In this article we will provide information to help you think through whether to rent or buy in Chicago as of December 2016, and specifically for Andersonville. Typically the primary drivers when deciding to rent or buy depends on sale prices, rents, duration of stay, mortgage interest rates, as well as the general well-being of the neighborhood and city where you live.
National and Local Housing Markets
Truepad released our fall market report last month. The real estate market changes seasonally, and winters are typically sluggish for visits and sales. We found that after a busy summer and crazy election cycle, the market has cooled off, but since then activity has increased. This may be driven by a post-election settling-in (as happened after Obama’s election in 2012) and interest rate increases.
As of December 2016, inventory is low; there are fewer open homes on the market than there were last year. According to the Census Bureau (via WSJ) homeownership is at a 51-year low nationwide. Younger generations, both more mobile and with fewer ties to home, are renting for longer. After buying, they prolong their time in their “starter” homes as well.
Chicago’s housing market is stable
In Chicago’s real estate market the average price rose 6 percent last year, and 3–4 percent over the past few years. The city does not show the drastic rises of some other metropolitan centers, remaining remarkably friendly for the middle class.
A consensus of Truepad’s Trusted Agents showed confidence that there is stability and room to grow in Chicago housing. When deciding to rent or buy in Chicago you should consider that the first half of the year was very aggressive, featuring multiple offers and over-list-price offers, pushing prices up. As winter and the holiday season approach the market slows down and list prices are more reasonable. Look around now, but if you want many options, you might wait until spring to buy.
Andersonville is one of the hottest neighborhoods to buy in Chicago. Like the city in general there is low inventory and quick turnaround in homes (especially single-family homes) for sale.
A mini-neighborhood within Edgewater, Andersonville is part of an ecosystem that includes Lincoln Square and Ravenswood that appeals to young professionals and families. We talked to Baird & Warner agent Alicia O’Toole about renting versus buying in the area. She’s been a part of the Andersonville community for the past 12 years. “When first moving to Chicago, there is a desire to stay closer to downtown for work or school. But once they venture further north, people really fall for Andersonville,” O’Toole told us.
Andersonville’s Swedish roots stand out in the variety of delis, bakeries and bars that give the north side haven its particular flavor. The LGBTQ and other local community groups actively involved in the area’s development has inspired a lively corridor on Clark St. of independent shops, vintage furniture stores, and cafes and restaurants.
Rent or Buy in Chicago: Andersonville Neighborhood
|Rent||Buy||Need More Info|
|Checking out new neighborhood||Like/love your neighborhood|
|Uncertainty in location||Stable location||Unsure, but will likely stay put for at least 2 years|
|Uncertainty in income/low income or bad credit||Stable income/savings||Lenders and government funding available to low- and mid-income home buyers/ Discuss options to repair credit and for low cost closings with mortgage broker.|
|Don’t want upkeep and repair expenses/ Save time||Want creative control over repairs and updates||The home’s condition and your interest in DIY/rental income for repair. Condos have less upkeep.|
|Not thinking about investments yet||Investments/ Equity Building/ Tax Incentives||Good income with bad credit or debts: Time to repair|
Reasons to Rent
People rent when they:
1) Are new to a city
2) Don’t want the responsibility of owning a home
3) Can’t afford to buy
Alicia had a client who was just about to move here. “Perfect situation for renting—he doesn’t know Chicago yet.” After talking with O’Toole about his rental options, she urged him to go below his budget, as his goal was buy in a year or two. “He rented a modest studio and was able to save $600 a month towards a down payment.”
Another reason to rent: to keep an under-market deal. According to anecdotal evidence, a busy young bartender may find a rental in Gold Coast where she works for similar rent to West Town or Lincoln Park. It’s hard to find valid statistics on rent when many rentals are informal arrangements, and there’s lots of variation in quality.
However, if you are set on living in a particular neighborhood, you can more often find deals renting than buying.
Side by side look at rentals near Andersonville:
|Lincoln Park||Edgewater||Lincoln Square||Roscoe Village|
Andersonville is somewhat more affordable to rent in than many nearby neighborhoods, but there are cheaper deals as you venture outside its borders.
Reasons to Buy
The right time to buy primarily depends on the ratio of sale price to rent, duration of stay, mortgage interest rates, as well as the general economic health of the neighborhood and city.
Reasons people buy:
1) To own home of their own
2) To build equity or credit
3) To get a better deal than renting
With a median list price under $200K, Chicago’s real estate market is one of the most affordable big cities in the country. Meanwhile, Chicago’s rents that have been rising at a clip over the past few years. “Last year housing prices rose 6 percent, while rents rose 14 percent,” Alicia told us. The boom in rental construction downtown reflects this.
“Rents rising in the city is never just an issue in the most desirable neighborhoods. These popular areas have low inventory for rentals, pushing prices up,” O’Toole explained. That has a knock-on effect of raising prices in neighboring areas, and costs rise all over.
With documented resale value, Andersonville is more expensive than some nearby neighbors (Uptown and Ravenswood). It is, however, far more valuable to buy in Andersonville than Lake View just to the south. With a good stock of condos, it has an affordable range for first-time buyers.
Prices in Andersonville (2016)
|Property type||Avg. list price ($)||Min. Price ($)||Max Price ($)||Avg. Days on Market||Properties for Sale||Price change from last year||Sales change from last year|
|Single Family Home||1,091,831||415,000||2,699,000||112||26||-3%||20%|
Sale prices in Andersonville continue to rise. There is a wide range of prices, with starter condos for around $200,000, and renovated single-family homes from $400K to over 2 million.
Alicia had one client who was not actively thinking about buying, but loved Andersonville. O’Toole started helping her look for rentals. “She had 3 dogs, which can make it really tough to find a rental in Chicago,” she said. The client noticed the rental prices were continuing to rise, and soon she asked to look at condos to buy as well. “We were able to find a great condo for a great price, with a highly motivated seller. She was very happy she decided to buy,” O’Toole said.
Andersonville sale prices are stabilizing, and rose only 2% over the past year. Of course this should be countered by the fact of a very wide range of price and quality in the offerings. Agents concur home prices will likely rise modestly next year as well.
Bottom Line when deciding to rent or buy in Chicago:
Though Andersonville prices are somewhat bullish, we still recommend to buy if you can afford it and find a good deal, particularly if you want to stay there.
Homes in Andersonville.
Next, we’ll take a look at a few other neighborhoods around Chicago to help you decide to rent or buy in Chicago.
Read the Rent or Buy Series.