Rental Market in Chicago starting to slow?

Is the rental market in Chicago starting to slow? I have yet to run any statistical analysis from the MLS regarding rental data but my pulse on the market has accurate in the past and now I’m getting the feeling that the rental market is starting to slow. The fall is always a slower time to rent and December will be even slower than previous months, but I have noticed activity slow in the market place in comparison to last year.

While I have seen rental activity slow I have seen buyers come out of the woodwork, many of whom plan to buy this winter!

What do I believe is causing the slow down? I think we are seeing more renters turn into buyers. This is evident by inventory levels of homes for sale decreasing month after month in Chicago. The rental market slow down I speak of is only very minor. Prices are still at record highs and rentals are still renting quick but when I am starting to get the sense that rental prices are hitting a plateau. In Chicago we will see over 3,000 rental units hit the market in the coming year. While all these rental units target the class A downtown rental market (studios near 2,000/mo, 1 beds from 2,500, etc) other rental markets such as Lakeview, Lincoln Park, etc. can still feel the impact of increased inventory levels if a price war ensues downtown.

 

Rental Inventories DOWN all over Chicago – Wicker Park, Bucktown, Lakeview & More

Inventory levels appear to be down all across Chicago, at least as far as rentals are concerned. Last year around this time I would forward clients lists of properties. They would pick out the ones they like and I would make calls and send out e-mails to schedule appointments. Last year, roughly half the responses I would get would be “Sorry, this condo has been rented.” This year however there are not many places on the market that I can even call!

Let me give you a few examples. I just ran an MLS search for Wicker Park & Bucktown for rentals between $1,500 and $4,000/mo. That is a huge price range and should typically yield a decent number of results. Well, there are only 22 units on the market in Wicker Park and Bucktown in this price range many of which already have applications pending.

Other areas such as Lakeview and Lincoln Park are seeing the same problems; limited inventory. In a normal market this may mean that less people are moving and therefore there are less people looking. However with more people choosing to rent than buy demand continues to remain strong and inventory levels are dropping as many tenants are choosing to renew leases as opposed to take their chances with the fast moving rental market.

Absorption Rate: Absorption rate is a number that tells us how long it will take a market to absorb new units coming on the market. What we do is we look at how many units are currently available versus how many units have either rented or sold over a certain time period in order to figure out how long it would take to go through the current supply.

Lets take a look at some of the current absorption rates in some popular neighborhoods so you can see how quickly the rental market is moving. I’m using a wide but common price range of $1,500 to $4,000

Lincoln Park: 47 Units Available. 97 Units rented in the past 30 days which means there is currently only 14.5days of inventory on the market in Lincoln Park. In other words, if no new rentals come on the market there will not be any units available in 2 weeks.

Lakeview: 79 Units Available. 103 rented in the past 30 days which means there is currently 23days of inventory on the market.

River North / Gold Coast / Streeterville: 143 Units Available. 195 Rented in the past 30 days which means there is currently 22days of inventory on the market.

South Loop: 93 Units Available. 99 rented in the past 30 days which means there is currently 28.1days of inventory on the market.

Bucktown / Wicker Park: 22 Units Available. 39 Units rented in the past 30 days which means there is currently 17days of inventory on the market.

Lake Shore East: 22 Units currently available. 20 Units rented in the past 30 days which means there is currently a 32day supply of inventory on the market.

 

Paul Blackburn is a licensed Illinois Realtor & Broker with @ Properties Chicago. He can be reached via e-mail at Paul@PKBlackburn.com

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