We all have read or at least heard the stories regarding residential rent prices going up, but by how much? In one of my last blogs I reported that the downtown rental market saw an increase of just over 13% from the same time last year (February through April). However, many of my recent Lakeview clients have started to become frustrated with the lack of good inventory on the market. So, I decided to run my own numbers for Lakeview and this is what I found:
2010 from March 1st to May 15th: 384 Units Rented with an Average Price of $1,554.31
2011 from March 1st to May 15th: 468 units Rented with an Average price of $1,797.15
This is a year over year increase of a whopping 15.6%, a significant difference from the increase downtown. However, what about other areas such as Lincoln Park? Then what about areas further north such as Uptown and Edgewater? Everyone says that Uptown and Edgewater are cheaper to live in than Lakeview but are the same things happening to prices up there?
First, lets start south in LINCOLN PARK:
2010 from March 1st to May 15th: 273 units rented with an Average Price of $1,831.95
2011 from March 1st to May 15th: 304 units rented with an Average Price of $2,053.52
This is a year over year increase of 12.1%
If we head north to UPTOWN:
2010 from March 1st to May 15th: 87 unit rented with an Average Price of $1,393.36
2011 from March 1st to May 15th: 126 units rented with an Average Price of $1,393.40
Virtually no change at all! While more units were put on the MLS for rent, rents remained stable.
Again, if we head even further North to EDGEWATER:
2010 from March 1st to May 15th: 73 units rented with an Average Price of $1,158.22
2011 from March 1st to May 15th: 109 units rented with an Average Price of $1,188.86
This is a 2.6% increase from the same time last year. A very modest increase, something that can be expected in a healthy economy.
So the question is, why are certain areas seeing rent increases and others not? Well, I believe there several factors.
Areas such as Lincoln Park and Lakeview are very desirable. As incomes start to increase again for those who have jobs, these are the first areas people want to live in and move to. For those who are new to Chicago, these are the areas where all the restaurants and bars are. These are the areas where many Chicago transplants may have friends and family living. It is a natural area to look for a place to rent if you are new to Chicago, if you are moving out from your parents home, etc.
What I believe is fueling the demand and increase in the # of rentals for Edgewater and Uptown are area residents who want to get more for their money. Uptown and Edgewater have nowhere near the amount of bars and restaurants that Lincoln Park and Lakeview do, however, they do offer very nice communities and a much great value for the dollar. I believe throughout the year and into 2012 we will see a steady increase in rent prices in Edgewater and Uptown, however, nothing in double digits. Furthermore, I believe we will see continued growth in rent prices in Lincoln Park and Lakeview, however, we are starting to near a ceiling. 15.6% growth in Lakeview is simply not sustainable, especially when there are neighboring communities, along the same transportation routes for a fraction of the cost.
The last contributing factor are the sales prices are condos in these areas. Areas such as Uptown and Edgewater saw a great decrease in prices over recent years, while Lincoln Park and Lakeview simply did not. Therefore, rents have more room to increase in Lakeview and Lincoln Park because housing did not decline to levels that entice renters to give up their flexibility and buy a home. However, in Uptown and Edgewater there are many properties that have declined in price 20%, 30%, and even more in price and the perceived value of buying in these areas versus renting are greater.