LAKEVIEW RENTAL PRICES – HOW MUCH HAVE RENTS GONE UP IN LAKEVIEW?

The rental market in Lakeview, and throughout the majority of the city saw a very strong 2011. During the “hot months” of the rental season, May through October, I saw multiple applications submitted on most rental properties I dealt with. During these times rental prices were up dramatically, in some cases by over 10 and 12%. The real question is, how did the market handle itself over the entire year including the winter months? Here is the data. To better under this data and why I am using it please quickly read this following blog I wrote previously concerning the leasing market in Chicago. HOW TO UNDERSTAND THE RENTAL MARKET IN CHICAGO

LAKEVIEW

The Lakeview neighborhood is comprised of several areas including but not limited to East Lakeview, Boystown, Wrigleyville, Southport Corridor and West Lakeview. All these areas and everything in between were included in my search. The search area on the MLS is known as “8006.” Data was combed to exclude any “extreme” numbers as well as to exclude any listings that were rented before print or any listings with a market time of greater than 150days as these listings do not represent typical scenarios in the rental market.

ONE BEDROOMS

2010   Units Rented: 515     Average Market Time: 32days    Average Price: $1,203.28

2011    Units Rented: 492     Average Market Time: 23days    Average Price: $1,288.00

Total Price Increase of 7.04% with Average Market Time declining by 9 days.

TWO BEDROOMS

2010   Units Rented: 547     Average Market Time: 40days    Average Price: $1,719.39

2011    Units Rented: 782     Average Market Time: 29days    Average Price: $1,898.68

Total Price Increase of 10.43% with Average Market Time declining by 11 days. Also very interesting is that the number of units rented increased by 43% yet we still had a substantial decrease in market time as well as a substantial increase in price.

THREE BEDROOMS

2010   Units Rented: 259    Average Market Time: 38days    Average Price: $2,321.22

2011    Units Rented: 355    Average Market Time: 29days    Average Price: $2,479.89

Total Price Increase of 6.84% with Average Market Time declining by 9 days.

When we look at this data what does it tell us? The most important number we want to look at is Market Time. Market Time will always be the first to change when supply and demand shifts. Prices will change after a sustained period of increased Market Time. Market Time will always shift from month to month as some months are more popular for renting than others. If we were to  break the data down month by month we would want to compare October 2011 to October 2010 for example, as opposed to October 2011 to September 2011.

What does all this mean for the 2012 rental season? In my opinion the 2012 rental season will remain very strong. I believe we will see moderate price increases, however not some of the double digit growth we saw last year. If we just look at the numbers you might say I’m wrong. Look at the 2 Bedroom data. We saw an increase in price by 10% plus an increase in supply by 43% and a decrease in market time! Just looking at these numbers one might say “Well, if supply doesn’t increase at all we very easily could see an additional 10 or even 15% increase in price again.” If Lakeview was an isolated market, then yes this could be true. However, we must take our blinders off and consider other neighborhoods as well such as Buena Park, Uptown, Anderonsville, Edgewater, and others that can be comparable substitutes for those looking in Lakeview. It is these substitute areas that will help absorb some of the demand from Lakeview as renters get priced out.

 

Paul Blackburn is an Illinois licensed Realtor and Broker with @ Properties in Chicago. His experience ranges from new construction development, condo conversion and luxury restorations to residential leasing and sales throughout Chicago. He has served as an expert witness on both residential and commercial property values and has been interviewed by numerous sources such as Fox News Chicago and the Chicago Tribune.  CONTACT PAUL AT ANYTIME FOR ASSISTANCE SEARCHING FOR A NEW HOME, TO SELL OR LEASE AT PAUL@PKBLACKBURN.COM

How to Understand the Rental Market in Chicago

As with any free market the forces of supply and demand control the market. In Chicago leasing we have two types of properties: Institutionally owned apartments (typical large rental buildings) and privately owned condos. As a Realtor it is very easy for me to track the data of privately owned condo rentals since the majority are reported real time on the MLS. From experience, I also find privately owned condos a much better indicator of the health and stability of the rental market. The reason for this is that an individual owner is affected much quicker and greater by changes in supply and demand than a hedge fund that may own a 500 unit building. Here is an example:

If a single owner has a unit up for rent for $2,000/mo and it is vacant for 2 months, this is $4,000 in lost income which equates to 16.67% decrease in their yearly revenue.

If an apartment building that has 500 units and 5% are vacant for 2 months, this would only equate to a loss of 10% of their yearly revenue.

An individual owner wants to get money as quickly as possible because they may only have 1 or 2 units. If the individual owner lowers her rent by 10% it only affects that individual unit or others in the building; but what does she care? She doesn’t care if other units in the building lower their rents to compete with her, she only cares that her unit is rented quickly. Whereas if an apartment building started to lower rents on 25units out of 500, the lower rent may become the new “standard” for that building putting the rest of their revenue at risk.  A 500 unit building has a vested interest in leaving a unit vacant for an additional month and foregoing current cash-flows in order to keep rents in that building at a certain level. The loss of cash today will be made up tomorrow.

It is for this reason above why I find the individual condo market a LEADING indicator of the rental market versus the institutionally owned apartments which I consider a lagging indicator.

Soon to be posted, on the Rental Statistics tab will be my comparison of 2011 rental data by neighborhood versus 2010. I have compared a full year of data by unit size using number of bedrooms. I have eliminated  any listings on the market for over 150days as well as any listings that were never on the market for rent and only placed on the MLS to give MLS credit. Since we cannot verify the true market time for these listings they were not included.

There are 3 stats that will be compared with each neighborhood year over year and they are: Number of Units Rented, Average Market Time, and Average Rent Price. Since I have personally eliminated any “extreme” data I find the average price to be more accurate than the median price.