Buying a Home in 2016: Chicago Real Estate Edition
By Jennifer Riner of Trulia
Buying a home may have lost popularity points after the housing bubble burst in late ’08 and the following financial crisis that hit the U.S., but the revival of owning real estate is apparent in Americans of all ages. In a recent Trulia-Harris Poll online survey of 2,000 Americans, 75 percent of respondents said they dream of owning a home. And, 80 percent of millennials said they wish to own a home one day, an increase of 2 points from last year.
Although aspirations amongst the public are back, are they a reality? Mortgage rates began to increase late last year, but are on the decline once again. As of February 2016, the market average on a 30-year fixed rate mortgage in Chicago is 3.44 percent, compared to 3.42 percent nationally. Mortgage rates across the country at the end of 2015 were over 4 percent, and projected to increase gradually over 2016, so obtaining a home loan might not be as complicated as some may have previously assumed. This isn’t to say rates won’t increase again, but applying now while rates are low might be a good option for individuals and families searching for homes in Chicago.
How should hopeful Chicagoans looking to achieve the American Dream narrow down their searches? Follow these tips:
- Determine your long-term financials
Although interest rates are low, you should also take the time to deliberate on whether to rent or buy a home in Chicago. Assuming your current rent is the median in Chicago of $1,550 and you’re planning to purchase a median priced home of $240,000 at a 3.45 percent 30-year fixed mortgage, buying is 23 percent cheaper, averaged over time. Included in this calculation is a 20 percent down payment, 4 percent closing costs, property taxes, renter’s insurance, homeowner’s insurance and economic assumptions such as appreciation and inflation. If it makes sense for you, and you have $24,000 to provide a 20 percent down payment along with the willingness to be a responsible homeowner, it might be time to talk to a lender.
- Select a neighborhood
Choosing an apartment location is arguably easier than selecting a for-sale neighborhood because you’re only locked down in a lease for 12-months, typically. To buy, consider Lincoln Park, which is just north of the Loop on the shores of Lake Michigan. Prices are high in the neighborhood relative to Chicago as a whole, but buying a home in Lincoln Park is a safe investment if you can afford the down payment and monthly dues. The median sales price from September to December of last year was $380,000 and trends show a 6 percent year-over-year increase in median sales price.
Prices on real estate in Edgewater, a neighborhood also located along Lake Michigan, dipped in the Spring of 2015 but rose to a median sales price of $224,250 at the end of last year. Trends indicate median sales prices in Edgewater are rising 1 percent year-over-year.
On the other side of I-90/I-94 and directly west of downtown is Humboldt Park, where the median sales price at the end of 2015 was $138,500. Trends show the median sale price on homes in Humboldt Park are increasing 47 percent year-over-year.
- Don’t fall for listing descriptions
Finding a good deal can help you save money and receive a high return on investment. If you’re willing to put in a little work, a fixer-upper is a way to profit on the piece of property you’re already living in. But, beware of listing descriptions with tell-tale red flags. Homes described as bargains aren’t necessarily bargains. In a recent study, Trulia found only 55 out of 100 U.S. housing markets with homes that listed “bargain” were actually lower price points compared to other listings without such terms in the same area. According to Trulia’s Chief Economist, Chicago, along with Los Angeles and San Francisco, is more likely to contain a false bargain listing than a market in the Bargain Belt.
If you are interested in buying inexpensively to remodel, consult an agent who can compare prices within neighborhoods to ensure you’re receiving a fair discount on homes in need of some TLC. Keeping up with markets trends in your neighborhood is also important to know your home’s value as it increases and the most profitable time to sell in the future.