Tag Archives: Chicago region

Chicago area apartment market continues price increases

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With homeownership still moving downward in the United States, the apartment market in the Chicago suburbs keeps going up in price:

The median net rent in the Chicago suburbs rose to $1.29 a square foot in the fourth quarter, another record, up 4.7 percent from a year earlier, according to a report from Appraisal Research Counselors, a Chicago-based consulting firm. The occupancy rate was 95.3 percent, versus 95.1 percent a year earlier.

Suburban rents have increased five years in a row—they rose 21 percent over that period—as more people have held off on buying a home, either because they can’t get a mortgage or are wary of owning after the housing crash. More recently, the improving job market has boosted demand for all housing, and apartment landlords are getting their share.

On the supply side, new developments are sprouting up from Naperville to Northbrook. Developers completed more than 3,300 apartments in the suburbs over the past year, the most in a decade, and another 2,700 are under construction, according to Appraisal Research…

Yet the revenue side of the equation is about as good as it gets for suburban landlords. Market revenue performance, a metric that combines the occupancy rate and median net rent, hit $1.23 in the fourth quarter, the highest it’s ever been, according to Appraisal Research.

An interesting housing market these days. Starter homes are not being built. New McMansions are back even as older McMansions sell briskly. People are considering disaster chic. The luxury market is booming in big cities like New York.

If apartments are indeed popular because they offer more short-term flexibility, how many suburbs will allow the construction of many apartments? Historically, wealthier suburbs in the Chicago area tend to avoid apartments and their more transient residents. So, I would guess most of these new suburban apartments are actually higher end, the kinds of places appealing to young professionals or the just retired and often located near cultural or transportation amenities like denser downtowns and train stations. If so, more expensive apartments don’t help many in the housing market who still need reasonably priced and conveniently located housing in the Chicago region.

Teardowns back on the rise in the Chicago area

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Teardowns are back in wealthier Chicagoland communities:

Wilmette, for example, saw 48 teardowns last year. That’s way up from the 15 to 20 the North Shore town experienced annually from 2009 to 2011. “We’re almost back to the old average of 50 a year,” says John Adler, Wilmette’s community development director. “And the resurgence is attributable to developers getting involved again on the speculative side—not just people of means building their dream homes.”

Hinsdale, the priciest west suburban housing market, had 60 teardowns last year, versus 47 in 2013, says its community development director, Robert McGinnis. All but six of the single-family homes that started construction there in 2014 replaced teardowns. McGinnis estimates at least half of the new projects are being built on spec, as opposed to being custom-built…

The teardown candidates aren’t just tiny bungalows this time. Developers are targeting larger houses as well, particularly if they sit on coveted property. Antiquated plumbing, the absence of upscale amenities such as media rooms, and the high cost of gut rehabbing (roughly $300 a square foot, versus $200 for new construction) are pushing homes on North Shore lots near the lake into early retirement. Two properties that sold for around $4 million each in 2014—one in Wilmette and one in Winnetka—are on their way to the scrap yard, says Berkshire Hathaway HomeServices KoenigRubloff agent Joseph Nash. Both were on three-quarter-acre lots with private beaches, and the Winnetka house had seven bedrooms—big and nice, but apparently not nice enough.

While there will always be preservationists who bemoan these changes, Boyle says he hasn’t witnessed as much handwringing this time over the evolving neighborhood character in La Grange: “Most people are happy that people are updating homes, because they’re seeing the value increase for their own property.”

I want to know more:

1. Are some people (like the neighbors who get upset about such homes next door) going to be happy that teardown McMansions are back just because they signal a more vibrant housing market? Or, are these teardowns just another sign of the bifurcated market where the wealthy still have money to burn?

2. Do these teardowns today look significantly different than those of the early 2000s? Did builders learn any lessons or has the market shifted dramatically?

3. We might know that the housing market has really returned when teardowns are happening in communities that aren’t the usual suspects like Hinsdale, Naperville, Elmhurst, and the North Shore. Any activity in other suburbs?

Early 1990s proposal for Personal Rapid Transit in the Chicago suburbs

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Officials are still trying to develop effective mass transit in the Chicago suburbs but perhaps they missed something: an early 1990s proposal for Personal Rapid Transport from several suburbs.

I came across a 1991 “Proposal for a Personal Rapid Transit Demonstration System” from the Village of Rosemont. Envision, if you will, a network of autonomous, futuristic five-person pods zipping through the glassy canyon of corporate headquarters near O’Hare, alighting at their passengers’ chosen destination…

It wasn’t the only avant-garde transportation idea that the RTA was considering at the time “in an effort to coax drivers, particularly in the suburbs, out of their cars.” In June of 1992, as the competition to get PRT continued, the agency was also investigating SERCs, or “stackable electric rental cars,” approximately the size of a Honda Accord, with a range of 28 miles and a top speed of 50-60 miles an hour. The system would allow workers to take the Metra to a SERC station, drive the last few miles to the office or home, and return it by the next day—sort of like bike-share for tiny electric cars. It doesn’t seem to have gone beyond a symposium on the technology.

But the PRT plan got serious. Rosemont retained Winston & Strawn—around the same time the RTA hired them for lobbying work—at a cost of $50,000. They spent another $50,000 to prepare for the application. The mayor told the Tribune in May of 1991 that they were prepared to spend another $100,000 to get the RTA experiment. And Rosemont got the nod, though it took two years.

In 1998, eight years after and $22.5 million dollars after the RTA set it in motion, Rosemont’s PRT system came to life. It came to life on a test track at Raytheon in Massachusetts, but nonetheless, it existed, in RTA-emblazoned glory. RTA officials were pleased.

Moser suggests the plan was killed by two main factors: cost overruns and then Raytheon got out of this particular business. But, I just don’t see how this would have been attractive to average suburbanites. Monorail like lines would have to be constructed to connect major buildings and nodes; how many want to live around those (even with little noise)? It still requires a certain level of density in order to have consistent ridership. This might work great along office corridors – which the suburbs in on this proposal, Rosemont, Naperville, Deerfield, and Schaumburg, all have – where there are thousands of workers on a regular basis. The primary advantage is that people don’t have to ride with many others, something that wealthier commuters seem to like and would pay to get. But, in the end, this seems like a more private form of train/monorail/bus linking higher density areas.

Public homebuilders increase their Chicago area market share in the last 15 years

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What kinds of firms have built homes in the Chicago region has changed quite a bit in the last 15 or so years:

Public companies accounted for nearly 60 percent of the contracts for new homes in the Chicago market last year, up from 54 percent last year and well above the 11 percent market share they held in 1999, according to Tracy Cross & Associates, a Schaumburg-based consulting firm.

The top five builders in the Chicago area all were public companies, led by D.R. Horton of Fort Worth, Texas, with 517 local contracts signed last year.

The growth of public companies partly at the expense of private builders—a trend playing out in many markets across the country—will likely continue for the next few years until conventional banks grow more willing to finance land purchases and development, said Tony Avila, chief executive of Builder Advisor Group, a San Francisco firm that advises and raises capital for homebuilders.

Many private builders rely more on banks, which have clamped down on financing home construction since the financial crisis, while public companies have other options, such as issuing bonds or shares, Avila said.

Quite an increase since 1999. This reminds me of the shift from really small builders – often just a few homes a year – before World War II to the larger-scale construction afterward (often said to be illustrated by Levitt and Sons). Then (big housing need, new innovations) and now (economic crisis leading to new lending guidelines), broader economic and social conditions contributed to these changes.

With that said, how does this affect the average homebuyer and resident? Large-scale firms may offer economy of scale and therefore lower prices but they also might have fewer options in their housing designs and interiors and be able to construct larger developments, contributing to sprawl. Does the quality increase? Do homebuyers have a better experience in one versus the other?

Following the ideals of Gautraux to deconcentrate poverty in the Chicago suburbs

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The Gautreaux Program in Chicago preceded Moving To Opportunity and now there are more recent efforts to deconconcentrate poverty in the Chicago region:

After all, suburbs are no longer the bastions of privilege they once were (though majority white suburbs still, for the most part, are). Since the recession, it’s the exurbs in Chicago that have had job growth, while affordable housing near those jobs is often hard to find. Poverty is growing in suburbs across the country, including in Chicago, and moving families blindly out of the city may do more harm than good.

That’s why Chicago’s leaders are now focusing on helping low-income people live in mixed-income neighborhoods in both the suburbs and the city that have good access to transit and jobs, high homeownership rates, low commute times, walkable areas and a low percentage of people receiving public-housing assistance, said Robin Snyderman, a non-resident senior fellow at the Brookings Institution who also works as a consultant on housing policy in Chicago.

Nine housing authorities now participate in a regional pool of resources that began more than a decade ago. They include authorities in counties such as DuPage, Lake, and McHenry, using the money to build nearly 30 mixed-income developments in “opportunity areas” that are near transit and job opportunities.

“Just getting rental housing into some of these communities was hard to do for many years,” said Snyderman said.

A pilot program launched in 2011, the Chicago Region Housing Choice Initiative (CRHCI), encourages families to use vouchers to move to some of these locations, giving them counseling to help them do so.

Regional authorities and mayors have “adopted new tools for promoting inclusion and diversity, building on the lessons learned from Gautreaux,” she said. “I feel more hopeful that the historic segregation in the Chicago region can be transformed—because it’s now not all on the shoulders of the public housing authority,” she said.

See this earlier post about some of the results of the Moving To Opportunity program. These programs aren’t immediate panaceas and progress is often slow. It took decades to get Gautreaux into action and more time to assess results from MTO. Additionally, it can be difficult to get wealthier suburbs to buy in – if they do talk about affordable housing, it tends to involve seniors, young college graduates, or civil servants, not actually poorer residents.

In all, residential segregation is a difficult problem to address. If it is all left to the market, wealthier residents will move to nicer suburbs, maintaining or increasing their life chances, and then limit the access of others to move into their communities (even if they need them as workers in that community). Social programs can help but they can be costly, it takes time to assess their effectiveness, and it requires wealthier communities to get on board. This is one of those social problems that requires patience, active efforts, and time to see social change occur.

The county with the worst roads for traveling in the Chicago region

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The Chicago Metropolitan Agency for Planning has a new data tool online and it provides insights into the commuting experiences of Chicago area residents:

CMAP planners say it’s time to “get people excited about data.” The hope is CMAP’s constituents — Cook, DuPage, Kane, Kendall, Lake, McHenry, and Will counties — will use the facts to understand why certain projects deserve prioritization and funding. To access the data, go to http://www.cmap.illinois.gov/mobility/explore…

To that end, a section on ride quality includes detailed maps measuring pavement conditions on both expressways and major roads. A snapshot of counties’ ride quality on major roads puts Cook County with a 47 percent rating compared to 72 percent in DuPage, 80 percent in Kane and 83 percent in Lake and 90 percent in McHenry.

Other data available includes stats on bridges in need of repair, pavement quality, the number of passengers boarding at Metra and CTA stops and the worst railway crossings for delays in the region — FYI, it’s on Chicago’s South Side at Morgan Street and Pershing Road with 3,194 vehicles delayed a day.

Taken cumulatively, the website sends a message that the region’s infrastructure needs more capital to avoid gridlock, stagnant transit and deteriorating roads. The warning is timely, with a new governor in Springfield and a push for state and federal multiyear capital programs.

Two things strike me as interesting:

1. I always like the idea of putting more data into people’s hands. Commuting is a common experience and one that people would probably want to see improved. However, without data that moves behind individual and/or anecdotal evidence, it is hard to have conversations about the bigger picture in the region.

2. Some people may like data but it is another thing to translate that data access into collective action. Assuming that some people go to this site, will they then take an interest in infrastructure projects? Will they contact political officials? Will they vote differently? How exactly CMAP goes about putting this data into action is worth paying attention to.

Pace wants to “change the suburban transit environment” with new bus routes

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Pace has an ambitious proposal intended to link important areas in the Chicago area via bus:

A wide-ranging network of suburban bus routes could transform the way people commute and shop, connecting people to job centers in Naperville, Elgin and Elk Grove Village, according to an ambitious $2.3 billion plan shared by Pace on Tuesday.

Express buses with high-tech amenities would take riders from the south suburbs to O’Hare International Airport. Or from McHenry south to Oswego via Randall Road. Or from Evanston to O’Hare along Dempster Street.

And buses would travel on the shoulder of the Jane Addams and Edens expressways, bypassing car traffic…

Pace has submitted its plan for an innovative suburban Rapid Transit Network to Congress, which asked for candidates for a program called Projects of National and Regional Significance. The agency revealed details of its proposal to the Tribune on Tuesday…

The network is composed of two service types: arterial bus rapid transit and suburban expressway service.

Mass transit that connects suburbs is sorely needed in the Chicago region. The current system of buses does little to add on to the existing hub-and-spoke railway system that connects the suburbs to downtown. New buses provide a flexible form of transport compared to railroads; rather than having a fixed track and sunk infrastructure costs, buses can take advantage of existing important roads and highways.

However, I suspect this plan has a lot of hurdles to overcome even beyond the federal funding they are seeking.

1. How do you get suburbanites to consistently ride the bus? Trains are one thing but buses seem to have a different status.

2. Can schedules between mass transit options be lined up?

3. Can the buses actually get people to places rather quickly and at most times of the day? The current bus system tends to take long amounts of time compared to driving.

4. Perhaps the most important question: is there enough density along the proposed lines to have consistent numbers of riders who need to go where the buses are going? Density contributes to riders which leads to more buses which leads to more options. Going to the airports makes sense – both Chicago airports are busy (O’Hare may just be the busiest in the world again) – as does more highway buses to Chicago but linking residences and businesses is a more difficult task. Downtown Naperville may be lively but how many live near there who would commute by bus elsewhere? Are there concentrations of people living along Randall Road? I wonder if there is any way to encourage denser developments – apartments, condos, townhomes, rowhouses – near such bus lines to help provide more potential riders.

A reporter spends the night under O’Hare’s new air traffic patterns – and doesn’t report much

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After recently learning of an uptick in complaints regarding airplane noise around O’Hare Airport, one reporter spends the night in an affected neighborhood:

On the horizon are five blinking lights, all destined for the runway that parallels Thorndale Avenue, which now handles almost half of overnight arrivals. A little south, coming in toward the Lawrence Avenue runway, are two more jets. As they converge overhead, it looks as if the Northwest Side were in the midst of an alien invasion.

At one point, the planes coming in pass overhead at the same time, and the whines of the engines bounce off each other in stereo. JP launches the noise monitor app on his phone and registers 86 decibels, which, according to the Illinois Deaf and Hard of Hearing Commission, is roughly equal to the sound of a screaming child. The FAA claims the metric for “significant” jet noise—meaning the amount at which homeowners can be eligible for soundproofing subsidies—is a day-night sound level average of 65 decibels. But only those residences within the FAA’s noise contour map (Sauganash Woods and most other Northwest Side neighborhoods are not) qualify for the soundproofing…

Evening settles in, and JP and I sit in his family room to watch the Bears-Packers game. Every once in a while, a plane whizzes by, which actually provides a welcome distraction from the historic pummeling the Packers are giving the Bears. After the game, my hosts head to bed, and I try to get some sleep on the couch.

A few minutes later, around 11, the jets start rumbling by again, often in 30-second intervals. Using radar and tracking apps on my iPhone, I watch the dots as they approach: At 11:55, a Boeing 747 Yangtze River Express from Shanghai blows in at 1,300 feet. At 11:56, an Airbus from Phoenix roars over the house. The last plane I see on the screen before dozing off at 12:30 a.m. is a Cessna coming in from Green Bay. (Jay Cutler’s private jet?)

The general theme of the report is that some people’s lives are affected by these changes at O’Hare. At most, it suggests at least a few families, businesses, and communities are affected. But, we don’t hear if life is unbearable. We don’t hear if everyone in these neighborhoods and communities feels the same way. We don’t get a broader view from elsewhere in the region. We get a narrow slice of life with an uncertain conclusion.

Articles like these tend to draw my sociological attention because this one addresses (a) an area experiencing some significant change, which leads to differing reactions from people and (b) the issues at O’Hare represent an opportunity to discuss metropolitan-wide issues. Certainly, other areas in the country have similar issues, whether it is from airport noise or an undesirable facility nearby or because the powers that be decided to change things for the good of the majority. This particular case at O’Hare could provide an interesting comparison to see exactly how this balance between individuals, communities, and the region plays out. Yet, most of the media coverage I’ve seen so far tends to focus on individual complaints or relatively small communities.

Institutional buyers slow purchases in the Chicago region

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Rising home prices in the Chicago area have slowed the purchases made by institutional investors:

But several housing markets, including Chicago’s, are considered prime places for institutional buyers to cash out if they choose, walking away with tidy profits, according to an analysis by RealtyTrac. These are the same investors that consumers have complained about because their own bids for distressed homes were beat out by the firms’ higher cash offers.

Institutional investors, defined as buyers who acquired 10 or more homes during a year, spent an average of $161,252 to acquire a home here, and that home now has an average market value of $210,126, according to RealtyTrac. That’s a gain of 30 percent. Meanwhile, the S&P/Case-Shiller home price index puts the Chicago area’s home price gain between January 2012 and this past September at 22 percent.

That rise in prices certainly has tempered large investors’ appetite to increase their holdings. In Cook County, for instance, affiliates of Blackstone Group, which operates its homes under the Invitation Homes name, acquired close to 150 homes in 2013. This year, they bought fewer than 20, according to property transfers filed with the Cook County recorder.

The question becomes at what point does the housing market normalize enough, and enough consumers opt to buy instead of rent, that profits level off and firms begin to sell those homes. In the meantime, they are settling in, learning their role as landlords and the ins and outs of taking care of properties and tenants. There have been liens filed against them by contractors seeking to get paid for work completed. There have been eviction cases filed against tenants who haven’t paid the rent. And there have been the expenses associated with homeownership.

It will be interesting to see what these institutional investors do. Will they wait to see if they can get higher prices within a relatively short time frame? Are they in it for the long haul but only with some houses or areas within the region? Can they handle large-scale maintenance and renting? I want to see more work in this area to find out the (a) long-term goals of these investors; (b) how residents and local leaders view them as time goes by; and (c) how their actions affect other players in the real estate market, particularly people at the lower end of the housing market who need a good deal in order to purchase a home.

The American Dream and how Chicago magazine determined “Chicago’s Best Places to Live”

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Chicago has a new list of the best places to live that includes 12 Chicago neighborhoods and 12 Chicago suburbs. Here are the factors the magazine used to identify these communities

First we looked at the factor that tends to be uppermost in the minds of families these days: safety. We eliminated from contention all community areas that notched violent crime rates higher than 7.0 offenses per 1,000 inhabitants last year (the city average: 9.3 per 1,000). That meant tossing out the Loop (9.9 per 1,000) and the historic South Side neighborhood of Pullman (11.2 per 1,000), for example. And we eliminated suburbs with violent crime rates above their county’s average—which removed from contention such otherwise appealing places as Evanston (2.2 per 1,000) and Oak Park (2.7 per 1,000), both in Cook County (2.1 per 1,000).

Then we turned to education. If a town or community lacks a public school whose students score above average on standardized tests, we dinged it. And because raising kids in an area that’s at least somewhat diverse is a goal of most parents, we nixed spots where more than 92 percent of residents are of any one race. (Bye-bye, Kenilworth, Western Springs, and Winnetka.)

For the places that remained, we looked at ease of transportation downtown, giving extra points to those that have several el stops and at least one Metra stop. (Places with outstanding schools and low rates of property crime also got bonus points.) And we considered how home prices in these places have fared in recent years compared with prices in neighboring areas, as well as whether buyers there can get good value for their money—which is not the same thing as paying the smallest amount. (For detailed price charts covering all Chicago suburbs and neighborhoods with at least 20 home sales in 2013, see this page with all the housing data.)

Finally, I hit the pavement to assess which spots possess those hard-to-define qualities that matter hugely when you’re looking for somewhere to live. Things like vibrancy (are there lots of bustling restaurants and shops?). Beauty (are there architecturally interesting buildings or just cookie-cutter developments?). Friendliness (does the community have a natural center that brings people together?). Is it, quite simply, a great place to call home?

So it boils down to safety, good schools, good transportation, higher than average housing values, and quality of life. Such measures are not uncommon on Best Places to Live lists.

However, it struck me upon reading this list that these traits tend to match a particular vision of a good community. If I may put it this way, it is a middle to upper-class ideal where kids are safe and nurtured and communities are protected from the difficulties of the world. It roughly matches the American Dream where people can live in small-town type places (even though most Americans do not live in such areas, they harbor the ideal of living in a tight-knit community – even if they may not want to contribute much to it) in relative comfort.

Just to take the two examples from DuPage County, Wheaton and Hinsdale, these communities partly derive their ranking from protecting this particular vision over the decades. Not everyone can move into these communities; it requires a certain amount of money as the affordable housing the communities discuss has much more to do with allowing senior citizens and recent college graduates to have somewhere to live rather than truly addressing low-income residents.

Maybe this methodology does reflect what many Americans want. The suburbs on the list are nice and the Chicago neighborhoods, while having more diversity, tend to be the more sought-after ones. At the same time, such lists could reinforce the notion that protected and wealthy places are the best ones, the ones we should all aspire to live.