Illinois real estate and rental markets were strong in 2021 but cooled a little towards the third and fourth quarters of the year. This has left many investors and property owners wondering what to expect from 2022.
There are a few factors to look at to answer this question, but the general answer is that Illinois markets appear to be following a national trend of remaining strong but stabilizing some after a record-breaking year in 2021. Here’s a closer look at the data supporting this and some trends Illinois landlords and real estate investors can anticipate in the coming year.
Home Prices Will Continue to Rise
Dr. Daniel McMillen, head of the Department of Real Estate at the University of Illinois at Chicago College of Business Administration, anticipates that home prices in Illinois will increase between 2 and 8% this year. While this is not as substantial as the growth the area saw last year, it’s still strong growth.
McMillen explains that there continues to be a supply and demand imbalance in the state, and as long as that exists markets will remain strong and prices will continue to rise. In a recent podcast interview with Illinois Realtors, McMillen explained that “there aren’t signs of a big buildup in inventory in the near future; home prices are expected to rise, but not at the rate of 2021; and while home sales could increase moderately at different times in the year, significant increases aren’t expected.”
Rental Markets Should See Steady Growth
After some uncertainty over the last couple of years, rental markets in the state appear to have stabilized. The statewide vacancy rate is currently around 7.9%. While that is higher than many places in the country, it’s declining. The Chicago area was hit particularly hard by the pandemic. However, demand seems to have returned, as vacancy rates are decreasing and rent prices are rising. The state as a whole saw rental prices increase by around 10% in the last year, while the Chicago area saw rent prices increase by around 8.6%.
Rising home prices are one reason for the strengthened rental markets. When potential buyers are priced out of the market, they decide to rent, leading to increased demand and higher rental prices. While there is rental growth statewide, there are a few areas that are growing at above-average rates – for example, in Oak Park, rental prices were up 25.6% last year; in Aurora they were up 12.5%; and in Naperville, they were up 11%.
The takeaway here for investors should be that the volatility of the pandemic seems to have passed and rental markets are stabilizing and growing. This means now could be a good time to purchase an investment property; however, with that in mind, it’s still a good idea to focus on areas that are seeing above-average growth and to always research an area before making a purchase.
Chicago Remains a Good Investment Opportunity
The Chicago area continues to see growth and offers good opportunities for investors. The metro area has had a cumulative appreciation rate of about 44% over the last ten years. The average appreciation rate is around 3.76%, but it’s expected that the area will see above-average growth over the next year.
While prices are rising, the median home price is still around $300,000, which makes Chicago more affordable than most major cities. Additionally, the area is seeing steady population growth that is expected to continue in the coming years. At the same time, Chicago’s economy is growing, with a diverse and expanding job market.
The third largest city in the country, Chicago has a large population where 53% of the households are renter-occupied. The takeaway here for investors should be that this is an affordable area to buy, homes are appreciating at above-average rates, and rental markets are strong and growing.
Get the Best Returns Possible
Once you find a good opportunity in Illinois, you want to get the best returns possible and to protect your investment. This starts with good Tenant Screening – https://www.ezlandlordforms.com/tenant-screening-services/, which ensures that you only rent to Tenants that will consistently pay rent on time and take good care of your property. The next step is creating a good Illinois Lease that will protect you and your property should anything go wrong. These two tools should set you up to get the most out of your investmeNt and your experience as an Illinois Landlord.
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