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Rehabbing Cities: Chicago

How the Windy City is becoming a profitable center for house flipping

In 2016, Chicago was the U.S. city with second-biggest increase in property flipping, behind only Detroit. Flips accounted for 7.5 percent of homes sold in Chicago, a substantial increase from 4.7 percent in 2015. Detroit saw a larger increase of 4.8 percentage points, but the total still came in lower than Chicago at 6 percent. 


 Chicago skyline overseeing real estate markets

Why Chicago?

The large increase in house flips is due primarily to buyer demand as the regional economy recovers, according to Trulia chief economist Ralph McLaughlin. He explained that, when investors see buyers are ready to purchase, flipping increases. 

Other factors in Chicago's economy have contributed to this demand. Wage growth was above the national average in 2016 with healthy employment growth in various areas such as the professional services, transportation, and hospitality.

Supply is also a major factor. Buyers who are not inclined to rehab themselves have opened up the opportunity for flippers. The flips are much more than just past foreclosures. An increasing number of condos are being sold by people who have lived in them for a quarter century or more but who don't want to complete the rehab process themselves. A slowing in downtown condo construction has also sparked demand for rehab condos, especially among individuals who don't have the time to wait for entire buidlings to be renovated. 

 

The Numbers

Chicago's home median sales price increased $5,250 over the past year to $280,000, according to Trulia. The average price per square foot for the same period rose from $217 to $230. Across Chicago, the average gross profit for flips was $81,162.  

Wilmette and Avondale were the two most profitable zip codes for house flipping. In 2016, Wilmette saw an average profit of $232,000 while Avondale saw gross profits average at $211,000. The three next most profitable zip codes were the Sauganash neighborhood, Forest Park, and Wheaton. In terms of number of flips, the top three towns were Bolingbrook, West Lawn on Southwest Side, and Romeoville.

 

Summary?

With the rise of house flipping due to positive economic signs, the city of the 2016 World Series Champion Cubs is definitely a real estate market of interest. 

 

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