I wanted to cover this last week but the Crain's site was having technical difficulties. About a week ago Crain's reported that rents and occupancy rates have been rising in apartments downtown for the first time in 2 years, which is unusual, given that unemployment is so high. However, the explanation offered in the article is that a lot of would-be condo buyers are renting while they sit on the sidelines waiting for the condo market to bottom.
Of course, I have no idea how they will know when it bottoms. I suspect it's a lot like the stock market - you'll know that it bottomed after it's risen 20% from the bottom. Then you'll say "yep, that was the bottom". I'm making fun of myself, too, because I've been sitting on the sidelines waiting for the Chicago real estate market to bottom for 10 years now. Then again, I'm casually looking these days and making occasional offers. In my opinion, buying has never looked so attractive relative to renting - at least not in the last 10 years - with the perfect alignment of the lowest interest rates in 50 years and the lowest real estate prices in 8 - 9 years. I'll be doing a blog post soon on the rent vs. buy decision but I digress.
Here are some of the more interesting highlights from the Crain's article:
- Damn, the cost of living is high in this city! Renting in downtown Chicago will cost you about $2.16 per square foot per month. So it costs you about $2.16/month just to store your vacuum cleaner in the closet.
- Demand for these expensive apartments must be pretty darn high because occupancies and rents are rising even though developers dumped 4,077 apartments on the market since the beginning of 2008 and the number of occupied apartments rose by 2,190 units in the last year alone. And, once again, with Chicago area employment at a 14 year low this is really surprising.
- However, it's not a wonderful life for all developers. The South Loop has an oversupply problem - not only from new construction but also from owners renting out condos that they can't sell.
But let's put all this in perspective for a minute. If you click on that chart above you will see that there is a lot of noise in the data. These upticks are a fairly recent phenomenon and rents and occupancies are still down from their peaks in the '06 and '07 time frame.