Monthly Archives: October 2012

Rent Bacon: August 2012

Color Me Surprised. Kind of.

After several months in a row of the numbers telling me that Chicago’s apartment market is peaking, today’s installment of Rent Bacon is kind of surprising. While the downtown market remains pushed to its absolute limit, the outlying neighborhoods showed very strong growth just when I thought they were at the breaking point.

However, this sudden surge should not be mistaken for a permanent effect. August 2012 was now fully 2 months ago and encompassed the traditionally strong September 1 rental market. (Unfortunately I cannot really run Rent Bacon until at least a month has passed, as Realtors can be sluggish in marking their listings as rented.) More telling are last week’s quarter over quarter stats, which showed an overall slowing of the pace across the board. If Chicago continues to show upward motion in next month’s installment I may change my tune, but for now I’m still thinking we’re maxed out citywide. Even 4.9% growth – the lowest seen for any zone in August – is far in excess of standard inflation and not sustainable in the long term, especially in a slow economy.

Points of note

Zone 3’s market times have dropped from a 2012 peak of 62 days to 25 days, putting them right on track with the rest of the neighborhoods we’ve tracked. Remember that an average market time of 25 days means an actual market time of less than a week for the best units, given that the time to get from “off the market” to “rented” artificially increases the market time by about a week.

Zone 3 landlords are more reluctant to bump up their prices, showing consistently smaller increases year over year than their downtown and near north neighbors. While this has improved cash flow for these landlords by an incredible amount by shortening market times, it has also had the side benefit of keeping at least one section of Chicago affordable.

The total number of units on the market in all zones has remained remarkably consistent from year to year, rarely varying by more than 10 units rented. This tells me that the MLS has largely stopped adding new “accidental landlord” inventory and is instead recycling the same listings year after year. However, I would be remiss to not mention that all three zones saw a very slight decrease in total rental inventory compared with last year. Some units have sold out of the rental market. Other buildings are at their limit. A few landlords probably chose to go it alone without agent assistance this year.

The average price for a 2 bedroom, 2 bathroom rental downtown is nearly $2500. It’s easy when looking at these numbers to get caught up in the trends and ignore the face value numbers. The minimum was $1000, the maximum was $5000. If all of those tenants stay for 12 months, the downtown area generated $6,436,260 in rent just for 2 bed, 2 bath units in one month, just from the MLS alone!

The Numbers

Average RentAverage Market TimeTotal Rented
Zone 1
August 2011$230922 days225
August 2012$249423 days215
Zone 2
August 2011$194826 days113
August 2012$208920 days104
Zone 3
August 2011$144538 days35
August 2012$147125 days33

Stats reflect pricing and activity for 2 bedroom, 2 bathroom apartments listed in ConnectMLS as with rented dates during the month of July. Analysis of specific areas is available upon request.

What is Rent Bacon?

Rent Bacon is a quick visual summary of what’s happening in the rental market this month compared with this time last year. It breaks the city down into three zones. For each zone, it takes the change in average rent rates and the change in average market times as percentages, and then averages the two percentages together on a 3 to 1 weighted basis.

Zone 1 covers central Chicago from South Loop through Lincoln Park. (Actual coordinates: 2000 South to 2000 North, from Western Ave to the Lake).

Zone 2 covers the near North side of Chicago, including Lakeview, Bucktown, Uptown, Lincoln Square, Roscoe Village and NorthCenter. (Actual coordinates: 2000 North to 5200 North, from Western Ave to the Lake.)

Zone 3 covers the Far North and Near South side of Chicago, including Edgewater, Andersonville, Rogers Park, West Ridge, Chinatown, Bridgeport and Douglas. (Actual coordinates: 5200-7600 North plus 2000-4500 South, from Western Ave to the Lake.)

Want more Bacon? Here’s last month’s update.

The Post-Season Apartment Hunting Blues

It’s all over for Chicago. Again.

Something very strange happens in Chicago on October 2nd every year. Not the end of the baseball season. Not the return of Oktoberfest beers. Not the announcement of the Oscar host. It’s the end of the rental season, and it’s arrival is both sudden and predictable. Don’t believe me? Check out the Google Insights for people searching for “apartments” and “rentals” over the past 8 years.

Now check out the seasonal rental activity for a few select Chicago neighborhoods in the MLS going back to 2007, when rental listings were first added to the system:

Neighborhoods: Lincoln Park, Portage Park, Hyde Park and West Town chosen to show consistency across city neighborhoods. Click to enlarge.

You see those annual dips towards the end of the year? That’s what I’m talking about. The most very basic law of economics – supply & demand – has caused the Chicago rental market to evolve into a very unbalanced annual cycle. This is not a chicken/egg paradox – lower demand definitely leads to lower supply and not the other way around. Personally I would think that this is due to many leases starting on the first of the month. Let’s look at what happens on the first of the month in Chicago after October 1:

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Trick Or Treat, Deserted Streets

Hey! Operation Porchlight now has its own web presence. Check it out at OperationPorchlight.com, or on Facebook & Twitter.

Let’s get some activism going.

The Halloween Apartment Blues

At the end of this month comes a holiday that involves strangers visiting the homes of other strangers. It’s a great time for neighbors to get to know each other while passing down a great tradition to the next generation. However, like many Chicago residents, I live in a multi-unit building, two stories up from the street. Giving out candy on Halloween is kind of tricky. Kids rarely buzz up in multi-unit buildings, and it’s tough to convey from way up here that I’m home and have candy to distribute.

I have no doubt that there are oodles of apartment renters in smaller multi-unit buildings – the ones that are too small to have a good number of kids living within – who are in the same position as me. If given a chance to participate in Halloween from the grownup side, they’d take it in a heartbeat but their living arrangements don’t make it easy.

Spooky Houses By the Truckload

While it’s getting better, many streets of Chicago still look like this.

Meanwhile, on the same block, or nearby, in pretty much every Chicago neighborhood, stand homes that have been boarded up and taken over by banks in foreclosure. These houses are more than your standard haunted house. They are reallyscary, and to a trick-or-treating child they pose more than a little danger. Deserted for sometimes years, potentially harboring wildlife, squatters or worse, these homes are dangerous for children to visit or walk past alone. They drive down property values and have made the past 5 years of Halloweens pretty lousy in some sections of the city where block after block of board-ups extend as far as the eye can see.

You guys can already tell where I’m going with this.

Operation Porchlight

So we’ve got residents who’d love to be able to hand out candy. And we’ve got boarded up houses that could use a little TLC, or at least a Halloween costume of safety for one evening. Wouldn’t it be cool if we could figure out a way to pair up one with the other in a sort of grassroots effort for Halloween Night? We could call it Operation Porchlight. Think of the benefits:

  • Neighbors become more aware of their local foreclosures.
  • Kids get a safer street for trick-or-treating.
  • Exposure to a foreclosed property may lead to purchase of that property.
  • Temporary adoption of a home serves as a positive loitering activity that may keep the worse parts of society away from these buildings for a night.
  • Occupying these buildings temporarily on what is traditionally the worst night of the year for vandalism & tagging may help to keep damage down.
  • Apartment and condo dwellers who’d otherwise have to take a pass on the evening now get to help out the kids and help out the neighborhood all at once.

This idea actually hit me about a year ago on Halloween day, too late to do anything about it. But as of today, we’ve got a month to get something going. I think we may need to start up with just a few volunteers who would like to “adopt” a house – or at least a front porch – for the evening. I can pretty easily find out which bank has foreclosed on any given Chicago property and try to get permission for a candy-giver to hang out there for an evening. We’d need to figure out the insurance issues. We’d need to know which neighborhoods stay filled with kids and which are pretty much abandoned in favor of the suburbs. But I think it’s possible to accomplish.

I would love to see this kind of thing take off. Does it interest you at all? If so, leave a comment and please share this with other parties who might be able to help, either banks with REO departments, neighborhood foreclosure counselors, or other potential advisors.