It's a well known fact that housing in Chicago is relatively affordable compared to coastal cities like New York, San Francisco, or Boston. But a new study from UBS states that Chicago is the world's only under-valued city. UBS analyzed 20 developed cities around the world to assess which are at the greatest risk of a housing bubble. While none of the major U.S. cities are in dangerous territory, San Francisco, Los Angeles and New York are overvalued. Boston is fairly valued while Chicago is the only undervalued city on the list.
I've long felt that Chicago's housing market represents a "goldilocks" type of situation for landlords and investors. The city's economy is highly diversified and no one industry dominates (think of Tech in San Francisco, Entertainment in Los Angeles, or Autos in Detroit). This diversification means the city's economy (and by extension, the city's housing market) will be more immune to any industry-specific downturn. From an investor's point of view, Chicago's relatively lower property values coupled with it's strong rents means great returns. We may not have the eye-watering price growth of say, San Francisco (80% rise in home prices over just the last 6 years), but we believe the slow and steady appreciation will increasingly attract national and international investors.
The chart below show the UBS Global Real Estate Bubble Index and the article can be accessed here.
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