The Chicago rental market is stable but experiencing some of the fastest price increases in the United States

war bids. Stock shortage. Offers above the asking price. All the characteristics of a hot local housing market, these trends are now also showing up in Chicago’s rental market.

While rents are stabilizing in Chicago after the sharp increases seen in 2021 and 2022, the market is experiencing its usual winds of spring and summer. Rental listings are snapped up in a matter of days, with many receiving multiple offers and going for hundreds of dollars more than originally stated. More people tend to move in the spring and summer, when recent college graduates are also in the housing market.

Mihir That, a 23-year-old software engineer, said he faces stiff competition from college graduates interested in moving to the same neighborhoods he loves: Old Town, Lincoln Park, Lakeview East.

He currently lives in Lincoln Park with four roommates in what he calls a “party pad” and is moving with two roommates into a $2,850 three-bedroom apartment in the same neighborhood on June 1.

“It looks like in our (price) range and in the neighborhoods we want, things are really competitive,” said That, who lost three bids before this bid, which he got at the listed price. “Places are snapping up the second they come to market, so you go to the first show window, there’s six other people there, and they’ve all put apps in there.”

Clients who bid on the listed price have more success, said his agent, Neil Turk of Fulton Grace Realty, as “crazy bidding wars” happen on the North Side.

Bill Delaney, a 60-year-old attorney, got into a bidding war over a one-bedroom apartment in a two-apartment apartment in Bucktown. Delaney’s bid, $400 more than the listed price, won.

Delaney was coming to the rental market after being a homeowner for 25 years, and had spent the past seven years living in an apartment in the South Loop. He agreed to take possession of his lease earlier than he wanted, 1 May, in an effort to make his offer more attractive. Now he has to pay the first month’s rent and the last mortgage payment on his apartment in the same month.

“I didn’t expect the competition to be this much and the rent to be this high,” said Delaney, whose starting rental budget was $2,500 a month. He raised it to $3,000 after assessing the market and his options.

Rents in Chicago increased 1.7% in April compared to a 0.5% increase nationally, putting the city in fifth place for the fastest monthly rent growth among the 100 largest cities in the country, according to data from Apartment List. The same data shows rent growth in Chicago year-over-year at 5.2%, down from the nearly 12% annual increase this time last year. That number is close to 6% year over year in Illinois in April 2023.

“Chicago has some of the fastest rent increases happening right now compared to other locations in the country,” said Rob Warnock, co-chief researcher at Apartment List.

He added that while cities are not seeing the same high rent growth that people have seen over the past two years, growth trends in Chicago are similar to those seen at the beginning of last year, with prices peaking in July or August.

The apartment listing has median rent for a one-bedroom unit in Chicago at $1,333 and a two-bedroom unit at $1,446, with a citywide apartment vacancy rate of 5.6% in April. Chicago’s median rent is nearly 6% higher than the national average for the nation’s 100 largest cities.

Part of the reason for the high rental prices, Warnock said, stems from demand outstripping the supply of new units.

Doug Ressler, director of business intelligence at Yardi Matrix, a real estate data provider, said people are starting to flood major metropolitan areas again like Chicago now that pandemic fears — which led to the exodus from cities — have subsided.

For the Chicago market, he said the city is implementing different avenues for affordable housing, thanks to programs from former Mayor Lori Lightfoot, such as the LaSalle Street Adaptive Reuse Project as well as the trend of condos being converted into rentals in the South Loop.

“Right now, we’re seeing a very positive kind of impact on (the rental market) in Chicago,” Ressler said.

In Cook County, Ressler said there should be about 8,000 new units on board this year, with that number dropping to 7,000 new units next year, allowing rental prices to continue to slow because of market stabilization, not oversupply.

New units can’t come fast enough for estate agents like Katja Luhrmann, who’s seeing low inventory and units fly off the shelves in places like Lincoln Park, Bucktown, Wicker Park and Old Town. She said some properties receive as many as 10 applications. Luhrmann said clients looking for rentals this summer can expect to lose at least two to three applications before they get a place.

“I think[the limited availability of leases]has to do with a lot of people understanding how crazy the market is, so they choose to re-sign their leases,” said Luhrmann, who works for Keller Williams Realty. “So a lot of the new rental listings are not coming in to meet the demand.”

She said many leases are heading toward bidding wars like last summer, with one-bedrooms running $150 to $200 off the listed price and two-bedrooms running $300 to $400.

One of Lorman’s clients, Audrey Wolz, 23, was able to land a $2,500 two-bedroom place in Lakeview without getting into a bidding war and with a listed price. But the apartment was the only place still available on the list of rental options she and her future roommate had compiled.

“When we walked in on this place, I jumped on it because everything else was going by leaps and bounds,” said Walls, an interior designer who lived in Chicago for a year.

Rent prices tend to follow home price movements, said Orphe Divounguy, chief economist at Zillow.

“The (cooler) housing market has caused rents to drop,” said Devongi. “While rents have fallen, rental prices begin to rise during the spring homebuying season.”

Divounguy said the typical annual rent increase ranges from 4% to 5%. In Chicago, similar to Apartment List’s calculations, Zillow posted that number at 6.7% year over year in April, down from 11.6% in April last year. Nationally, year-over-year rental growth was 5.3% as of April.

While Divounguy said the rental market is returning to where it was before the pandemic was normal — helped by an increase in multi-family building in the past two years — Chicago’s downturn may be more of a slowdown.

“Chicago always has this problem: It has some of the highest property taxes in the country,” said Devongy. “And landlords pass the property tax increase on to their tenants, and that could play a role in rent trending from here compared to the rest of the country.”

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