At this point in late January we are in full-on prep mode for the spring market in Chicago. Even though we have snow on the ground and single-digit temps, in terms of the real estate market, spring is right around the corner! This time of year always fills me with a great amount of hope and anticipation, and I am excited to see what this year’s market brings us. For Chicago, I see three factors playing the biggest role in the overall landscape.
Rates and Federal Reserve Outlook
Throughout 2024 we saw a positive trend in interest rates declining. The Federal Reserve reduced rates three times last year, which has resulted in a full percentage point drop – very encouraging news! This trend is set to continue in 2025, though my only concern is inflation remaining at a rate higher than the Fed would like: despite the positive rate reductions, inflation remains higher than the Fed’s target. The labor market also continues to see rising costs. As a result, while I don’t anticipate a sharp increase in rates, it’s hard to predict exactly how the Fed will act. I do think the current outlook for buyers is filled with opportunity and relative stability.
Google’s Chicago Headquarters: A Potential Game-Changer
Welcome to Chicago, Google! Google establishing a major office in the Loop is bound to have an impact on both the rental and sales markets in my opinion. Rentals around the Thompson Center will increase in price, but I also think that neighborhoods like Lincoln Park and Gold Coast will also see an impact as highly compensated executives move throughout the city.
Google employees are expected to be well-compensated, with average executive salaries around $217,000. Here is how that translates to potential home purchases:
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Average Executive: $217,000 salary ≈ $1M home purchase / $9,000 rent per month
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C-Suite: $663,000 salary ≈ $2.5M home purchase / $25,000 rent per month
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Lower-Level Employees: $100,000–$125,000 salary ≈ $500K home purchase / $5,000 rent per month
The Challenges and Opportunities for Millennials and Gen Z
One of the most significant factors that shapes every housing market is how and when young people enter the market. Millennials have continued to delay home buying as a result of student loan obligations according to the National Association of Realtors (NAR). For Gen Z though, things may be different. Many experts believe that Gen Z is in a better financial position to enter the housing market than Millennials.
The average Gen Z buyer is projected to earn $550,000 in their 20s, which is 14% more than millennials earned. As a result, Gen Z can spend on a down payment versus rent. Gen Z buyers in Chicago are projected to spend $157,250 on rent by age 30, while purchasing a home before 30 would cost them $183,500 — a difference of just $26,300. I take this as a promising sign that the younger generation will be better positioned to enter the housing market earlier. Please reach out to me if you know people with student loan debt. There are mortgage programs that may be able to help forgive some of the debt.
I believe the combination of relatively favorable interest rates, Google investing in Chicago and new first-time buyers will infuse our 2025 market with momentum. One of my favorite parts of real estate is that each year brings us a new unique marketplace and I am excited to help buyers and sellers navigate this one!
