Bidding wars. Lack of inventory. Offers above asking price. All characteristics of the hot local housing market, these trends are now also showing up in Chicago’s rental market.
While rents are stabilizing in Chicago after red-hot hikes seen in 2021 and 2022, the market is experiencing its usual spring and summer tail winds. Rental listings are being snapped up within days, with many receiving multiple offers and going for hundreds of dollars more than originally listed. More people tend to move in the spring and summer, when recent college graduates are also in the market for housing.
Mihir Thatte, a 23-year-old software engineer, said he was facing steep competition from college graduates who are interested in moving to the same neighborhoods he likes: Old Town, Lincoln Park, Lakeview East.
He currently lives in Lincoln Park with four roommates in what he calls a “party pad” and is moving with two roommates to a $2,850 three-bedroom apartment in the same neighborhood on June 1.
“It seems like in our (price) range and in the neighborhoods we want, things are really competitive,” said Thatte, who had lost out on three bids before this one, which he secured for the listed price. “Places are snapped up the second that they are put on the market, so you could be going to the first showing window, and there’s six other people there, and they all put applications in right there.”
His agent, Neil Turk of Fulton Grace Realty, said clients who are bidding over the listed price are having more success, as there are “crazy bidding wars” happening on the North Side.
Bill Delaney, a 60-year-old attorney, got into a bidding war for a one-bedroom apartment in a Bucktown two-flat. Delaney’s offer, $400 over the listed price, won out.
Delaney was coming to the rental market after being a homeowner for 25 years, with the last seven years spent in a condo in the South Loop. He agreed to take possession of his rental earlier than he wanted to, May 1, in an effort to make his bid more appealing. Now he has to pay his first month’s rent and his final mortgage payment on his condo in the same month.
“I wasn’t expecting it to be that competitive and the rent to be that high,” said Delaney, whose initial budget limit for rent was $2,500 a month. He upped it to $3,000 after evaluating the market and his options.
Rents in Chicago increased 1.7% in April compared with a 0.5% increase nationwide, placing the city in fifth place for fastest month-over-month rent growth among the 100 largest cities in the country, according to data from Apartment List. The same data shows Chicago’s year-over-year rent growth is at 5.2%, a drop from the nearly 12% year-over-year increase at this time last year. This number is nearly 6% year-over-year for Illinois in April 2023.
“Chicago does have some of the fastest rent increases that are taking place right now compared to other spots in the country,” said Rob Warnock, senior research associate at Apartment List.
He added that while cities are not seeing the same high rent growth that people experienced the past two years, in Chicago growth trends are similar to those seen at the start of last year, with the peak for prices expected in July or August.
Apartment List has the median rent for a Chicago one-bedroom unit at $1,333 and a two-bedroom unit at $1,446, with a citywide apartment vacancy rate of 5.6% in April. Median rent in Chicago is nearly 6% higher than the national rate for the 100 largest cities in the country.
Warnock said part of the reason for the elevated rent prices stems from demand outpacing the supply of new units.
Doug Ressler, manager of business intelligence with Yardi Matrix, a real estate data provider, said people are starting to flood major urban areas again like Chicago now that pandemic fears — which led to mass migration out of cities — have subsided.
For the Chicago market, he said the city is implementing different methods for affordable housing, thanks to programs from former Mayor Lori Lightfoot, like the LaSalle Street adaptive reuse project as well as a trend of condos being converted to rentals in the South Loop.
“Right now, we are seeing a very positive type of influence for Chicago’s (rental market),” Ressler said.
In Cook County, Ressler said there should be about 8,000 new units coming on board this year, with that number dropping to 7,000 new units next year, allowing rent prices to continue to decelerate due to a stable, not oversupplied, market.
The new units can’t come fast enough for real estate agents like Katya Lorman, who is seeing low inventory and units flying off the shelves in places like Lincoln Park, Bucktown, Wicker Park and Old Town. She said some properties are receiving as many as 10 applications. Clients who are looking for rentals this summer can expect to lose out on at least two to three applications before landing a place, Lorman said.
“I think (the limited availability of rentals) has to do with a lot of people understanding how crazy the market is, so they are choosing to re-sign their leases,” said Lorman, who works for Keller Williams Realty. “So a lot of new rental listings aren’t coming up to meet the demand.”
She said many leases are coming down to bidding wars like last summer, with one-bedrooms going for around $150 to $200 over the listed price and two-bedrooms going at around $300 to $400 over.
One of Lorman’s clients, Audrey Wolz, 23, was able to land a $2,500, two-bedroom place in Lakeview without going into a bidding war and for the listed price. But the apartment was the only place still available on a list of rental options she and her future roommate had compiled.
“When we walked through this place, I just jumped on it because everything else was going super quickly,” said Wolz, an interior designer who has lived in Chicago for a year.
Orphe Divounguy, senior economist for Zillow, said rent prices tend to follow movements in home prices.
“The (cooling) housing market has caused rent to come down,” Divounguy said. “While rents have come down, rent prices start to pick up during spring homebuying season.”
Divounguy said that a typical annual rent increase is 4% to 5%. In Chicago, similar to Apartment List’s calculations, Zillow has this number at 6.7% year-over-year in April, down from 11.6% in April of last year. Nationwide, year-over-year rent growth is at 5.3% as of April.
While Divounguy said the rental market is returning to the pre-pandemic normal — with the help of an increase in multifamily construction in the past couple of years — Chicago’s comedown could be more sluggish.
“Chicago always has this one issue: It is plagued with some of the highest property taxes in the country,” Divounguy said. “And landlords pass the property tax increase on to renters, and that could play a role in where rents go from here compared to the rest of the country.”
