Population decline in Chicago and Illinois
Oak Park, IL · Member since 2017 · 14 posts · 7 votes
Hello everyone,
I'm a newbie real estate investor in the beginning stages of saving money for a down payment on a multifamily buy and hold. I'm currently looking at the area surrounding the Garfield Park Conservatory. There are obviously issues with the area (crime, violence), but at this stage I'm looking at investing from a 40,000 view. One of my high level concerns is population decline in Chicago and Illinois.
I'm trying to remain optimistic that the population decline is a good thing because it may increase the chance of finding a good deal. However, the cynic in me says that state corruption and tax increases is going to continue to drive people to move out.
Any insights on what this means for investors?
I've lived in Chicago almost my entire life. It's a city of extremes. There are areas that are booming like I've never seen before, and there are areas with entire blocks of vacant lots and abandoned buildings. The same stark differences exist between neighborhoods in terms of crime rates, income levels, etc.
Because of this, I find many of the "40,000 view" stats about Chicago -where the all of the extremes are averaged together and presented as simple data- almost meaningless. Even neighborhood-specific data can be misleading if you don't understand the dynamics. For instance, some gentrifying areas actually see population loss as multifamily buildings are converted into SFHs and apartments that used to house entire families are rehabbed and rented to a couple roommates.
You just have to know the neighborhoods.
Hello everyone,
I'm a newbie real estate investor in the beginning stages of saving money for a down payment on a multifamily buy and hold. I'm currently looking at the area surrounding the Garfield Park Conservatory. There are obviously issues with the area (crime, violence), but at this stage I'm looking at investing from a 40,000 view. One of my high level concerns is population decline in Chicago and Illinois.
I'm trying to remain optimistic that the population decline is a good thing because it may increase the chance of finding a good deal. However, the cynic in me says that state corruption and tax increases is going to continue to drive people to move out.
Any insights on what this means for investors?
Only taking into consideration this chart, I wouldn't worry a bit. Population decreased one-tenth of one percent - that's nothing. New York, which looks like it had a huge increase in comparison, increased only 0.6%. Corruption, high taxes, and crime are nothing new to Chicago and Illinois as a whole.
We're still seeing good activity in the real estate market. Right now homes are selling faster, the number of home sold is the highest its been, and number of homes for sale is at the lowest its been in 10 years:
http://mred.stats.10kresearch.com/infoserv/s-v1/7Q...
The perception of an area having high crime can be devastating to local home values. It doesn't happen in a short period.
In Silicon Valley there is an extreme example of Palo Alto and East Palo Alto which are separate cites and are adjacent to each other (they are actually in different counties).
The avg cost per sq.ft. for a house in Palo Alto is about: $1,400
The avg cost per sq.ft. for a house in East Palo Alto is about: $600
You only have to walk a half mile or so to go from homes selling for perhaps $500,000 to homes selling for $3,000,000 (Silicon Valley home prices are very high compared to the U.S. as a whole)
Jobs and the economy drive home prices. However looking at these two cities, it is clear that neighborhood reputation can have a profound impact.
For decades there have been investors thinking the economic pressure on East Palo Alto would force a dramatic change. A few years ago a speculator put together about $50M of financing to buy a huge number of multifamily residences. His plan ultimately failed leaving the lenders to foreclose on his properties. He was also accused of violating the rent control laws in an effort to boost the value of the properties he bought.
So is East Palo Alto really bad? Although I live and work in Palo Alto, I eat lunch more often in East Palo Alto than in Palo Alto. The city has problems but there are a lot of good hard working people there. It is a rather unique city in Silicon Valley.
So a small population decline isn't a deal breaker? I am looking at a few more rural areas and the population is not increasing but cashflow seems to be good. How much consideration should be given to population?
I agree with @Matthew Olszak. The overall migration of millenials to cities is going to keep Chicago growing, even if baby boomers and the middle aged start moving out. Businesses are still coming back to the city, Motorola being the biggest one off the top of my head, and jobs are still plentiful. I personally moved to Little Village to get started in real estate because the prices were low and I could handle the crime and quality of life here (tons of amazing Mexican food helps too).
I think Garfield Park is going to be an area that actually sees some decent growth, but the crime rate in the neighborhood is going to slow that down for a while. That said, I'm looking at possibly expanding into North Lawndale just south of there hoping that the Pilsen gentrification keeps moving west. I think GP is going to see the same thing eventually, but it's going to move out from the West Loop, so the area near the conservatory will take a bit to see it.
I've lived in Chicago almost my entire life. It's a city of extremes. There are areas that are booming like I've never seen before, and there are areas with entire blocks of vacant lots and abandoned buildings. The same stark differences exist between neighborhoods in terms of crime rates, income levels, etc.
Because of this, I find many of the "40,000 view" stats about Chicago -where the all of the extremes are averaged together and presented as simple data- almost meaningless. Even neighborhood-specific data can be misleading if you don't understand the dynamics. For instance, some gentrifying areas actually see population loss as multifamily buildings are converted into SFHs and apartments that used to house entire families are rehabbed and rented to a couple roommates.
You just have to know the neighborhoods.
Until the reputation for violence calms down, I fear that families will continue to migrate OUT of the core city.
The violence in the city is contained to a few specific neighborhoods. You are correct that some of the people in those neighborhoods who have the means to do so are fleaing for the suburbs or elsewhere.
The metro area of Chicago is fairly stagnant. A decline of less than 3K people in a metro area of 9.5 million is a tiny fraction of one percent. Really, Chicagoland is largely not growing or declining as a whole, currently.
The city's demographics are changing. Neighborhoods are gentrifying. The north side is generally growing in people and growing in wealth. The south side depends largely on the neighborhood. Some areas are really starting to gentrify. Others are struggling with violent crime and people are doing what they can to avoid the violence.
Downtown is exploding in population as condos and apartments are being built in mass.
Here's a great Crain's article from a few months ago that addresses population change in the city limits.
http://www.chicagobusiness.com/article/20161213/BLOGS02/161219983/as-loop-population-booms-south-sides-plummets
Hello everyone,
I'm a newbie real estate investor in the beginning stages of saving money for a down payment on a multifamily buy and hold. I'm currently looking at the area surrounding the Garfield Park Conservatory. There are obviously issues with the area (crime, violence), but at this stage I'm looking at investing from a 40,000 view. One of my high level concerns is population decline in Chicago and Illinois.
I'm trying to remain optimistic that the population decline is a good thing because it may increase the chance of finding a good deal. However, the cynic in me says that state corruption and tax increases is going to continue to drive people to move out.
Any insights on what this means for investors?
Only taking into consideration this chart, I wouldn't worry a bit. Population decreased one-tenth of one percent - that's nothing. New York, which looks like it had a huge increase in comparison, increased only 0.6%. Corruption, high taxes, and crime are nothing new to Chicago and Illinois as a whole.
We're still seeing good activity in the real estate market. Right now homes are selling faster, the number of home sold is the highest its been, and number of homes for sale is at the lowest its been in 10 years:
http://mred.stats.10kresearch.com/infoserv/s-v1/7Q...
Great Info Matt. Is the info in your links the city of Chicago or the entire metro area?
I agree with @Matthew Olszak. The overall migration of millenials to cities is going to keep Chicago growing, even if baby boomers and the middle aged start moving out. Businesses are still coming back to the city, Motorola being the biggest one off the top of my head, and jobs are still plentiful. I personally moved to Little Village to get started in real estate because the prices were low and I could handle the crime and quality of life here (tons of amazing Mexican food helps too).
I think Garfield Park is going to be an area that actually sees some decent growth, but the crime rate in the neighborhood is going to slow that down for a while. That said, I'm looking at possibly expanding into North Lawndale just south of there hoping that the Pilsen gentrification keeps moving west. I think GP is going to see the same thing eventually, but it's going to move out from the West Loop, so the area near the conservatory will take a bit to see it.
Motorola, McDonalds, Caterpillar, ConAgra are just a few of the recent ones.
Here's a list of companies who've left the burbs for the loop over the last decade or so.
http://www.chicagotribune.com/business/ct-company-...
Personally, I think East Garfield Park could gentrify someday, but I see the path of progress in the short term continuing up the blue(Logan Square, Avondale, Irving Park), Red(Uptown Edgewater, Rogers Park), brown(Albany Park, Irving Park), orange(Bridgeport, McKinley Park), and Pink(Pilsen, Little Village) lines.
Hello everyone,
I'm a newbie real estate investor in the beginning stages of saving money for a down payment on a multifamily buy and hold. I'm currently looking at the area surrounding the Garfield Park Conservatory. There are obviously issues with the area (crime, violence), but at this stage I'm looking at investing from a 40,000 view. One of my high level concerns is population decline in Chicago and Illinois.
I'm trying to remain optimistic that the population decline is a good thing because it may increase the chance of finding a good deal. However, the cynic in me says that state corruption and tax increases is going to continue to drive people to move out.
Any insights on what this means for investors?
Only taking into consideration this chart, I wouldn't worry a bit. Population decreased one-tenth of one percent - that's nothing. New York, which looks like it had a huge increase in comparison, increased only 0.6%. Corruption, high taxes, and crime are nothing new to Chicago and Illinois as a whole.
We're still seeing good activity in the real estate market. Right now homes are selling faster, the number of home sold is the highest its been, and number of homes for sale is at the lowest its been in 10 years:
http://mred.stats.10kresearch.com/infoserv/s-v1/7Q...
Great Info Matt. Is the info in your links the city of Chicago or the entire metro area?
I didn't realize it doesn't print what data was used, sorry about that. City of Chicago only and only including attached/detached sfh and condos. Unfortunately it doesn't let me include 2-4 unit buildings, but it still paints a good picture.
Hello everyone,
I'm a newbie real estate investor in the beginning stages of saving money for a down payment on a multifamily buy and hold. I'm currently looking at the area surrounding the Garfield Park Conservatory. There are obviously issues with the area (crime, violence), but at this stage I'm looking at investing from a 40,000 view. One of my high level concerns is population decline in Chicago and Illinois.
I'm trying to remain optimistic that the population decline is a good thing because it may increase the chance of finding a good deal. However, the cynic in me says that state corruption and tax increases is going to continue to drive people to move out.
Any insights on what this means for investors?
I think if you unpack those Chicago numbers closer...these declining populations will be in just a few zip codes on the south side. But beware I have seen bp turnkey marketers selling multi plexes there too. Maybe not a good match for most TK investors long run but the marketers will never tell you that or I don't think they even know themselves.
Course the flip side of that are not many TKs that are going get enough inventory to really be a TK on the Northside. Far as I know there are few if any true TKs doing better areas. You need inventory to do TK and scale property management.
Hi Erica - I'm a lifelong Chicagoan and a realtor who grew up on the West Side of Chicago (I spent a LOT of time around Garfield Park). I understand your concern about crime, but realize people always need somewhere to live and all of this happens in cycles.
I would say do the numbers and if it looks good . . . go for it. :-)
Course the flip side of that are not many TKs that are going get enough inventory to really be a TK on the Northside. Far as I know there are few if any true TKs doing better areas. You need inventory to do TK and scale property management.
Right on. The ones I saw is was as if you intentionally looked for the worse location in the nation. I am sure there are better south side areas that could be more turnkey...these ones were not going to be turnkey in any shape or form.
@Erica Rodriguez Your concerns are valid, especially if you're looking in Garfield Park, which has some rough spots. However, real estate is even more local than the city or regional level. Don't look at it from your ability to find a good deal. Look at it as a resident and there desire to live there going forward.
While there are great corporate jobs moving in downtown, that's not the tenant base for Garfield Park. The tax revenue from those companies is supposed to support ALL of Chicago's communities, but we'll see if that happens. While, much of the north side is thriving, it's still losing population as well due to a decrease in density. Overall, the population is aging and immigrants are moving in at a much slower pace. And I haven't even touched on the African-American decline.
All in all, dive a little deeper behind the numbers and understand where the community is headed before investing in that neighborhood. Here's a pretty good article that summarizes the issues - http://www.chicagomag.com/city-life/March-2016/Coo...
Thanks so much for your input and links everyone!
The map in this article is great. thanks!
Originally posted by @Jeff Burdick:
@Erica Rodriguez and the comments in that article are very insightful, too. Thanks @Jeff Burdick for posting it. My take on IL is that short term prospects look good for most areas (flips, etc.) but long term prospects (buy and hold) perhaps not so good.
@Erica Rodriguez the national perception is that Chicago is a crime ridden disaster. Not a day goes buy in the national news without some horrible story out of Chicago. This morning I read about a grandmother convicted for torturing her 8 year old grandchild to death. Murders, gang violence, you name it and its been reported. I won't even visit Chicago on vacation let-alone consider relocating there. I don't see it changing with your current elected officials. They spend more time criticizing the police than supporting them and trying to make the city safe.
As far as the charts, keep in mind there could be people leaving Chicago for the suburbs. You probably need to look at the state or larger metro area to know for sure how serious the issue is.
@Joe Splitrock Please tell me that is a joke (your overall commentary and not the part about the grandmother).
@Joe Splitrock Please tell me that is a joke (your overall commentary and not the part about the grandmother).
Last year 762 murders and 3500 shootings. More murders than NYC and LA combined and both cities are much larger. Are you just desensitized to it or something?
http://www.cbsnews.com/news/chicago-murders-shootings-2016-more-than-new-york-city-los-angeles-combined/
It depends on where are you in Chicago it's not just mass murder in the streets...
@Joe Splitrock Such stunning statistics...a less than 0.0003 chance of being shot. People in countries like Germany @ 0.7 homicides caused by guns per 100k persons likely look at ALL of us in the USA, you great folks in Sioux Falls included, and wonder how you/we survive with 3.43 firearm deaths per 100k persons here in the USA as a whole. Do you think that's a fair analysis of where you live?
Here in Chicago, demographics are extremely segregated and violence along with it, enough so that I'm surprised the federal gov't hasn't made more of an issue of the segregation (but that's a soap box for me to stand on in a different thread). Even within our neighborhoods, the violence is concentrated to certain areas/blocks of certain bad neighborhoods. I can understand how an outsider may view Chicago based on the sensationalist media reports, but I can tell you as a resident and broker who works throughout a number of the "war zones", these stats and stories you read about are extremely concentrated to certain areas while the rest of the neighborhoods flourish.
I'm not trying to paint a daisy-field picture and ignore the violence, but rather to put the stories you receive via the media into perspective. I'm also certainly not desensitized, but am rather unaffected, having not been shot along with roughly 2,717,045 other people here, assuming your and @Erica Rodriguez's numbers are accurate.
In both cases - in the neighborhoods that flourish and in those that are challenged - there are opportunities to invest based upon your goals. And that's one of the things I love about Chicago, we've got some great places to dump money into for the long-term appreciation, and just a couple miles away you can pick up a place and hope to double your money in a few years just on rents.
People aren't fleeing the violence like asylum-seekers from Syria. For most of us nothing has changed, the bad areas have just gotten worse. I'd chock up this ever small decrease in population to the natural cycle of folks moving to and from the suburbs, and even then question the accuracy depending on what this data was based upon.