According to Crain’s Chicago Business, those who bought homes in the northwest neighborhoods right after the recession are the most “equity rich” in Chicago. “Equity rich” is loosely defined as having at least 50% equity in your home. But only about 15% of Chicago area homeowners are in this enviable boat.
In fact, about 17% of Chicago area homeowners have negative equity of 25% or more, meaning they owe at least 25% more on their homes than what the property is worth on the market.
While buying in a popular area can help your future home value, it isn’t a guarantee. A “hot” neighborhood today could be overpriced. And while previous homeowners in the neighborhood may have done well, your own equity growth could be slower to materialize. Timing the market, and predicting what’s going to be trendy 10 years from now, isn’t an easy task.
So how can you come out ahead? Keep these factors in mind:
1. Location. When you buy a home, you buy the neighborhood! School quality, traffic, noise, and crime rates all affect the desirability of a neighborhood. So does the array of local amenities. Do your research, and consider the pros and cons of the neighborhood.
2. Price history and neighboring home values. A home that sold for prices between $200,000 and $239,000 in recent years shouldn’t suddenly be worth $350,000, unless it received significant upgrades. Even if upgrades explain the lofty new price, take a serious look at the home values in the immediate vicinity. Buying the most expensive home on the block rarely pays off.
3. Home size, layout and features. Every home is unique, but it’s possible for a home to be too unique. When buying in a “hot” market, you might be able to forgive a home’s design flaws and functional obsolescence. But you don’t know the market conditions you’ll be facing when you sell, and future buyers might reject the oddities.
A home that is very small, or rambling large, could also be harder to sell in the future. Both extremes appeal to a smaller pool of buyers. Again, look at the surrounding properties. Is the home typical for the neighborhood?
4. Home condition. An older home with “good bones” that needs some updating shouldn’t be overlooked, especially in a good location. But a home that has been neglected for a long time could involve more headaches than it’s worth. Construction quality, structural integrity and overall condition should be examined carefully.
In all cases, plan well, make the best down payment you can afford, and think long-term when choosing your home!
StartingPoint Realty – helping first-time home buyers!
StartingPoint Realty serves first-time home buyers throughout Chicago and the Northwest suburbs. We provide complete guidance during the entire home buying process! Attend a free home buying seminar to begin your path to home ownership!
We provide great resources to help you become a successful home buyer! Check out our list of home buyer assistance programs on our website!
Always feel welcome to contact us for help with your Chicago home buying questions!
Ryan Gable Broker/CEO Starting Point Realty
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