StrawStickStone Rent Index: 3rd Quarter 2012

So it’s the end of the third quarter. Do you know where your renters are? If the rental stats from the MLS have any truth to them, I’d say they’re getting out of town and/or starting to buy property. The past two quarters have shown high numbers and pretty major rent rate growth in all three of the Chicago neighborhood styles that we measure here at StrawStickStone. (See the Quarter 1 and Quarter 2 reports.) This time around, we’re seeing lower prices, which should come as a welcome relief.

First of all, the total count of units rented was very slightly lower in pretty much every neighborhood. We’re about 7% down compared with Q2 activity. Bear in mind that I am running this survey with about 4 days left in the month, so we could very well still make up the difference before Saturday. However, these numbers do include the massive September 1 move date up against Q2’s Big Bertha moving date of May 1. The number of units rented should be pretty much identical to what we saw 3 months ago, and it was. It stands to reason that our average rent rates should also be pretty close, but they weren’t.

Dissecting the Districts

The downtown luxury market saw rent prices relaxing in nearly every size and style of rental. Only 1 beds with in-unit laundry and 3 beds saw the average rent rate increase when compared with 2nd quarter 2012 activity. The uptick in the average rent rate on 3 beds shown here is deceptive, too. While it increased, the area also saw a pretty drastic shift downwards in the number of units rented, so while the average rent rate went up, the volume of rent received overall may have fallen off by as much as 22% over the course of just 3 months.

So, where are the renters going? Well, the Name Brand Neighborhoods absorbed a lot of the old downtown volume. Areas like Wicker Park and Lakeview saw increases in average rent rates across the board even though their numbers also tapered off compared with 2nd quarter numbers. The vintage properties suffered – remember, this survey is based on MLS numbers, and tenants searching with Realtor representation are looking for something a little classier than your standard 1940’s walkup. But the condos, especially those with higher end fixtures, did quite well. The rationale is obvious. If you can get a 1 bed with in-unit laundry in the loop for $2060, or nab a 2 bed with in-unit laundry in Bucktown for an extra $300 a month, Bucktown’s probably going to win.

What about the generic neighborhoods, those off-brand, next door districts adjacent to the trendy areas we’ve all come to know and love? Well, here we see another very interesting tale. With 10-13% average rent rate growth in some of the styles but a massive 9% drop in the average rate of 3 bedroom single family rentals, I think we’ve found the answer to our overall mystery. The data from the home sales front confirms it: sale prices are up for the third month in a row. The folks who can afford to buy property are tired of the high rent rates, and they’re buying instead.

Crystal Ballin’

Other than a handful of Rent Bacon stats, this will probably be our last truly reflective report on the state of the market here at StrawStickStone until next spring. The 4th quarter rental market in Chicago is always slower than the rest of the year, so the numbers will be deceptively low across the board. Therefore, we pretty much have to make our predictions for the next season starting now. Personally, I anticipate a slow saunter downwards in price, particularly downtown, followed by a pretty big drop in 2014 when some of the developments currently under construction hit the market.

The transition from renters into first-time buyers and hence, the improvement of the sales market, relies heavily on rent rates staying high. A sudden drop in rent rates could kill the momentum of Millennials who are buying simply because renting has become inconveniently expensive. The future of the rental market could very well depend on the accidental landlords of the past few years slowly transitioning back into sellers to decrease the overall available rental inventory.

If you’ve been renting out your place because of the slow sales market, this winter and spring could very well be your turn to try selling again. The north side buyers in particular desperately need new sales inventory. Rent rates need to stay slightly elevated in order to nudge this next generation into homeownership. Your choice to sell now might be your best chance at getting a decent sale price and helping the economy simultaneously.

But enough of my soapboxing. Here’s the numbers.

The Numbers

Avg (Count) Change since Q2 Low / High
Studio $1318 (117) Down 0.9% $900 / $2750
1 bed, Vintage Invalid (3) $1050 / $2250
1 bed, Condo $1779 (448) Down 5.3% $1100 / $4000
1 bed w In-Unit laundry $2059 (248) Up 4.2% $1300 / $4500
2 bed, Vintage Invalid (1) $1750 / $1750
2 bed, Condo $2797 (347) Down 1.6% $1500 / $10000
2 bed w In-Unit Laundry $2919 (240) Down 1.3% $1500 / $10000
3 bed, Vintage Invalid (1) $2250 / $2250
3 bed, Condo $5419 (70) Up 3.3% $2200 / $13500
3 bed w In-Unit Laundry $5286 (64) Up 3% $2200 / $13000
3 bed Single Family Invalid (0) n/a
Pets**** Dogs OK: $2610 | No Pets: $2269 | Cats Only $2115
Name Brand Neighborhoods*
Avg (Count) Change since Q2 Low / High
Studio $1029 (55) Up 6.4% $695 / $1750
1 bed, Vintage $1363 (21) Up 8.4% $895 / $2250
1 bed, Condo $1532 (192) Up 1.4% $850 / $4200
1 bed w In-Unit laundry $1638 (45) Up 2.5% $1100 / $2400
2 bed, Vintage $1756 (29) Down 5.5% $1295 / $3050
2 bed, Condo $2278 (290) Up 4.3% $1200 / $7000
2 bed w In-Unit Laundry $2353 (211) Up 5.3% $1230 / $7000
3 bed, Vintage $2666 (18) Down 1.7% $1350 / $7275
3 bed, Condo $2999 (117) Up 0.4% $1400 / $4500
3 bed w In-Unit Laundry $3171 (123) Up 2.1% $1835 / $7275
3 bed Single Family $3287 (13) Up 1.6% $2000 / $6000
Pets**** Dogs OK: $2413 | No Pets: $2118 | Cats Only $1798
Generic Neighborhoods***
Avg (Count) Change since Q2 Low / High
Studio $874 (39) Up 6.9% $535 / $1350
1 bed, Vintage Invalid (6) $800 / $1400
1 bed, Condo $1371 (149) Down 1% $750 / $2500
1 bed w In-Unit laundry $1492 (62) Up 2.5% $750 / $2500
2 bed, Vintage $1469 (17) Up 14% $800 / $2700
2 bed, Condo $1692 (341) Up 0.7% $900 / $3450
2 bed w In-Unit Laundry $1741 (262) Up 1.9% $900 / $3450
3 bed, Vintage Invalid (6) $1150 / $1950
3 bed, Condo $2247 (71) Up 10.5% $1225 / $4500
3 bed w In-Unit Laundry $2214 (101) Up 3.4% $1100 / $4500
3 bed Single Family $1934 (31) Down 8.9% $1050 / $3200
Pets**** Dogs OK: $1674 | No Pets: $1546 | Cats Only $1302

* Downtown: Within 1.25 miles of the intersection of State & Madison, Chicago
** Name Brand Neighborhoods: Lincoln Park, Wicker Park, Bucktown, Wrigleyville / Lakeview
*** Generic Neighborhoods: Uptown, NorthCenter, Logan Square, Avondale, Irving Park, Humboldt Park
**** Average rent rates based on pet policy across all sizes of apartments.

Read more about Name Brand & Generic Neighborhoods.
Read more about why cat-friendly apartments are cheaper.

Stats based on printed rent rates for the third quarter of 2012 as listed in MRED LLC’s ConnectMLS for the city of Chicago. Completed rentals only, no active listings.

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-Kay C.

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