Chicago has maintained its streak for the fourth month, outpacing other major U.S. cities in terms of home price growth, as per the national index of August home prices released today. This highlights the city's housing market resilience amidst the recent nationwide slowdown due to rising interest rates. However, the report also reveals data indicating that, in the long-term perspective, home values in the Chicago area significantly trail behind those of most large cities.
In August, home prices in the Chicago area saw a significant 5% increase compared to the same period last year, marking the highest growth among the 20 major U.S. cities tracked by the S&P CoreLogic Case-Shiller Indices. New York followed closely behind with a 4.8% growth rate. This surge in Chicago's home prices is the most substantial since December 2022, when prices rose by 5.9%, as reported in February.
Nationally, home prices experienced a 2.6% increase in August, which is approximately half the growth rate observed in Chicago. This notable rise in Chicago's ranking is noteworthy because the city had previously lagged behind for an extended period. Between September 2016 and September 2021, Chicago consistently ranked last or second-to-last among the 20 cities in 43 monthly reports. However, as the Federal Reserve's efforts to combat inflation led to historic highs in mortgage rates starting in spring 2022, Chicago climbed higher in the ranking. This ascent was due, in part, to other cities that had experienced more rapid growth during the housing boom seeing their prices stabilize.
Chicago's market resilience is evident, as it didn't experience an inflated market during the boom and has not faced a subsequent decline. While the short-term price performance in Chicago is impressive, a long-term analysis reveals the relative weakness of investing in Chicago homes in the 21st century.
In August, the index placed Chicago values at 197.32 compared to the baseline month, January 2000, when all cities were set at 100.00 for future tracking purposes. This means that in August, Chicago-area prices were just under double their value at the turn of the century. Only two other cities besides Chicago had indices below 200 in August: Detroit (180) and Cleveland (182.64). In contrast, nationwide, home prices have more than tripled since January 2000, with the index for nationwide home values reaching 311 in August.
Interestingly, three cities—Miami (422), San Diego (419), and Los Angeles (417)—have seen home prices quadruple over the past 23 years. However, while these cities have experienced substantial growth, affordability has significantly decreased in Miami, San Diego, and Los Angeles, making Chicago a comparatively more stable market in terms of housing investment.