Chicago Property Management Blog

Current Market Conditions - How is the Coronavirus / Covid-19 Currently Affecting the Real Estate Market in Chicago

Current Market Conditions - How is the Coronavirus / Covid-19 Currently Affecting the Real Estate Market in Chicago

We’ve recently entered uncharted territory, unlike anything we’ve experienced before. Most of us remember the financial crisis of ‘08-’09 but this is different. Never in modern history have we seen things changing so rapidly. 

One day the stock market is up 1,000 points - the next, it’s down 1,500. 

Shutdowns across the nation are forcing business owners to close their doors. Now, the government is pumping hundreds of billions of dollars of stimulus money through checks to small and mid-sized businesses. It’s a rollercoaster economy unlike anything we’ve seen before.

This past week, over 10 million Americans filed for unemployment. Some economists are projecting unemployment to reach up to 15-20%. 

A lot of what’s being discussed in the media and in the business world has been focused on the stock market -  so I wanted to send out a quick market update on what I see happening (or potentially happening) in the real estate market.

Short Term Rentals

As you can imagine, the short term rental market is being decimated right now. Cancellations are at an all time high and new bookings are non-existent. A lot of the short term rentals on the market right now don’t have a single booking through April and into May. The short term rental market is closely tied to the economy, travel, unemployment, etc so I don’t see this changing anytime soon. Depending on how things go over the next couple weeks, we could see a slight uptick in May and continual improvement into June/July. So, if you’re considering launching a short term rental, I would strongly advise against it right now. If you have short term rentals, I would be slashing prices and increasing the less expensive amenities to make your listing more attractive. 

Property Management / Rentals / Investments

With US unemployment rising over 10 million claims in just a few weeks, there’s a lot of confusion and anxiety in the real estate investment market right now. Many tenants are losing their jobs and therefore hampering their ability to pay rent. The local and federal government is stepping in to offer assistance and has been working on several different programs to help tenants with paying their rent. This is absolutely crucial right now for those in need, but the rollout has been anything but smooth. 

The CARES Act, introduced this week is relatively clear on how it will assist Americans during this crisis. This Act allows the federal government to cut checks to all Americans for $1,200 and $500 for each qualifying child that’s making less than $75,000 annually. I think this is a great start and it’ll definitely help the middle class pay their April expenses but I worry what happens when May rolls around. We all know that in Chicago, $1200 doesn’t go very far. For those without savings or emergency accounts to fall back on, these funds will quickly run dry. 

Property management companies and landlords are trying to support by waiving late fees and working out payment plans for anyone affected by coronavirus / coronavirus-related income disruption. As of April 1st, 2020 the Illinois Department of Commerce and Economic Opportunity has prohibited open houses and showings of occupied units. As you can imagine, this is going to further exacerbate the landlord’s issues by grinding the rental market to a screeching halt. 

As tough as it seems, current investors need to hold strong and be as empathetic as possible to tenants going through tough times. After we weather the storm, good tenants will be grateful for landlords willing to reach out a helping hand. This can lead to a longer and better relationship over the course of the tenant’s stay. For new investors or investors looking to grow, I would advise against any purchases in the near term. Over the next few weeks and months, we will know more about the long standing impact that the COVID pandemic will have on our economy. However, in my opinion, things are going to get much worse before they get better. Those willing to wait 6-18 months will be handsomely rewarded.

Home Sales / Purchases

As of today, title companies and banks are still open and funding deals. Meaning if you have something in the pipeline with a closing in the next few weeks, there shouldn’t be an issue. However, the further out the closing date, the more uncertain that becomes. Properties going under contract today are more susceptible to the rapidly changing laws that the federal and state government is introducing to slow the spread of the virus and the possibility of the credit market freezing, similar to ‘08-’09. 

As I mentioned above, the Illinois Department of Commerce and Economic Opportunity has recently prohibited open houses and showings of occupied units. Owner occupied units can still allow showings if they’d like but I would imagine the current health concerns will dramatically reduce the volume of showing activity. With less buyer activity, and less people able to make their payments, we should see a surge of supply over the next 6-12 months, resulting in a decline in overall home prices. 

Long story short, if you’re not in a hurry to buy, there will be better deals in 6-12 months.