Housing Bubble Risk

Talks of an impending housing bubble has been worrying investors and new home-buyers. However, Chicago poses a low threat of a housing bubble according to the UBS Global Real Estate Bubble Index 2019.* The report looks at 20 big cities around the globe and compares the current housing prices to the average over the last five years. They then use that measure to gauge the risk of a housing bubble. The greater the difference, the higher the risk of a bubble occurring in that city. Chicago’s steady home prices over the last few years means there is a low risk for a housing bubble. The report also indicates that Chicago’s home prices are undervalued, meaning there is potential for growth. Of all the cities on the list, Chicago was the only one listed as undervalued.  


How Does Chicago Compare to Other Cities?

We also took a look at the NSA Index, which tracks home sale prices nationally and per city, to better understand the housing market and how Chicago measures up to other cities. Chicago is well below the national average in housing prices, even when comparing it to the 10-city and 20-city indices the difference in prices is still pretty substantial. In January 2019 Chicago prices were about 63 index points below the national average, while the 10-city and 20-city indices were both 20 and 10 index points above of the national average, respectively.** 


Chicago's housing market prices are lower than the national average.

Looking Towards the Future

What does this mean for people looking to buy in Chicago? You will be paying a fair price for a home in a market that has been undervalued for the last few years, meaning there is big potential for growth and a higher ROI down the line. Many companies have moved their offices to Chicago’s downtown and surrounding loop areas. Chicago is seeing a boom in the number of professionals living here. This has brought more residents to the city’s center and these new residents will be looking to invest in property in the near future. 


Chicago has been listed as the #1 tourist destination by Conde Nast, meaning there is a lot of external interest in Chicago and a lot of potential for its future growth.*** Tourism supports a lot of Chicago’s big industries and having more visitors means more people are becoming acquainted with the city and may see it as a home in the future.  


Chicago is one of the few affordable cities to live in globally, and the housing market being undervalued only highlights this fact. Anyone looking for a vibrant place full of opportunity should choose Chicago because it is still accessible to people of different income levels and there is long-term potential for those looking to invest.  


Chicago's Housing Market is stable and poses a low threat for a housing bubble, though pricing is below national averages.

(*)  UBS

(**) Cities included in 10-City Composite are: Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, and Washington, D.C. The 20-city composite includes the 10-City composite plus these cities: Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland, Seattle, and Tampa. S&P 

(***) Conde Nast 

RNP Real Estate Group is a division of Vesta Preferred Realty.