If you’re the average prospective buyer looking for a house in the Proviso Township area, good luck with the search.
New data from a range of real estate experts show that the housing stock across the country, including in Proviso, is in increasingly short supply and being snapped up by investors at an ever faster clip, driving more and more would-be homebuyers to rent. That dynamic, in turn, is contributing to ever rising rental rates.
According to the National Association of Realtors (NAR), the median existing-home sale price in February rose to nearly $360,000, up 15% from a year ago — marking “120 consecutive months of year-over-year price increases, the longest-running streak on record.”
In 2020, the median price for homes sold in Forest Park that year was $250,950, up 9 percent from 2019. A year later, the median home price in Forest Park was $257,000, according to Crain’s Chicago Business, which compiled data provided by the Chicago Association of Realtors, Midwest Real Estate Data and Showing Time.
“Housing affordability continues to be a major challenge, as buyers are getting a double whammy: rising mortgage rates and sustained price increases,” said Lawrence Yun, NAR’s chief economist. “Some who had previously qualified at a 3% mortgage rate are no longer able to buy at the 4% rate.”
Yun said the increasing mortgage rates, coupled with high inflation, “is taking a heavy toll on consumers’ savings,” making it harder for people to buy homes. According to NAR, 84% of houses sold in February were on the market for less than a month, with properties typically sold within 18 days.
About a third of housing sales this year have been attributed to first-time homebuyers, with individual investors or people buying second homes — a group that comprises many cash sales, NAR reports — making up about 20% of home sales.
And the share of housing sales going to investors seems to be growing, according to Redfin, the realty company. Last year “investors bought nearly one in seven homes sold in America’s top metropolitan areas,” the Washington Post, referencing the Redfin data, reported in February.
“Investors were even more aggressive in the final three months of the year, buying 15 percent of all homes that sold in the 40 markets,” according to the Post, which created an interactive map that allows readers to explore the Redfin data in 40 metropolitan areas, including Chicago.
The map shows suburbs in Proviso Township have some of the highest shares of homes bought by investors in the entire Chicago metropolitan area.
Among Proviso Township suburbs, Forest Park leads the way, with 45% of homes purchased last year going to investors — significantly higher than the 7% average for the Chicago metropolitan area.
Maywood and Bellwood also experienced high rates of investor housing purchases last year, with 17% and 13%, respectively. In Hillside, the share was 11%.
“Real estate investors can be large corporations, local companies or wealthy individuals, and they generally don’t live in the properties they are buying,” the Post reported. “Some look to flip homes to new buyers, while others rent them out.”
And communities that are predominantly Black have been particularly ripe targets for investors, the paper reported.
“Last year, 30 percent of home sales in majority Black neighborhoods [was] to investors, compared with 12 percent in other Zip codes, The Post’s analysis shows.”
Forest Park’s roughly 57% white population makes it something of an outlier in that respect.
LaShonda Williams, a real estate broker who owns Living Well Realty, a firm based in Westchester, said another factor that could stifle prospective homebuyers looking to settle in the area is the high property taxes.
“I can see why there’s way more investors than homeowners — it’s because of the property taxes,” she said. “Although the homebuyers may be able to afford the house price-wise, the extremely high taxes make it impossible for an average homebuyer to own [in the Proviso area].”
Williams said investors typically pay cash for properties or have private mortgages that make them much more attractive buyers for sellers.
“There are so many strikes against buyers, particularly if they’re using FHA [Federal Housing Administration] loans and they’re competing against conventional buyers,” she said.
Williams said FHA loans, or loans backed by the federal government, often come with more regulatory hurdles that slow down home sales.
“This being a seller’s market, they have the advantage of saying they don’t want to be involved with the FHA and have to wait an extra 45 to 50 days, as opposed to a conventional buyer who can close in 30 days or less, or a cash buyer who can close in [a week],” Williams explained.
Critically, she added, prospective homebuyers with FHA loans are much more likely to be Black and Brown.
So what are those homebuyers who can’t find housing to do? They rent — either in houses owned by investors or in apartments. That, in turn, creates other problems, namely ever rising rents.
According to a data by Zillow, the real estate firm, rents have skyrocketed since February 2020.
“Typical rent in the U.S is about $1,883 per month, $283 per month higher than in February 2020,” Yahoo Finance reported, referencing the Zillow data.
“Making matters worse, a spike in mortgage rates is pricing would-be first time home buyers out of the market, and into the rental pool, exacerbating the upward pressure on rents amid ever tighter inventory.”
Stessa, a real estate software firm, ranked U.S. states by median rent. Illinois ranked 21st, with an estimated median rent of $1,301, according to Stessa. The median rent for a studio is an estimated $975 and $1,071 for 1- and 2-bedroom units.
According to Rentcafe.com, a national apartment listing service, the average rent for a roughly 700-square-foot apartment in Forest Park, which the service considers average size in the village, is $1,100 a month. That’s a deal compared to other suburbs like Oak Park, where average monthly rent for an average-size apartment is about $2,000, but rent in Forest Park is still the highest it’s been since at least 2019, according to Rentcafe.com.
Vera Gibbons, a Yahoo Finance contributor, told the outlet that people should get used to the rising cost of housing.
“The economic conditions that drove rents up so rapidly last year are still present. This year is trending very similarly to 2021 and could end up being worse,” she said. “The madness is not temporary. It’s the new reality.”