Tag Archives: charts

Rent Bacon: March 2013

No Foolin’.

The Rent Bacon index number is an indicator of how a district is performing compared to the HUD Fair Market Rents. Landlords can use it to figure out how much more to charge this year. Tenants can figure out how much more it will cost to move.

The Rent Bacon index number is an indicator of how a district is performing compared to the HUD Fair Market Rents. Landlords can use it to figure out how much more to charge this year. Tenants can figure out how much more it will cost to move.

New month, new Rent Bacon. Rent Bacon gauges the change in actual value of apartments in Chicago on a quarterly basis using rental data from the local MLS. The index takes into account the rent rates, market times, and ratio of rented units compared to listed units. This month we’re looking at 2 bedroom, 2 bathroom apartments throughout the city. For more info on how the index is calculated, check out this explanatory post.

Observation #1: Better value

Now this is not something obvious from the chart above, but it is quite clear if you compare it against last month’s results for 3 bedroom, 2 bathroom apartments. The index value for 2 beds is considerably higher, peaking over 300 for the smaller units. Does this mean that they’re actually a better value? Yes, absolutely. (more…)

Rent Bacon: February 2013

Let’s talk about 3 bedroom apartments.

The Rent Bacon index number is an indicator of how a district is performing compared to the HUD Fair Market Rents. Landlords can use it to figure out how much more to charge this year. Tenants can figure out how much more it will cost to move.

The Rent Bacon index number is an indicator of how a district is performing compared to the HUD Fair Market Rents. Landlords can use it to figure out how much more to charge this year. Tenants can figure out how much more it will cost to move.

It’s March. That means it’s time to see how the Chicago rental market performed over the past three months in that fancy statistical analysis we like to call Rent Bacon. As a reminder, we changed formats last month to make this monthly feature more useful. In the process we created a rent index which can be used as a means of comparing value between neighborhoods and gauging how much rent could go up or down over the next year. If you want to read more about what the numbers mean, check this explanatory post about the new Rent Bacon.

This month we’re talking about 3 bedroom / 2 bathroom apartments, and investigating how they’ve performed over the past three months. This is the first time we’ve really looked at 3 beds, which are pretty much the top end in terms of size as Chicago apartments go. You might be able to find something larger in a single family home for rent, but they’re few and far between.

Observation #1: The Gap

In a previous installment of Rent Bacon, I remarked that I saw indicators of people flowing from very expensive Zone 1 to moderately priced Zone 2 when rents got really high downtown. However, that movement didn’t continue from Zone 2 to the even lower-priced Zone 3. My surmise was that the folks who live in Zone 3 – the outskirts of the city – are more likely to move up in size in their same area instead of moving further inwards when their situations changed.

Today in reviewing the index prices we see another potential reason – the gap between Zone 3 housing costs and the inner districts is massive, especially when it comes to apartments large enough to house a big family. Look at the chart above. Look at the gap between the bottom two lines. The average 3 bedroom apartment in Zone 3 is fully 33% cheaper than anywhere else in the city. This is not just a matter of people on the city outskirts loving their neighborhoods. The price gap may be completely insurmountable. A family would have to be earning $84k per year to meet the “affordable housing” limits in Zone 1 or 2. Unless you’ve got a white collar breadwinner or two blue collar/no collar working adults in the family, that just isn’t going to happen.

Observation #2: The winter really blows for 3 beds.

Winter is a tough time to move for the families that tend to occupy 3 beds. It means uprooting the kids from school and packing up a massive amount of stuff during the worst possible weather of the year. The rental market in Chicago generally slows way down in the winter, but for 3 beds it’s a bit more extreme than we see with smaller apartments. All three of the zones saw major drops in the 4th quarter every year going back to 2010. This year has been particularly nasty.

Zone 3’s values took a major hit, falling 11 points since the same time last year and 78 points since the 3rd quarter of 2012. Rent rates actually improved, so the change in value is largely attributable to a glut of extra units coming on the market. As I discussed in an earlier article, January is always a big month for relationships to fall apart and one bedroom rentals spike upwards accordingly. The improving economy has allowed large groups of roommates to split up, which may be resulting in more large units on the market.

Zones 1 and 2 are sitting pretty and showing growth compared to last year. However, the growth is drastically slowed. Last summer the downtown index peaked at 295.65 and the Zone 2 index at 292.99, so we’ve fallen off a bit from those lofty heights. However, when compared with last winter, an equally slow season, the inner districts actually gained 10-14 points.

Zone 1 is seeing static rents and steadily increasing market times. However, this trend should reverse itself once the spring market hits, so don’t count on it being a trend that we’ll see through the year. Meanwhile, Zone 2’s market times are stable, but the rent rates have relaxed a bit and is suffering from a slight inventory glut that’s hurting it’s rent-to-list ratios. Again, this should be remedied by the spring market when a large number of renters suddenly hit the scene all at once to snap up the leftovers from a slow winter season.

Observation #3: That Chart is Too Steep to Sustain

That’s a pretty nasty slope on that chart. Zone 3’s values at their peak last year had inflated to reach downtown’s 2010 values. That kind of growth is far too rapid for renters – traditionally the poorer members of society – to sustain on an ongoing basis. While the rents in Zone 3 have remained largely stable, the rental pace and market demand out there have made it very difficult for someone working 50+ hours a week to find anything good. Meanwhile, in Zones 1 and 2 average rents have increased by between $400-500 for a 3 bed in just 3 years. This means that the average 3 bedroom renter has to be earning between $14k and $18k more in 2013 than they were in 2010. I somehow don’t think that’s realistic.

Chicago has earned the envy of other northern US cities for a long time when it comes to our roomy apartments and comparatively low rents. When you stack downtown Chicago rents against New York ($6000 for a 3 bed) or San Francisco ($4500) prices we’re still pretty cheap. Even so, 18% growth in rents over 3 years is about twice the pace that an average renter can handle. There must be a slowdown. I see it happening within the next 2 years.

everything is going to be alright

The Numbers

Table indicates values for 1 bedroom/1 bathroom rentals based on MLS data.

Average RentAverage Market TimeUnits Rented | ListedIndex
Zone 1
Dec 2011-Feb 2012$252359 days60 | 107261.19
Dec 2012-Feb 2013$254748 days64 | 98271.08
Zone 2
Dec 2011-Feb 2012$218843 days95 | 123226.78
Dec 2012-Feb 2013$233742 days75 | 102241.59
Zone 3
Dec 2011-Feb 2012$149553 days38 | 6760.52
Dec 2012-Feb 2013$157460 days22 | 4749.41

The Zones

The Chicago neighborhood zones remain consistent between this version and the last.

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.)


 

I’ll be back on Wednesday with some advice for a renter who got a nasty surprise this month. See you then!

Cook Eviction Stats Part 9: The Cost of Doing Business

Evictions in Cook County are a multimillion dollar industry. With close to 40,000 cases happening each year, the amount of time and energy devoted to people who don’t pay their rent is mind-bogglingly vast. In fact, today I want to take some time to discuss what the eviction industry is costing Chicago in terms of lost time and money. And tenants, if you think this doesn’t pertain to you, it does. Remember that the resources that a landlord puts into evictions could otherwise be spent purchasing and rehabilitating the apartment buildings that are currently sitting empty and inaccessible.

Long time readers will know what this means. I’m going to do math for you. Again.

Yay math time!

Yay math time!

(more…)

Rent Bacon, January 2013 – New Format!

New. Improved. Actually Useful.

Rent Bacon, January 2013: 1 bed/1 bath rentals Chicago

The Rent Bacon index number is an indicator of how a district is performing compared to the HUD Fair Market Rents. Landlords can use it to figure out how much more to charge this year. Tenants can figure out how much more it will cost to move.

Welcome to the new Rent Bacon. As I explained last month, I’ve redesigned the Rent Bacon concept to be more comprehensive and more recent. I’ve spent quite some time over the past month thinking about the goals for this monthly series and I’ve got some really exciting results for you.

First of all, we will be rotating monthly through 1 bed/1 bath apartments, 2 bed/2 bath apartments, and 3 bed/2 bath apartments so that we hit all three of the most popular apartment sizes at least once a quarter.

Secondly, we will be looking at 3 month averages instead of one month averages in order to get a decent sample size in each of our zones.

Thirdly, and this is most exciting, the index is actually useful. The new Rent Bacon Index is a rough estimate for how much more the same apartment is worth this year over last year. This means that if you’re a landlord, you can use it to figure out how much to increase rents this year. If you’re a tenant, you can figure out how much more or less you can expect to pay to move to the same size apartment in the same area.

About The Graphic (more…)

Cook County Evictions Part 2: Yes, Virginia, there is a bias.

OK that was mean of me. I gave you a teaser at the end of Monday’s article, indicating that there was definitely a bias in the Cook County courts when it came to evictions. I even gave you a pie chart with the numbers intact but the categories redacted.

When I did my small-scale analysis in May 2012, I came to the conclusion that the system was biased when it came to money judgments but basically fair when it came to getting possession of apartments back from deadbeat tenants. Landlords stood to win their cases about 50% of the time, which is exactly what you’d expect to see in an unbiased system. However, once I obtained the large-scale data from 8 years of eviction history and crunched the numbers, a different picture emerged. This picture will allow us to temporarily put to bed the pervasive urban legend that the courts are biased against landlords.

That’s right. 222,323 cases were found in favor of the landlord. 131,423 cases were found in favor of the tenant. The division is consistent across all six districts and consistent regardless of if you filed for possession only, or for possession and money. So if you’re a landlord, you’ve got just about a 2 out of 3 chance of winning your case. So there. Ha.

Maybe Not. (more…)

Rent Bacon: November AND December 2012

This is the end of Rent Bacon as we know it.

Today I’m posting the Rent Bacon data for two months: November and December 2012. It is the last time you’ll see it in this format. Next month we’re going to repurpose Rent Bacon in three ways.

More timely.

One of my pet peeves with the Chicago rental industry is the tendency of Realtors to leave their listings active for just a little too long. I’ve discussed this concern over leaving listings active for too long at length before. However, I took this matter into consideration when I started doing Rent Bacon last year. In order to make sure all of the leases for a given month are included in the stats, I’ve been waiting an entire extra month and therefore running 2 months behind with the data by the time it’s printed here.

November Rent Bacon.

November Rent Bacon.

We aren’t going to do that anymore. (more…)

Rent Bacon: October 2012

The Offseason is Upon Us!

As I’ve discussed before, the rental market slows down in Chicago once October 1 passes. Rent Bacon is a year-over-year analysis, and as the quickie image shows, the market is still up as compared to where it was this time last year, but compared with the activity and prices of two months ago we’ve slowed down considerably. This is to be expected. However, the average rent for a 2 bed/2 bath rental downtown remains firmly stationed above $2500 per month and for the near north area it’s sitting pretty over $2000.

Detailed Analysis

(more…)

Chicago Renters and Owners: A Snapshot

I’ll be off on Friday for the Thanksgiving Holiday, so I thought today we’d do a chart-based photo essay. As I promised at the end of Monday’s article counting Chicago apartments, I went back into the American Housing Survey from 2009 and dug up some more results. There’s a little something for everyone in the following charts and graphs. Take home a few select morsels to argue with Uncle Bob about at the dinner table.

(more…)

Rent Bacon: September 2012

Zone 3? What are you doing?! Zone 3! Stop!

Ladies and Gentlemen, It’s the Offseason!

Remember last month when I said that the August rental stats would probably be the last reliable analysis we get on the Chicago market until spring? Well, the September stats are here, and I was correct to a certain extent. They are definitely all higgledy-piggledy. However, there is some amount of information we can wring out of the numbers if we look closely.

Zone 1 – big slowdown

The rents in the downtown area (Zone 1) once again showed improvement, both over where we were 12 months ago and where we were one month ago. However, the market times, while better than they were last year, are a little longer than we saw in August. After all of my talk about how the market slows down in the late summer you’d think we’d see those rent rates drop, but instead we see the change in the number of units rented. Yes, the rents went up, but fewer of them filled, leaving more to coast into October. In August we saw 215 units rent, and in September of 2011 it was pretty close to that same number at 212.

So for Zone 1, this means the agents probably were hoping that the standard seasonal downturn would be offset by the extremely hot rental market that we’ve seen over the pat 12 months and did not lower their prices in anticipation of the annual 50% drop in demand that occurs as September ends. I’m thinking based on these numbers that the average Zone 1 asking rent on a two bedroom apartment needs to come down by about 10-15%. My bet is that next month we see a much higher market time as many of the units will have remained on the market into October.

Zone 2 – Slight slowdown

Moving out of the luxury market into neighborhoods with trendy names and smaller architecture, the Zone 2 results show a more gradual relaxation but there is no doubt even here that the end of season had an effect on the September numbers. While rents were higher than they were in 2011 by about 3.5% and market times were two days shorter, they actually fell 2.8% from where they were just a month ago in August of 2012.

Market times were consistent, so it looks like the Zone 2 agents have a better ability to anticipate the end of the rental season. I think that downtown/Zone 1 is seeing some Realtors dabbling in rentals when they normally handle sales only. The Zone 1 market has for years been the near-exclusive province of the property management companies with in-house leasing staff. It’s only in the past two years that the condo-to-rental market has necessitated that downtown Realtors sidestep into leasing. Many of them probably started doing rentals sometime this year and couldn’t predict what was coming as the weather turned colder. By contrast Zone 2 agents (and Zone 3 agents as we’ll see) are more practiced in the apartment market and were able to warn their clients. As a result, while the total number of units rented was still a 23% drop over last month, it was pretty consistent with the 2011 performance. Well done, Zone 2!

Zone 3 – Ouch.

Oh my goodness what the heck happened in Zone 3? 5.6% lower rents and almost 50% longer market times compared with 2011. A 10% drop in rents since August. The lowest attained rents since January. What happened? The answer lies in what happened at other sizes. Remember, Rent Bacon is a snapshot of 2 bedroom, 2 bath apartments only. Our drop in Zone 3 was absorbed by the larger 3 bedroom, 2 bath apartments.

Renting at an average price of $1615 this year, 3 bedroom apartments in Zone 3 are far more affordable than a 2 bed in any other zone, and not terribly much more expensive than a two bedroom. Renters have noticed this. They only rented eight 3 beds in September of 2011, but this year they rented 21 of them. Almost 300% growth in demand. Coupled with the standard price drops and increased market times of the off-season, this shift in popularity is what caused such disastrous numbers for Zone 3 two bedroom apartments.

The Numbers

Average RentAverage Market TimeTotal Rented
Zone 1
September 2011$245233 days212
September 2012$255826 days163
Zone 2
September 2011$196323 days87
September 2012$203121 days80
Zone 3
September 2011$140529 days26
September 2012$132746 days24

Stats reflect pricing and activity for 2 bedroom, 2 bathroom apartments listed in ConnectMLS as with rented dates during the month of April. 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.

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 Rent Bacon? Here’s all of them on one page!

 

 

Breaking a Lease in Chicago

When You’ve Gotta Go…

Lease breaks happen. Landlords hate them and often get really grumpy when their tenants don’t honor the full term of their lease agreements. They’re totally justified in being dour about it, especially if the tenant takes off in the middle of the winter. It’s an inconvenience, a hit to the wallet, a bad time for a vacancy, not to mention a broken promise. However, it’s important to remember that tenants, especially with home prices as low as they are here in late 2012, are renting for a reason. They know they can’t commit to a long-term home ownership situation. They know they may have to cut out early. They are renting because they are trying to be responsible about their large-scale purchases. The whole point of renting is that it allows for a much easier “out.”

I’d say that about 30-40% of the 1200+ leases that I have worked on since 2005 have wound up with the tenant leaving in the middle of a contract term. They may stay for a year, renew the lease, and then leave halfway through the second year, they may bolt in the middle of their first month, or they may even stay for 10 years and then suddenly have to depart. No matter what, it’s still means a broken lease and the potential for some very bad blood between the landlord and their departing tenant.

In Chicago, there’s two standard routes that a responsible tenant can take to break a lease. One is subleasing and the other is rerenting. They are often confused and somewhat murky. So, in the interest of making everything very clear, I’ve gone ahead and made a twee pink infographic for you, available after the jump.

(more…)

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.