Home Price Analysis for Chicago
By the Research Division of the National Association of REALTORS®
Executive Summary
With home prices rising strongly in most parts of the country, there has been widespread media coverage on the possibility of a housing market bust. A thorough analysis of the Chicago metro market, as detailed below, reveals that there is very little danger of this. In fact, the local housing market is in excellent shape with a potential for significant housing equity gains, particularly for homebuyers who plan to remain in their house for the long run.
Because prices have risen faster than income, the ratio of price-to-income is currently above the historical norm. This measure is frequently cited to imply that there is a housing market bubble. But this ratio is a misleading measure in assessing bubble prospects. A more relevant measure is the mortgage servicing cost relative to income. This ratio is only minimally higher than the local historical average. It implies no widespread financial overstretching to purchase a home in the region.
Chicago Price Activity Current Appreciation8% Modest 3-year Appreciation 29% Strong
By the Research Division of the National Association of REALTORS®
Executive Summary
With home prices rising strongly in most parts of the country, there has been widespread media coverage on the possibility of a housing market bust. A thorough analysis of the Chicago metro market, as detailed below, reveals that there is very little danger of this. In fact, the local housing market is in excellent shape with a potential for significant housing equity gains, particularly for homebuyers who plan to remain in their house for the long run.
Because prices have risen faster than income, the ratio of price-to-income is currently above the historical norm. This measure is frequently cited to imply that there is a housing market bubble. But this ratio is a misleading measure in assessing bubble prospects. A more relevant measure is the mortgage servicing cost relative to income. This ratio is only minimally higher than the local historical average. It implies no widespread financial overstretching to purchase a home in the region.
Chicago Price Activity Current Appreciation8% Modest 3-year Appreciation 29% Strong
Price Activity
• The current price of $263,600 is about 30% above the national average.
• The median home price rose 9.6% in 2004 and 29% in the past three years.
• Home price growth has been weak throughout the 1990s. So part of the recent increase is attributable to the "catch-up" effect.
• Chicago home prices are one of the most affordable among large metro markets.
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