After more than a decade of unprecedented growth, the Chicago housing market is showing signs of a slowdown. The low interest rates that helped fuel the boom are inching upwards, buyers are growing more cautious and market times are lengthening. The days of wild appreciation, of home shoppers bidding each other above asking prices and houses selling in a day, are over, at least for now.
Why compile a list of “hot” neighborhoods as the raging fire is dying down? Is it even possible to make such a list in a cooling market?
We think so. Despite the cooling off, Chicago’s real estate market, especially for new homes, is still healthy. Homeowners in most city neighborhoods should see the values of their condos and houses continue to rise, and, of course, some will rise faster than others.
Enter the New Homes list. Our definition of a hot neighborhood is one in which homes haven’t already experienced galloping rates of appreciation but are poised to see above-average increases in housing values.
Frequently, such neighborhoods are on the fringe of more gentrified neighborhoods. This certainly is the case with Washington Park and Woodlawn, which are experiencing a spillover effect from highly-developed Hyde Park. The Near South Side is experiencing a similar effect as South Loop development continues to push past Cermak, and on the Near West Side, the influence of the built-up West Loop is spurring development on that neighborhood’s edges – in University Village, in the Fulton River District and in the emerging blocks west of Ashland.
A single development of scale also can heat up a neighborhood, and we think that will be the case in South Chicago, where a massive lakefront parcel is slated for a development that will change the community. Staid Galewood, which has seen little residential development in recent years, also is about to get discovered as Red Seal Homes builds its new Galewood Crossings community.
South Side neighborhoods feature heavily on our list. The south lakefront has a wealth of developable land and great infrastructure close to downtown, as many homebuyers squeezed out of pricey North Side neighborhoods have discovered. Likewise, Northwest Side neighborhoods like Avondale and Jefferson Park also seem to be next in line to take advantage of the domino-effect of rising property values.
There are no guarantees that you’ll get rich by investing in real estate in the neighborhoods that we have selected, but as the housing market’s all-night party begins to wind down, we believe that we have identified the communities that are most likely not only to avoid hangovers, but thrive on the morning after.
Ultimately, though, you need to ask yourself if a particular neighborhood seems like somewhere that you want to live. It’s true that the early bird catches the worm, but some of our “hot” neighborhoods, though rich in potential, still suffer from crime or a lack of retail. The early bird also can get burned and should be ready to feather the nest she chooses for the long term, even if she’s wishing for a quick return.
This Northwest Side neighborhood, bordered by Diversey Avenue, Addison Street, the Chicago River, the Metra tracks (south of Belmont) and Pulaski Road (north of Belmont), is known for its Polish roots, and in recent years, a growing Latino community. There’s also an Irish contingent – two of the city’s best-known Irish pubs, the Abbey Pub and Chief O’Neil’s are here – but “blue-collar” might be the best adjective to describe the Elston Avenue industry, aging frame houses and brick flats that dominate rural-sounding Avondale.
Buyers in search of affordable housing have set their sights on Avondale as home prices escalate in nearby neighborhoods such as Lake View, Bucktown and Logan Square.
The median price of a single-family home jumped to $350,000 during 2005, up 119 percent from 2000, according to the Chicago Association of Realtors. That’s a big jump, but detached home prices remain significantly lower than those in neighborhoods to the east and south.
The median price of townhouses and condos rose to $262,450 during 2005, up 17 percent over the previous year. Compare that price to the citywide median of $285,000 and consider Avondale’s convenience to both the Loop and O’Hare (the Kennedy Expressway cuts diagonally through the neighborhood), and it looks ripe for higher-than-average appreciation.
New developments, including Belmont Lofts, 4131 W. Belmont Ave., and Shoemaker Lofts, 3926 W. Belmont Ave., and several condo projects on Elston (yes, even on industrial Elston) have been cropping up. They’ll bring new residents and some new shops to Avondale’s sparse retail scene and over time, boost values.
Far West Galewood (Metra tracks to North, Austin to Harlem) sits on the edge of suburban Oak Park and Elmwood Park. It’s known for its tree-lined streets and brick bungalows as well as colonial, Tudor and Georgian homes. The neighborhood has several Metra stations and a Green Line el station, and though retail is sparse, nearby shopping malls fill the void.
The quiet neighborhood had seen little more than infill development and rehabbing until recently, when Red Seal Homes announced plans for a large mixed-use development, The Enclave at Galewood Crossings. This project will transform 50 acres of the old Galewood Yards site, 1900 N. Central Ave., into 187 new homes, commercial space (including a 14-screen movie theater), parks and a trade union center.
Prices at Galewood Crossings are a steal compared to new-construction prices on the lakefront and in nearby suburbs. At press time, single-family homes were priced from the $420s to the $540s. Townhomes ranged from the $290s to the $360s, and condos were priced from the $230s to the $320s. The median house price in Galewood was $310,000 in 2005, up 27 percent from the 2003 median of $245,000, according to Baird & Warner agent Layla Lombardo. Galewood Crossings has the scale to boost values and encourage development in a tidy neighborhood known for its manicured lawns and architectural variety.
The quiet Northwest Side neighborhood of Jefferson Park, bounded by Devon, Montrose and Nagle avenues and the CMSP&P tracks, is ground zero for Polonia in Chicago. The Polish restaurants and shops that line Milwaukee Avenue, dishing up pierogi and literature and fresh-baked bread, make the neighborhood a Chicago classic.
Jefferson Park may not be the trendiest neighborhood in the city, but it’s certainly family-friendly.Â It’s close to the Kennedy and Edens expressways and has the basics – a Jewel-Osco, a post office, a library and some terrific parks, including the stunning seven-acre Jefferson Park – as well as perks like the Capitol Club, where DJs spin for strobe-lit dancers, and the Copernicus Center a cultural institution that claims to be the world’s most extensive Polish film festival.
Beautiful brick bungalows line many side streets, and the Chicago Historic Bungalow Initiative has encouraged a wave of rehabbing that was already underway on these homes. Last year, the median single-family price was $356,000, an increase of 65 percent over the median in 2000. Older brick bungalows – many with terrific designs and detail – and ranch homes can still be found for under $300,000.
There are few large developments in the neighborhood (Lennar’s Concord at Jefferson Park is one of the biggest in recent memory), but builders have been tearing down old homes on large lots throughout the neighborhood, replacing a single old house with two new ones, typically priced from the $600s to the $800s. Not cheap, but a better price than you’re likely to find in Albany Park or Lincoln Square, to the east.
New condo projects also are scattered throughout Jefferson Park. At press time, two-bedroom, two-bath condos were priced from the $340s to the $410s at Kennedy Estates
Condominiums, 4810 N. Lavergne Ave. The median price for a condo or townhome in the neighborhood was $215,000 in 2005, up 65 percent since 2000.
Until recently, it seemed as though development on the Near South Side, bounded by Roosevelt Road, Lake Shore Drive, the river and 26th Street, bumped into an invisible line at Cermak Road. But the frenetic pace of development in the South Loop has sent builders southward, close to, and now beyond, Cermak.
New developments in the area include the Chieftain Group’s Lexington Park Condominiums, at Cermak Road and Michigan Avenue, where one- to two-bedroom condos are priced from the low $200s to the low $400s. Frankel and Giles is developing a 500-unit high-rise at 1712 S. Prairie Ave., and townhomes at Dubin Residential’s Wabash Club – just south of Cermak – are priced from the $420s to the $520s.
The Near South remains short on retail, restaurants and entertainment options, but it hugs the lake and is close to a growing base of restaurants and conveniences farther north, in an area you might call the “north South Loop.” During 2005, the South Loop led the downtown market for new residential construction, and during the first quarter of 2006, about 44 percent of downtown’s new-home sales occurred in the South Loop, according to housing analyst Appraisal Research Counselors.
That growth will benefit buyers close to and south of Cermak. So will the $500 million Prairie Station project, a mixed-use residential and retail development underway at 21st Street and Prairie Avenue. The project will include shops, health clubs, movie theaters and restaurants, as well as 2,000 condos and townhomes, including Aristocrat Tower and Chess Lofts, where sales are underway.
Rising prices and steady development in the West Loop have boosted emerging neighborhoods east of Halsted Street, west of Ashland Avenue and south of Van Buren Street. The Near West area bounded by 16th Street, Talman Avenue, Kinzie Street and the Chicago River shows great potential for development and appreciating real estate values around its edges. The West Loop proper already has seen so much development and price growth that the pace will be slower and steadier here – though also perhaps less risky.
West of Ashland Avenue buyers can find new homes priced from $250 to $275 per square foot, compared to an average of $350 per square foot in the West Loop, according to Jameson Realty Group. Yes, there are fewer restaurants west of Ashland, but the area is still close to the Loop, public transportation and the expressways.
Mixed-income communities such as Jackson Square at West End, 300 S. Western, are offering competitive prices for market-rate homes on former public housing sites and improving the neighborhood. Condos at Jackson Square were priced from the low $200s, and single-family homes were priced in the high $400s, at press time.
Development around the University of Illinois at Chicago campus, south of the West Loop, includes the $600 million mixed-use University Village, 1401 S. Halsted St.; University Station, 1550 S. Blue Island Ave.; and University Commons, 1000 W. 15th St. East of the West Loop, developers are continuing to fill in a formerly industrial area now called the Fulton River District with projects like Jefferson Tower, a 24-story condo high-rise at 200 N. Jefferson St.; the Residences at Left Bank, the Fifield Company’s 37-story apartment tower, at 300 N. Canal; and U.S. Equities’ MetraMarket, which will include a 15,000-square-foot French-style market, a CVS/pharmacy and dozens of restaurants, retailers and gourmet food vendors adjacent to the Metra Ogilvie train station.
South Chicago, bounded by 79th Street, 95th Street, the lake and the Chicago Skyway, is a diverse neighborhood with legendary industrial roots that linger, though its role as steel producer to the world ended years ago. The Eastern Europeans who worked in the steel mills remain with businesses like Polka Catering, though the population now is primarily African-American.
Commercial and residential improvements have been underway in South Chicago for years, and the neighborhood, which has had its share of gang and crime problems, has benefited from the citywide real estate boom of the last decade. In 2005, the median price of a single-family home in South Chicago was just $128,706, but that represents an increase of 115 percent over the median in 2000.
That’s not why South Chicago makes our list, however. You can find the reasons, all 578 of them, on the lakefront between 79th Street and 87th Street. U.S. Steel closed its South Works plant in 1992, and the site is the largest chunk of open land slated for development in Chicago. And it sits on the lake. “It’s amazing,” one city spokesperson said. “It’s like a big prairie out there the size of the Loop.”
The city’s goals for development at South Works hit a snag when Solo Cup Company pulled out of its plans to build a plant here, but developer Dan McCaffery hopes to build a mixed-use housing and retail community on 400 acres of the site. McCaffery does not have financing or a solid plan in place yet, but whether or not the deal works for him, this project could mean 15,000 new residents, hundreds of new jobs and a new retail base in South Chicago. We can’t supply a timetable – new housing here could be several or more years away – but in the long term, this project will have a massive impact on a community that’s already improving.
Washington Park extends from 51st Street to 63rd Street between the Dan Ryan Expressway and King Drive, running alongside the park from which the neighborhood takes its name.
Like much of the South Side, Washington Park suffered deteriorating housing stock and rising crime as white residents fled in the ’50s and ’60s. At first glance, an observer might see only a desolate landscape of boarded-up stores, vacant lots and blatant drug dealing, but, like nearby Woodlawn, Washington Park is perhaps a diamond in the rough.
Home prices are well below the citywide median, but they’ve been rising. Last year, the neighborhood’s median condo and townhome price was $185,900, up 32 percent from 2000, according to the Chicago Association of Realtors. The median single-family home price of $184,900 also jumped 32 percent in the last five years. Attracted by low land prices and a location next door to Hyde Park, developers have been converting vintage apartments to condos throughout the neighborhood. At press time, Foreit Properties was selling condos at its Courtyard on the Park conversion, 5936 S. King Drive, priced from the $120s to the $230s.
Affordable housing isn’t the only attraction in Washington Park. The park from which the neighborhood takes its name is a beautiful oasis of lagoons, running tracks, soccer fields and basketball courts, and nearby King Drive provides quick access to downtown.
Much work remains here. Homebuyers won’t find convenience retail in Washington Park – residents rely heavily on Hyde Park for restaurants, coffee shops, bookstores and other amenities. The twinkling blue lights of the Chicago Police Department’s security cameras on local streets serve as reminders of the neighborhood’s crime problem – and the community’s resolve to address it.
The South Side neighborhood of Woodlawn, bordered by King Drive, Lake Shore Drive, 67th Street and 59th Street, has long felt the effects of the white flight and massive disinvestment that afflicted the community in the 1950s and ’60s. The neighborhood is sorely lacking in retail and restaurants and marred by gang activity, drug dealing, vacant lots and shuttered shops.
But Woodlawn has all the bones of a great neighborhood. It’s a short distance from Loop offices, close to the lake and home to sprawling Jackson Park, which has tennis courts, a golf course and a Japanese garden. Perhaps most important, it sits on the edge of gentrified – and much pricier – Hyde Park, and development from that built-up neighborhood has spilled into Woodlawn. Community groups like The Woodlawn Organization and the Woodlawn Preservation and Investment Corporation have spent years improving the neighborhood, spurring housing development, courting retail and instituting anti-gang programs.
Homebuyers squeezed out of Hyde Park and expensive North Side neighborhoods increasingly have seen Woodlawn’s potential, and more and more developers have been building here, taking advantage of comparatively cheap land prices. At press time, R&B Realty was selling three-bedroom condos priced from the $250s at The Woodlawn, 6531 S. Woodlawn Ave. Handsome but rundown vintage graystone single-families are priced in the $200s.
In 2005, the median price for a condo or townhouse was $199,000, up 75 percent from 2000, while the median price of a single-family home increased 221 percent, to $146,450, according to the Chicago Association of Realtors. The fact that prices have come this far – and are still this low – make Woodlawn a good bet for the future.