Chicagoland’s luxury market is on the rise. But how does that bode for the rest of the industry?
The story of Chicago over the last 12 months can be summed up in a single word: bifurcation. Though the market has generally trended upwards as deep wounds, residual from the 2007 crisis, begin to fully heal, the disparity between affordable and luxury has grown significantly, creating something of a double-layered market in the Windy City. To sum it up, the rich are buying more, and the not so rich are struggling.
According to the Chicago Association of Realtors and data from Midwest Real Estate Data, sales of $1 million or more have risen 4.2 percent in the encompassing Chicagoland land area, with gains in high-end condo sales being particularly pronounced. Since the same time last year, $1 million-plus condo sales are up 15 percent – their highest level since 2007. Single-family homes in the same price range are up 1.2 percent.
From Top to Bottom
In an interview with Crain’s, J.D. Hewings, director of the Regional Economics Applications Laboratory of the University of Illinois, confirmed the local market’s bifurcation, explaining that as the stock market has recovered so have the financials of well-invested buyers, who are now shedding stocks to fund real estate purchases.
“A person of means can do that but a person at the lower end of the spectrum does not have that luxury,” he said.
For much of 2014, overall condo and single-family sales have been stumbling, falling 6.8 percent from the year prior, according to the Illinois Association of Realtors. However, as we reported in October, asking prices for both property types have been up year-over-year – 10.9 percent for condos and 8.6 percent for single-family.
Construction Helping to Fill Inventory
Chicago remains one of the nation’s leading construction markets, with new construction starts eclipsing the pace set in 2013, as we reported in November. But the city sits steeped in an insatiable demand. Inventory levels are persistently low, which has resulted in a seller-dominated market that pushes up prices and encourages multiple offer situations.
As we turn the corner into the new year, asking prices have shown signs of slowing in Chicagoland, which could help minimize the extent of the market’s bifurcation and ultimately lead us towards a long-term balance. The increasing demand for high-end properties, particularly condos, should continue grooming Chicago as one of the nation’s leading luxury markets.