Neal Templin: Chicago, with its share of problems, offers incomparable value

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UBS, the Swiss bank, examined home prices across prominent global cities, including four in the U.S., and out of 24 analyzed, only one was a bargain: Chicago.

What do a bunch of Swiss bankers know that nearly 1 million people who have moved out of Chicago since 1950 don’t?

Maybe it’s an appreciation of cities on lakes. The UBS headquarters is a 10-minute walk from Lake Zurich. But the bank’s annual Global Real Estate Bubble Index, followed by lenders, multinational companies and investors, has for years shown housing prices in some global cities soaring beyond apparent reason. Prices in Munich, Toronto, Hong Kong, Amsterdam, Frankfurt, Vancouver and Paris were well into bubble risk when the most recent list was assembled, and most others on the list were considered overvalued.

Chicago homes, remarkably, cost the same as they did 20 years ago on an inflation-adjusted basis. And yet the city checks the other boxes to qualify for inclusion on a global-cities list: top universities, world class museums, an innovative and eclectic restaurant scene, commanding architecture and an extensive public transit system. It’s the business and cultural hub of the American Midwest, though often overlooked by the Coastal Elite.

UBS calculates that a skilled service worker must work three years to pay for a 650-square-foot apartment near the city center in Chicago. In New York, it takes 11 years; in Paris, 15 years; in Hong Kong, 21 years.

What is peculiar to Chicago that accounts for its housing being so cheap? Population loss — though not as severe as seen in Detroit or St. Louis — is a big factor. Going from 3.6 million city residents in 1950 to 2.7 million today lessened demand for existing and new housing. Economic growth lags that of major coastal cities. There’s also a local and state unfunded pension time bomb — the worst in the country — overhanging civic finances and accounting for large property tax increases past and future. A long history of local and state political corruption has prevented solutions to that and other problems. And crime hasn’t shown the enormous decreases enjoyed by New York and Los Angeles in recent years.

There are also problems Chicago shares with other big cities. Among them, its school system does a great job educating elite students, but the rank-and-file schools often fail those who attend. College admission officers warm immediately to graduates of Northside College Preparatory High School but, according to its own ratings, Chicago Public Schools has 124 schools that aren’t in good standing, including 55 that need “intensive support.”

So, like many other big cities, Chicago is often a great place to live for those who can afford to enjoy its many attractions and navigate its patchy education and public safety realms, and a very different and difficult city for others. Its south and west sides have particularly suffered.

Chicago offers close-in neighborhood living, in both single-family homes and apartments and condos, at a fraction of the cost one would pay in major coastal cities. In Bucktown and Wicker Park, just four stops out from the Loop on the L’s Blue Line, the median home price is below just $500,000. The area is home to a lively restaurant and bar scene. Its housing stock is a mix of 100-year-old three-flats, typically rehabbed multiple times; modest single-family homes of a similar vintage; some larger apartment and condo developments; and, during the past 30 years, teardowns that are often very large, some across multiple lots. The area is fabulously walkable and home to the elevated 606 walkway.

The South Loop has been transformed from warehouse, light manufacturing and patches of housing into a forest of high-rise and mid-rise condo and apartment structures. It abuts beautiful Grant Park, the city’s Museum Campus and the lakefront. Median home prices below $500,000 as well as $1 million-plus condos now abound.

Other close-in neighborhoods offer similar bargains, relative to other global cities. Overall, Chicago’s median single-family home price is $299,900. Across the city, housing prices are more closely aligned to incomes than in coastal cities.

So, if the Chicago winter freaks you out — and it does many — enjoying a far lower cost of living there could allow for lengthy winter breaks, and perhaps a snowbird’s condo in Florida or Arizona.

As companies loosen up and allow more employees to work remotely, trading Los Angeles, San Francisco, New York or Boston for Chicago could mean an immediate and substantial raise in disposable income. And some will find they’ve actually traded up.


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