After many years of expansion and growth nationwide, most co-op and condominium markets saw both turbulence and some overall decline in 2018. The market has turned from one favoring sellers to one more hospitable to buyers. Markets like stability—and 2018 was a year marked by uncertainty. This uncertainty can be pegged to several trends, the most prominent of which were fluctuations in interest rates; changes in tax laws thanks to the 2017 tax bill depressing the tax benefits of home ownership; overbuilding (and potential overbuilding); and – despite the generally good employment figures – an undercurrent of declining confidence in the overall economic picture.
“Chicago isn’t one of the cool kids anymore” —at least not according to an article in Crain’s Chicago Business from last October. The Windy City is ranked 49th of 79 markets in the ‘Emerging Trends in Real Estate’ survey, down from 42nd last year. The overall feeling is one of caution. “Wherever they put their money, survey respondents were cautious about the direction of the broader market,” said the article, “wondering how much longer the good times will last. They’re not bracing for a bust, but they can’t see the market going much higher, either.”
According to IllinoisPolicy.org, the reasons behind the stagnation and possible impending decline in the Chicago residential market include outmigration, property taxes, and income taxes—including both Gov. J.B. Pritzker’s new state tax structure, and the still-resonating impact of the change in federal income taxes in 2017. Illinois in general —and Chicago in particular — is one of only 10 of the largest metro areas in the US to experience a decline in population last year.
Property taxes have also skyrocketed in recent years, according to IllinoisPolicy.org, and that has been affecting home affordability for many. Combined with the reduction in deductibility for state and local taxes, local tax burden has had an increasingly dampening effect on the market. Another tax issue is the recent increase in state income taxes by the new governor.
Conversely, some of those fighting the good fight in the field every day may see things a bit differently. Regarding the condominium and co-op market in downtown Chicago and surrounding neighborhoods, Gail Spreen, Senior Vice President of Sales at Jameson Sotheby’s International Realty, says: “2018 was a reasonably good year, though a bit flat. It really depended on the neighborhood. Projections are that 2019 will be similar. We see a 2- to 4-percent increase in prices and volume in the coming year. Things must be priced right to sell. You can’t really push the market, because it’s not there to be pushed. It’s generally more of a buyer’s market.”