Question: I recently purchased a new construction in West Humboldt Park. The prices are a lot lower there than in areas like Logan Square or Wicker Park. How can I tell whether my new home will appreciate well?
Answer: Affordable, quickly-developing areas such as Humboldt Park tend to be volatile when it comes to property values. They typically experience the effects of general market trends on a larger scale than other, less affordable neighborhoods.
As an example, we can compare rapidly appreciating Logan Square to its eastern neighbor, Lincoln Park. Lincoln Park prices increased until August 2008, when they peaked at $470,000. But even during the subsequent real estate crash, they fell by less than 10%. Since reaching their lowest levels in May 2012, they have risen by a very healthy 16.5%.
Prices in Logan Square were nowhere near as stable. Prices decreased through the 2008 crash, eventually bottoming in April 2012 at 33% off their peak values. Since then, Logan Square property values have sky-rocketed 62.5%, completely erasing their earlier losses.
While both neighborhoods lost value, then regained that value and then some, Logan Square experienced much more dramatic swings.
So if prices in the general market continue to rise, people will continue to be pushed West into more affordable neighborhoods, and they’ll pick spots close to the 606 trail and other neighborhood infrastructure, like parks and public transit. If prices were to depreciate, developers would stop building and renovating in that area, and people would move back East into housing that, thanks to the depreciation, is suddenly more affordable.
In short, your appreciation is some multiple of the general market. If it appreciates, your home should appreciate even faster. If it depreciates, your home would probably depreciate even faster.