What Will the Chicago Real Estate Market Hold for 2024?

Last year, Chicago's housing market was relatively inactive. The city closed out 2023 with 22,400 home sales, down 20.9% from 2022. Meanwhile, the median home price dropped by 1.5% year-over-year to $330,000. 

But what does 2024 hold for the Windy City? Let us walk you through what 2024 may look like for Chicago.

Table of Contents

• The Current Chicago Housing Market
• Chicago's 2024 Housing Market Predictions
• Chicago Real Estate Still Offers Fruitful Opportunities — Here's Why
• Tips for Investing in Chicago Real Estate in 2024

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The Current Chicago Housing Market

To understand where the Chicago real estate market is headed, you must first understand current housing trends. 

Housing Shortage: Like the rest of the country, Chicago is experiencing one of its worst housing shortages in recent history. According to one estimate, the city is short around 142,000 homes. That’s 3.7% of the metro area’s inventory as of 2022. 

The home shortage likely has many causes. On the one hand, now that average mortgage rates are 6-7%, many homeowners are hesitant to sell and give up their record low rates, constraining existing home supply (aka the “lock-in effect). 

On the other hand, the construction of new homes in Chicago has lagged since the Great Recession. According to Illinois Policy, the city has built 8.1 new single-family homes per 1,000 residents from 2010 to 2020, one of the slowest rates among major metropolitan areas. It doesn’t help that apartment construction in the city has also declined.

Inflated Home Prices: The low housing supply has also put upward pressure on Chicago's home prices.

In December 2023, the median home price in the city proper increased 7.8% year over year to $310,000. In the metro area, it increased 7% to $307,000. 

High Mortgage Rates: With fewer homes listed at higher prices, potential homebuyers are less inclined to put in offers, especially when higher mortgage rates dramatically increase the cost of homeownership for most buyers (80% of recent homebuyers financed their home purchase).

Low Volume of Home Sales: Consequently, Chicago home sales have been meager.

In 2023, they were down 20.9%, with 22,400 total homes sold. In the metro area, they slid 20.1% to 89,482 homes sold—pent-up demand from those waiting for mortgage rates to drop and homes to become more affordable remains.

Chicago's 2024 Housing Market Predictions

Mortgage rates likely must fall for more homeowners to list their properties for sale and more potential buyers to enter the market. Fortunately, that could happen this year.

Cooling Inflation May Help Lower Mortgage Rates

Now that inflation is cooling, the Federal Reserve could start cutting its key interest rate, and mortgage rates could follow suit.

Industry experts expect mortgage rates to land anywhere from 5.8% to 6.6% by the end of 2024. Though not a huge drop, this could spur more buyer activity and incentivize homeowners to part with their current low-rate mortgages. 

Home Values Will Likely Stay Elevated Due to Low Housing Supply and Increased Demand

Increased demand from potentially lower mortgage rates will likely put upward pressure on home prices.

Since the housing supply will likely remain tight, we can expect home values to stay elevated. Additionally, unlike during the 2008 housing crash, most homeowners are in a better financial position than they were then and have more equity in their homes. So, a crash in home values is unlikely.

Life Events Will Continue to Prompt Real Estate Activity Despite a Challenging Market

Americans tend to move as they age, have kids, downsize, etc. For many, homebuying isn’t just a financial but a life decision.

For example, millennials are entering their prime homebuying years (25 to 45 years old), and many are looking to settle down and may be willing to buy a home despite the constrained market.

That said, anything can happen. For now, Chicago real estate follows national housing trends. 2024 may relieve homebuyers via slightly lower mortgage rates and more inventory. However, the market likely won’t reach an equilibrium between supply and demand.

Chicago Real Estate Still Offers Fruitful Opportunities — Here's Why

Now that you better understand the Chicago housing market and where it could be headed, here are some factors that still make it a potentially worthwhile market to work in as a real estate professional:

Strong economy. Chicago is the third-most populous U.S. city, with a $720 billion metro economy bigger than all but 21 countries worldwide. In 2022, the metro area’s gross domestic product (GDP) reached $822 billion, up 3.41% from 2021 and 3.58% from 2019. Thus, real estate investors and agents can count on a robust economy.

Job growth. Chicago has seen steady job growth over the last few years. From November 2022 to November 2023, the number of nonfarm jobs went from 4.78 million to 4.83 million, a 0.9% increase. In 2023, the city was also named the top U.S. metro for corporate relocation and site selection for the tenth consecutive year. In December 2023, the unemployment rate was 3.9%, down from 5% in August. 

Steady home appreciation rates. Historically, Chicago real estate has seen moderate but steady rates of appreciation, with home values generally rising year-over-year. Consequently, long-term investors may expect a relatively stable investment. 

Diverse neighborhoods. Chicago offers a diverse range of neighborhoods: historic districts, areas with large student populations, emerging residential areas, and more. As an investor or agent, this means there are many niche markets within the city to serve.

Educational institutions. Chicago is home to several top academic institutions, including the University of Chicago, Northwestern University, and the Illinois Institute of Technology. As of Fall 2021, over 217,000 students were enrolled in Chicago-area colleges and universities.

Sports hub. Chicago has eight major league sports teams and several major stadiums, including Soldier Field, Wrigley Field, and Guaranteed Rate Field. It’s been named the Best Sports City by Sporting News three times and has made TSE’s international Ranking of Sport Cities every year since 2012. Naturally, the city attracts countless sports fans every year.

Other tourist attractions. Chicago offers many tourist attractions: Millennium Park, Navy Pier, The Art Institute of Chicago, Lake Michigan, and more. In 2022, visitors to the city rose 60% year over year to 48.9 million and spent nearly $17 billion.

Tips for Investing in Chicago Real Estate in 2024

Before investing in Chicago real estate, doing your due diligence is important. This can include the following: 

Conduct market research. To ensure you invest in an area that meets your goals and risk profile, study the neighborhood’s median home values, rental rates, historical appreciation, and other factors. The more you know, the better.

Limit risks. Avoid overleveraging yourself by taking on too much debt. Instead, consider investing with a partner, making a sizeable down payment, or crowdfunding the investment. Whatever you do, use debt responsibly. 

Explore creative financing options. With mortgage rates relatively high, you might consider creative financing solutions, such as hard money loans or seller financing. Don’t let a lack of traditional funding stop you from exploring other options.

Know local regulations. Ensure you follow Chicago’s landlord and tenant rights regulations, tax laws, and other guidelines. Otherwise, you could face significant legal challenges and hefty fines. 

Consult professionals. Becoming a real estate investor or agent in a big city like Chicago can be daunting. Consider consulting financial, tax, and legal professionals. They can help you avoid costly mistakes and steer you in the right direction.

Look for off-market opportunities. With Chicago homes for sale in short supply, look for off-market opportunities, i.e., properties not publicly listed for sale. You may find deals that could make lucrative investments for you or your clients.

If you have the right tools at your fingertips for making wise real estate decisions, Chicago can be a great place to invest in property or become a real estate agent.

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Frequently Asked Questions (FAQs)

Will Chicago home prices drop in 2024?

Possibly. More housing supply may be coming to the market this year, putting downward pressure on prices. However, pent-up demand and an ongoing housing shortage will likely keep home prices from falling very much, if at all. Monitor the market closely to detect home value changes. 

Is the Chicago housing market going to crash?

Probably not. Unlike the 2008 housing crash, Chicago homeowners are in much better financial positions than they were then due to stricter lending standards. Plus, many have more equity in their homes and are more motivated to hold onto them as a result. Though a downturn is possible, a major crash is unlikely.

Will the Chicago housing market recover in 2024?

With mortgage rates set to fall slightly and more housing stock potentially coming to the market, Chicago home sales could pick up. However, home sales will likely remain down from historical averages due to the ongoing housing shortage. Therefore, a full recovery, where the city reaches an equilibrium of demand and supply, is unlikely, but the market is moving in the right direction.

What’s the best Chicago neighborhood to invest in?

Chicago has many desirable neighborhoods, including River North, Gold Coast, Roscoe Village, Greetown, and Lincoln Park. The right neighborhood for you to invest in will depend on your personal goals, risk profile, target client demographic, and other preferences. 

Note on sources: Chicago home sales and median home price data were taken from Chicago Agent Magazine (unless otherwise cited).