In line with other top housing markets in the U.S., Chicago’s high-end properties have been cooling off so far this year. And sales in downtown Chicago (“The Loop”) are mainly to blame, as it accounts for a good portion of all luxury transactions in the metro area.
The number of multi-million dollar sales in Chicago dropped significantly over last year, particularly when compared to the overall market. In the first quarter of 2016, the median sales price for the overall market was $220,000, down 2% from the same period last year. But the total number of sales reached 19,500, representing 12% increase, driving the total value of sales up 7% overall.
Meanwhile, the median price of the homes over a million dollars was down 2% to $1.35 million, but the total number of sales was down 16% and total value down 15% to $700 million, according to data compiled by Realtor.com. (News Corp, owner of Mansion Global, also owns Move Inc., which operates realtor.com.)
“Although luxury growth in downtown Chicago areas varies greatly, a few very dense neighborhoods have seen significant declines in the top 10% of the market,” said Jonathan Smoke, Chief Economist for Realtor.com. Last year, The Loop accounted for 62% of all multimillion-dollar sales. This year that figure has dropped to 52%.
Research by Zillow.com has shown the same trend in Chicago’s luxury market, said Senior Economist Aaron Terrazas. There are three factors that have been negatively impacting the luxury market in Chicago as they do across the country. Namely:strong for-sale inventory, fewer foreign buyers due to the strength of U.S. dollar and greater price sensitivity among high net worth individuals.
But agents are more optimistic. Daniel Xia, an agent with Chicago real estate firm US Asia Group, believes that potential buyers are just temporarily holding off their decisions to buy. “Actually, I see more wealthy families moving to downtown from the suburbs, but they want to rent before they buy,” he said.
Maureen Burns, a broker specializing in Chicago luxury properties, agreed. “New construction has been setting the bar, and resales are stepping up their properties with updated finishes.” she said, “The remainder of the year looks promising.”
Write to Fang Block at fang.block@dowjones.com