In Chicago, the real estate market is thriving, much like the rest of the country. The third most populated city in America, Chicago’s population and job markets continue to rise, fueling a real estate market where demand outweighs supply. With this unique and changing market, it’s not surprising that Chicagoans are asking questions.
“Probably the biggest question I get is, should we expect 2009 all over again?”, says Chicago real estate broker Tom Campone.
“But if you look at the fundamental data, this market is very different from 2009. Then, the market was strongly driven by speculation, with people buying second, third, and fourth homes with very loose lending standards, and that’s just not the case right now.”
Tom Campone is an expert on Chicago’s vibrant South Loop neighborhoods. With a background in corporate finance and sales, he entered real estate with a desire to apply the disciplines and methods of corporate America to help people with what is often the most significant transaction of their lives; buying or selling a home.
In our exclusive Estate Monthly interview, Campone shares his take on the current Chicago market, and a few tips for buyers and sellers.
Estate Monthly: Regarding differences from 2009, is the current situation more about lack of available homes?
Tom Campone: Yes, it’s more about inventory levels. If you look back to 2009 and 2010, you had a lot of private equity companies purchasing these homes that were distressed, and people thought the homes would come back for sale once the market rebounded, but they never have. Many of the equity companies held those homes, so that’s almost 20 percent of the market which may never come back up for sale.
Estate Monthly: If you were speaking with a first-time home buyer or seller, how would you describe the Chicago market at this time?
Tom Campone: It’s a tale of two markets. Homes that are updated and turnkey ready are selling fast at a premium because of the low interest rates and the rising costs of raw materials. Homes that have not been upgraded are potentially good buys for first time home buyers as they are trading at a discount right now.
What I’m telling my clients now is, if you can buy a house and spend $50,000 more to have it turnkey-ready and that costs you maybe just $200 a month in financing, people are willing to pay a premium for that. That’s because financing is currently so cheap, and people don’t even know if they can hire a contractor right now, plus the cost of materials is rising.
Estate Monthly: How do you think the Chicago market will change over the next few months?
Tom Campone: I expect the Chicago market to be steady and pick up steam going into 2022. We have seen home buyers that were planning on leaving the city push up their plans last year and I expect to see more demand for Chicago property as employees get word that they will need to return to the office in some capacity.
Chicago is still a major metro area with a strong and diversified job market, which should support a healthy housing market going forward.
Estate Monthly: Talk to us about the suggestion that someone who is making a lateral move might not benefit as much in this market as opposed to someone who is downsizing or significantly up-sizing a home purchase.
Tom Campone: Now is a perfect time to upgrade if you are looking at a luxury property. You will get a premium on your home and the luxury market in Chicago is softer than the non-luxury market. Also people who are downsizing stand to make a sizable gain, as well.
If you are moving up marginally (or laterally- trading one home for another that is roughly the same value) you have to do the math to see if there’s a monetary benefit within this market. You will get a premium on your house (sale) but will pay a premium for your new home (purchase). Consider refinancing if the existing home works for you.
Estate Monthly: What would you say to younger buyers and first time buyers who might be debating between purchasing a home vs renting a home?
Tom Campone: Many first-time home buyers are looking at the cost to own in the first year. They need to remember that the cost of your mortgage stays fixed for 30 years while the cost of rent will continue to increase year over year. You also start building equity which makes it easier to trade up after a few years. Real estate is a long (term) game and the compounding equity over decades makes an enormous difference over 30+ years.
Estate Monthly: If you were speaking with a first time home seller trying to capitalize in the current market, what are the top three things you’d recommend they do before entering the market?
Tip #1. Do the small home improvement projects that will return the highest ROI—this is normally cosmetic updates to kitchen and bathrooms.
Tip #2. Know the value of your home—homes that are priced right from the start sell for, on average, 3% higher than a home that has to take a price reduction.
Tip #3. Be patient. Not everything in Chicago is flying off the shelf like you read about in the news.
This article is opinion and not a substitute for professional advice. Disclaimer