Conventional wisdom says overheated local housing markets in Chicago—the Logan Squares, West Towns, and West Loops—would see the most homes going rapidly under contract and closing above asking price. A data set capturing this exact scenario—191 Chicagoland homes that went under contract less than 10 days after listing that also closed above ask—shows these assumptions to be true. But it also reveals that the hottest city properties have a varied geography, with the bungalow belt featuring prominently.
Redfin winnowed this list down from regional MLS sales data for the six months of 2014 between June 7 and December 15, tapping it for its nationwide Hottest Homes report. I'll focus on homes sold in the city meeting the above criteria (76 of the 191), with a few observations for buyers to tote around with them:
- Neighborhoods both rich and poor appeared in the data but every home that went under contract within 10 days and sold above ask was well below the million-dollar mark. In fact, only three of these city sales topped $700,000—two condos in the West Loop and a two-flat in North Center. The broad price spread and diverse housing types strongly suggest the influence of investors in speeding up sales, although cottages and bungalows are more likely consumed by young families looking to grow their nests in the north and northwest corners of the city.
- The homes with the highest percentage increase in closing price over asking price tended to be in impoverished communities where the property was distressed or otherwise undervalued, or they were in Logan Square, Avondale, or East Humboldt Square, where indices are pointed toward gentrification (median sales prices shot up by almost one-third in Logan Square from 2011 to 2013). In both cases, sales prices were typically 10 to 25 percent greater than asking price with a few properties vaulting to 35 percent or more. The biggest dollar gain belonged to a house on a double lot in East Humboldt Park that listed for $449,000 and sold for $615,000; the next three in line were all in Logan Square.
- Multiple-bid situations (wars or mere skirmishes), although not recorded in the data, were probably involved with many of the contracts. Abundant caution or fear of a bidding war can sometimes lead buyers to offer more than asking price unprompted, or buyers up-bid based on real-time comp activity and the strategic advice of their broker.
- Quite a few properties on the “hot” list were fixer-uppers sold as-is. Several income-producing two- and three-flats also factored in. And many homes on the list had been on the market in the days leading into the recession, trying for far higher prices.
In the trendy environs of Logan Square, Lincoln Square, River West, and West Loop, the lion’s share of the rapid, over-ask closings were in multi-unit buildings. It makes sense that there would be a run on condos in neighborhoods where price increases in the last 10-15 years have made single-family purchases a stretch for most buyers. The decision boils down to this for a lot of buyers: pay $400,000 or more for a standard two-bedroom condo in a fun part of town, or spend half the money on a three-bedroom house in a comparatively dull, farther flung area. At a certain age, economics rules this debate.
But if you’re in the market for modest housing in traditional working-class neighborhoods like Portage Park, Irving Park, or Albany Park, expect competition and little room for negotiation on price. These entire communities are viewed today as high-value and upwardly trending, with the “deal” already built into the address.