to pay significantly more and take on additional risk in order to gain the ability to decorate my home how I want.

I do think housing might be in a small bubble that is likely to burst in the next year or two however it's impossible to know for sure and timing the market for such a thing could hurt you in the long wrong. Best of luck to you on whatever you decide!

[Hivemind31]

Originally Posted by dtcbnd03

I recommend staying put in your current place for another year.

Here's how I see the rental market going in 2023:
- Fed funds rates will continue to rise to 6% until Fed reaches a restrictive rate (currently at 4.50% to 4.75%).
- As a result 30 year fixed mortgage rates will rise to 8-9% (currently 7%).
- Buyers will NOT pay up at current price levels with 8-9% rates and Sellers will not give up 3-4% locked rates.
- Therefore, most property owners will continue to rent and jack up rental prices as much as possible.
- Homebuilders pause / delay many projects due to the higher lending costs, limiting supply and leading to higher rents.
- Once the Fed reaches a restrictive rate in late 2023 things will start to break after 1 year + of Fed rapid tightening.
- Job losses will go from a trickle to a sizable loss and renters will be maxed out or simply be evicted.
- Economy is in medium recession in late 2023 to 2024 (no soft landing...but certainly not a 2008 financial crisis).
- In 2024 Landlords will decrease rental prices due to above looking to secure higher quality renters with jobs / incomes.

This is a VERY detailed, and likely outcome for the next 1-2 years. Excellent post.

[Kmanshouse]

Originally Posted by Hivemind31

This is a VERY detailed, and likely outcome for the next 1-2 years. Excellent post.

Yes, agree.

Our situation is such that my employment (80% of our income) is at zero risk. My wife's (20%) is non-zero but has above average stability.

I don't want to get too detailed as to why, but if we weren't in such a solid employment situation I would absolutely be standing pat. But we're in a very good position with that.

I'm also dealing with a wife that's pretty emotional about this decision. She's "on tilt" with the prospect of an upgrade, but also will understand if it just doesn't work out. So my job is to explore all the options and try to make it happen, knowing that if it doesn't, we'll be okay but we tried.

At this point, what we are finding is that to get the great place we want, we'll have to go right to the top of what we are willing to spend, which is still only about 20% of our gross income. While a big increase from current, that's a healthy ratio.

[Hiruko]

Originally Posted by Kmanshouse

Yes, agree.

Our situation is such that my employment (80% of our income) is at zero risk. My wife's (20%) is non-zero but has above average stability.

I don't want to get too detailed as to why, but if we weren't in such a solid employment situation I would absolutely be standing pat. But we're in a very good position with that.

I'm also dealing with a wife that's pretty emotional about this decision. She's "on tilt" with the prospect of an upgrade, but also will understand if it just doesn't work out. So my job is to explore all the options and try to make it happen, knowing that if it doesn't, we'll be okay but we tried.

At this point, what we are finding is that to get the great place we want, we'll have to go right to the top of what we are willing to spend, which is still only about 20% of our gross income. While a big increase from current, that's a healthy ratio.

It seems like you both want to window shop, something that is impossible to do with current rental market conditions. A friend of mine, a RE broker that specializes in rentals, recently posted in a Lake View FB group that a $3k/mo apartment got 18 lease proposals and applications in just a day or two on the market.

I have some acquaintances moving to Chicago from NYC and they have resigned themselves to applying for rentals sight-unseen.

[Vlajos]

Sounds like we need more multi family development. I imagine many developers are very wary of a mayor Brandon Johnson and are waiting to see what happens.