January–Fall 2025 and Beyond
From the start of 2025 through the fall, Chicagoland’s housing market has reflected both resilience and strain. Rising interest rates in 2024 carried over into the first quarter of 2025, slowing buyer enthusiasm. Yet by mid-year, momentum began to shift as inflation cooled, wages showed modest growth, and more sellers re-entered the market. As the region heads into the final quarter of the year, buyers and sellers alike are navigating a market defined by contrasts: strong suburban demand, uneven performance in city neighborhoods, and persistent affordability pressures.
Housing does not exist in isolation. Chicago’s broader economy has played a critical role in shaping the real estate landscape. Job growth has been steady in health care, logistics, and professional services, even as finance and tech sectors moderated. Consumer confidence in the Midwest has ticked upward, though households remain cautious about big-ticket purchases. Mortgage rates, which started 2025 in the high-6% range, eased slightly during the summer, creating a small but important lift in buyer activity.
Through fall 2025, overall home sales across the metro area trailed 2024 by a narrow margin, but pricing has held firm. Median home prices in the city hovered near record levels, while suburban counties experienced steady appreciation, especially in DuPage and Lake Counties. Inventory remains a central challenge. Months of supply in many neighborhoods sit well below what economists consider a balanced market, leaving buyers competing for well-located properties. Homes priced under $400,000 in the suburbs continue to draw multiple offers, while luxury listings in the city see longer days on market and heavier negotiations.
Chicago’s neighborhoods tell a story of divergence. The South Loop and West Loop, once magnets for young professionals, have seen stable condo demand but slower appreciation than in the 2010s. Rising HOA fees and property taxes weigh on affordability downtown. On the North Side, single-family demand in areas like Lincoln Square and Ravenswood has been stronger, supported by families prioritizing schools. Meanwhile, suburban markets — particularly in DuPage, Kane, and Will Counties — continue to attract city out-migrants seeking space, newer construction, and perceived value. The suburban single-family market has outpaced condos and attached housing in appreciation through 2025.
Builders are responding cautiously. While suburban subdivisions are adding new single-family homes, developers remain wary of overbuilding given financing costs and material price fluctuations. In the city, adaptive reuse of older office buildings into residential units has become a more prominent theme, particularly downtown, where office vacancy remains elevated. Large-scale condo developments are rare, replaced by boutique projects targeting niche buyers.
Chicago’s rental market remains tight. Apartment vacancy rates in desirable neighborhoods — from River North to Logan Square — are near historic lows. Rents rose again in 2025, though at a slower pace than the sharp increases of 2021–2023. Suburban multifamily complexes remain attractive to investors, with stable cash flows and low turnover. At the same time, debates about affordability and rent policy have kept the topic in the spotlight at the city council level.
Mortgage financing has been the linchpin of 2025’s housing story. Rates that approached 7% at the start of the year cooled closer to 6.5% by fall, easing monthly payments slightly but still challenging first-time buyers. Cash buyers continue to represent a meaningful share of city transactions, particularly for investment properties. Lending standards remain firm but not restrictive, with FHA and VA buyers facing stiff competition in lower-priced markets.
Migration patterns continue to shape housing demand. Outmigration from Cook County to suburban counties and other states persists, though Chicago retains its draw for young professionals, immigrants, and students. Millennials remain the largest cohort of homebuyers, though affordability constraints are delaying some purchases. Baby Boomers, on the other hand, are increasingly downsizing into condos or moving to warmer climates, slowly freeing up inventory in established neighborhoods.
Property taxes remain one of the most significant concerns for homeowners within the city. Increases approved in 2024 are being felt in 2025 bills, influencing both buyer decisions and neighborhood appeal. At the same time, the fallout from the National Association of Realtors (NAR) settlement is reshaping how commissions are structured, with buyers now more directly aware of representation costs. This shift has created confusion in the early months of adoption but will likely normalize into 2026.
The core challenge facing Chicagoland is affordability. Home prices have outpaced wage growth, particularly for entry-level buyers. Rising insurance premiums linked to climate-related risks — especially near floodplains and riverfront areas — add another layer of cost. Developers face high borrowing expenses, making it harder to deliver new affordable housing at scale. These pressures risk sidelining younger households from ownership.
Looking ahead, most economists project a cautiously optimistic 2026. If interest rates ease further — with some forecasts suggesting sub-6% mortgages by mid-year — buyer demand could strengthen meaningfully. Prices are expected to appreciate modestly in most suburban markets, while city neighborhoods may see slower but steady growth. The condo market in the downtown core will remain sensitive to both tax policy and office-to-residential conversions. Overall, the balance of supply and demand suggests continued competition in the affordable price brackets, with luxury inventory moving more slowly.
From January through fall 2025, the Chicagoland housing market has demonstrated both durability and imbalance. Suburban demand remains strong, city neighborhoods show mixed performance, and renters continue to face rising costs. For buyers, patience and preparation remain essential; for sellers, well-priced homes in desirable locations continue to command attention. As 2026 approaches, the region stands at a turning point: the trajectory of interest rates, tax policy, and consumer confidence will determine whether Chicagoland enters a period of renewed growth or prolonged caution.