Recently, at sites where the wishful-thinkers don their blinkers and gather to blather about the future of Chicago’s lakefront market, there’s been a recurring meme to the effect that studio, 1- and 2-bedroom condos along Chicago’s lakefront are destined for an extended period of price declines and stable or falling rents.
In the more than 30 years during which I’ve followed lakefront Chicago real estate patterns, one factor has struck me as driving the market more than any other: household growth and decline among 20- to 34-year olds.
That led me to examine the price-decline meme in light of the best and most nuanced projections of demographically-sensitive household-growth for the next 10 years, from Harvard’s Joint Center for Housing Studies:
The category that captures the largest share of future household growth is persons living alone. Under the low immigration scenario the share of growth in this category is 34.5 percent in 2010-15, climbing to 42.3 percent in 2020-25. Under the high immigration scenario, with more household growth in the younger age groups, the share of the growth that is people who live alone climbs from 32.3 percent to 38.5 percent over this period.
The JCHS study also suggests that there is reason to believe that recently-depressed rates of household formation may indicate that there is offsetting pent-up demand for unabsorbed inventory and so-called “shadow inventory.”
Lakefront Chicago is likely to remain the preferred local destination for young singles and couples, and has shown a growing attraction for aging empty-nesters.
Given the nearly-certain demand from smaller households over the next 10 years, I find it hard to lend any credence to the theory that prices will decline and rents will stagnate for studio, 1- and 2-bedroom condos along Chicago’s lakefront. It would take a doomsday scenario for all of Chicago for that to happen.