We know that Chicago metro area home prices have not been advancing much in the last year and a half. As I've pointed out in my monthly update on the Chicago Case Shiller home price index, we are seriously lagging the rest of the country, behind 18 of the other 19 metro areas that they track. However, Chicago is a city of neighborhoods, each with it's own character and economic prospects. So the obvious question is how are home prices doing in different areas of the city?
This is actually a difficult question to answer because I don't have access to the Case Shiller data at a lower level than the entire metro area and they aren't even able to calculate their indices for all parts of the city because of the sparseness of the data they need to do that. Fortunately, Zillow provides historic home price information at various lower levels than the entire metro area which is based upon aggregations of their Zestimates. They essentially average their Zestimates for each geographical area at different points in time.
Although I'm a sharp critic of their Zestimates for individual homes (basically they're crap), when you aggregate them they are supposedly accurate in total. I actually believe that because the errors should cancel each other out - if they didn't they would be able to quickly adjust their Zestimates so that the errors do cancel. They provide an explanation of their Zillow Home Value Index methodology on their Web site and include this graph which shows how well they track the 20 city composite Case Shiller index. It's impressively good.
Zillow also goes on to explain how their methodology might even be more accurate than the Case Shiller index because of the potential biases in the Case Shiller index. In short, the Case Shiller index reflects the prices of what's selling whereas Zillow tracks the prices of all homes. It makes total sense.
So I analyzed their data at the zip code level (I can map that) and calculated the most recent year over year appreciation and created the heat map below (you can click it for a much larger version). The darkest orange color corresponds to 6% depreciation while the darkest green corresponds to 19% appreciation. That's right 19% appreciation in one year.
What's surprising about the map is that the most rapidly appreciating areas are not the usual suspects - the highest income, most centrally located areas. It's the outlying areas that are taking off. The darkest green area on the map is zip code 60637, which is the area around Woodlawn. It appreciated by 18.9% in the last year. Could it be the prospect of the Obama library? Next on the list is zip code 60609, which sorta corresponds to New City. It appreciated by 17.0%. And the third one down the list was zip code 60624, which surrounds Garfield Park.
I actually went into the MLS and checked the historical trend of median and average sale prices of homes in these zip codes. While not the same thing as what Zillow is measuring, that data is consistent with what Zillow is saying is happening in these areas.
As for the zip codes that are showing depreciation...I'm not so sure. Their data indicates that zip code 60661, which roughly corresponds with West Loop Gate, is the worst performing zip code with 5.5% depreciation and the South Loop, zip code 60605, is right behind it with 3.7% depreciation. That just flies in the face of what I know is going on in those neighborhoods and checking this data against the MLS data puts some serious doubt in my mind about the Zillow data. I probably need to take a closer look at this, using sales prices, and see what that map looks like.
Gary Lucido is the President of Lucid Realty, the Chicago area's full service real estate brokerage that offers home buyer rebates and discount commissions. If you want to keep up to date on the Chicago real estate market, get an insider's view of the seamy underbelly of the real estate industry, or you just think he's the next Kurt Vonnegut you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.