Chicago Real Estate History
Chicago has seen massive amounts of growth over the last 40 years. You might think the Lincoln Park yuppies have always been there and the South Side has always been the poorer half of Chicago, but you’d be dead wrong. In the 60’s you probably had a better chance of getting mugged on Broadway then you did on Martin Luther King Drive. Neighborhoods change and while one neighborhood leaves gorgeous masonry buildings to fall apart and become copper-stripped homeless depots, others have had massive rehabs and have become consumed by gentrified, overpriced urban dens.
That’s an important word in Chicago Real Estate: Gentrification. The word has loads of cultural implications but for Real Estate purposes it means “what can I buy today and sell for a lot more money tomorrow.” And Chicago had seen more gentrification and expansion of rehabs and new construction than almost any city in the country until the recent economic collapse. By the end of 2005 everyone knew someone who had left their demanding and painful job to become a Real Estate Agent. Everyone was out to strike it rich, buying a little property one year only to sell it in a year or two for tens of thousands in profit. Did you say preconstruction pricing? Yes please!
Through the 90’s and early 2000’s every neighborhood was the new “it” neighborhood. Ask an old developer what it was like owning property in the 70’s and they’ll tell you stories of a run-down Wrigleyville, drug dealers in Lincoln Park, rehabbers getting their buildings burned in Bucktown and a full blown minority lockout in Bridgeport. But by the 90’s every hood was open for real estate speculation. Cabrini Green was going to be demolished in the blink of an eye and instantly expand Old Town. Wicker Park was the new Lincoln Park; screw those artists and hippies, now we got hipsters! The University and historical housing nuts were taking back Hyde Park! Uptown was going to revitalize any day now, we were certain of it (over Alderman Helen Shiller’s dead body) and Pilsen and Humboldt Park weren’t just for Hispanics anymore. The imaginary rule “don’t buy property west of Ashland” became “west of Damen”, then “west of Western”, an ever shifting line of risk versus reward. A hard-working immigrant family that bought some 3 flat for next to nothing was now demanding a million dollars from a developer (who was in advertising just a year before but now he’s in the real estate game!). It wasn’t a matter of IF it would make money, just how much and how quickly. Of course it was in 2005 that talk of a Real Estate “bubble” began circulating, little did we know that this bubble popping was just the beginning of financial meltdown.
I’m sure you’re aware of the collapse of home prices and the eventual decline in value of…well everything in the United States. First it was impossible to make a profit on our condos and houses, then it was impossible to break even. That 100% financed loan suddenly didn’t seem so smart as your adjustable rate went up and up. Then as the banks began collapsing it became impossible to get a loan. It didn’t matter that you had a decent down payment and your credit was pretty good, banks weren’t lending. Anyone who had dropped a bunch of money on a 50% sold new construction building was staring at a stalled and half-built hull. In 2008 and 2009 the name of the game was buying foreclosed homes, which there were (and still are) plenty of. The guy who bought the immigrant’s two flat for $500,000 was now looking at a place worth $200,000. Whoops.
Things are sort of, maybe, kind of, possibly getting better now, I think. As developers drown in debt, real estate agents pickup “part-time jobs” and the massive amount of new inventory dwindles in Chicago, we are starting to see a creep back to normalcy. Whatever that is. You’ll hear plenty of predictions about home prices and if they are going down, up or sideways. The key is to look at your own financial and living plans and figure out what investment works for you. The rules of the game are by no means simple but in the coming weeks I will post the following series of articles in an attempt to break down the basics in a severely offhand and biased fashion. God Bless the Internet.