When the pandemic hit, photographer and PR professional Micaeh Johnson realized she needed a little more space for social distancing in the apartment she shared with her now 7-year-old daughter.
So he rented a two-bedroom, two-bathroom townhouse in the South Loop, near McCormick Place, for $3,250 a month.
Johnson, director of Simply Be in Chicago. Agency, had been paying $2,875 in monthly rent for her two-bedroom apartment in the South Loop, and upgrading the townhome was overkill for her monthly budget. But the supplemental child care income his company provided during COVID helped. Also stay inside and not travel.
But once the pandemic began to subside and things began to open up, he felt the pinch again. And then the oven went off in the row house.
“We were paying a lot to stay in the South Loop, and our landlord didn’t blink an eye when the oven went off. We felt isolated, my budget was stretched and I had no idea what I was paying for anymore,” he said.
:quality(70)/cloudfront-us-east-1.images.arcpublishing.com/tronc/6X3A6J2DBNGPPP7KUSLWD3DRGY.jpg)
Tired of the struggle, Johnson bought a 1,700-square-foot, two-bedroom, two-bath home in Logan Square in December 2021, paying just $1,800 a month on the mortgage.
Johnson isn’t the only one facing higher rents. Median rents in the Chicago area have risen nearly 9% since 2021, according to the online apartment listing marketplace Apartment List. A combination of inflation and rising demand for units as consumers emerge from the pandemic has pushed up rents, with little or no sign prices will reverse any time soon. At the same time, many of the rental assistance programs offered during the height of the pandemic have ended.
Some people, like Johnson, have been able to transition into homeownership. Others are making lifestyle changes or looking for more affordable units as a way to cope with rising rents.
Alvin Griffin, 46, moved to Homewood in 2017 so his only daughter could get a good high school education. Taylor is now a sophomore at Homewood-Flossmoor Community High School, and Griffin doesn’t anticipate leaving the area anytime soon.
But when the monthly rent she was paying for a three-bedroom single-family home rose to $2,100 last year, up from $1,750 when she moved in, she knew she needed to find a more affordable residence while staying within the Homewood school district.
It took him two months to find the rent he now pays $1,500 a month. And finding that space was not easy.
:quality(70)/cloudfront-us-east-1.images.arcpublishing.com/tronc/V6UJLAQ375B5TEXF574Q6ZSSQI.jpg)
“I would say it was luck,” the PepsiCo employee said. “A friend of mine was on Facebook telling everyone about this rental unit. I called her and things went from there.”
Griffin said the current real estate market is tough, but he’s dealing with it the best way he knows how. That means less socializing, less travel, and no new cars. All the money he saved by moving now goes into his gas tank because he commutes to his work downtown.
William M. Bennett, an adjunct professor of real estate at Northwestern University, said landlords have been forced to “rush out and offer concessions” during the pandemic, such as offering a reduced rent or a few months rent-free, as the people were not sure of the “benefit”. of living in the urban environment during a pandemic.”
But the launch of vaccines in 2021 and the return to work and leisure in person have led to an increase in demand for rental units. And according to a report by appraisal firm Integra Realty Resources, concessions have been “virtually eliminated from the market as most buildings have been filled.”
“I think in the first half of 2021 … there was a general feeling that everyone was going to be back in the office as usual in the summer of 2021,” said Ron DeVries, senior general manager of Integra. “So people who moved home or moved out of state temporarily decided, ‘Well, I’d better go find an apartment downtown again.’ … But that requirement never materialized … so I think it will be interesting to see what happens over the next year.”
According to DeVries, while all of the city’s submarkets have seen spikes in rent, the “hottest” market for development right now is the West Loop, while Bennett pointed to the West Loop, as well as River North and Fulton Market.
“All of these buildings are at or above the rents where they were before COVID hit,” DeVries said. “So they had a 20% or more decrease in rent, and almost all of these buildings are now rented above where they were before COVID. So there’s kind of a V-shaped recovery.”
Kyle Stengle, senior managing director of investments at Marcus & Millichap, a company that specializes in commercial real estate sales and financing, said smaller units like studios were hit the hardest during the pandemic, as people were left “ trapped” with little to do and in need of more space.
Meanwhile, luxury real estate has had one of the most successful comebacks of the past year.
:quality(70)/cloudfront-us-east-1.images.arcpublishing.com/tronc/DLIKSPMRJNFATIKKUMMRUTETXQ.jpg)
“High-end luxury buildings are the first to take the hit when the market starts to decline, but they’re also the first to come back as the market recovers,” DeVries said.
Real estate agent Maria Smith says rising rents are the reason she sees more homes shared between family members. She said low supply, increased demand, property taxes and inflation are reasons for the rent increases.
“Landlords are raising rents because the lights are higher, the gas is higher, the water is higher,” said the former owner of three Southland homes, who tries to educate people about homebuying through of funny videos on social networks. “I see children who return to live with their parents. I see many families coming together to buy buildings, two or three stories. They’re getting together to buy a building, move into the unit below, and have someone in the other units pay the rent. That’s the way people can afford real estate because they’re using the rents to qualify for the mortgage.”
According to DeVries, the higher rents are explained in part by a shortage of available units, as well as the strong year the market had in 2021.
Going forward, it’s unclear whether increasing the supply of units will ease rents, as inflation has pushed up construction costs, and once renters get a unit downtown, they’re not as incentivized to leave. as they were in 2020.
“Even with these higher rents, it’s really difficult to calculate the numbers for new buildings, so we don’t expect to see hypersupply,” DeVries said.
A Marcus & Millichap report notes that for the first time since 2000, fewer than 18,000 units will be available in the downtown market this year, with the vacancy rate expected to be less than half the 2019 level. .
With an “inflationary environment and supply chain issues,” Bennett said continued high demand “will paint a picture where rents and the apartment market should continue to rise at a much higher rate than inflation” in the future. foreseeable future.
That’s why Johnson says if you can find inventory, consider buying. “Be creative if you need to rent/sell in the future,” he said. “The rates are high, but you can make a lower offer and refinance when rates drop. I was lucky that when I was on the brink with the South Loop, I found a great house for our family with a house that had been on the market for a while and while the rates were low. Now we no longer feel like passers-by in a city where we were born.”
join our Chicago Dream Homes Facebook Group for more luxury listings and real estate news.
Source: www.chicagotribune.com