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Chicago’s housing prices are soaring, but unlike other major metros, they’re not setting records. Here’s why.

U.S. home prices have been at record highs in every major metro area but Chicago, where the market is hot but a number of factors, from a slow recovery after the Great Recession to geography, have meant the city hasn’t seen the numbers logged at the height of the real estate boom.

Overall, housing prices jumped 18.6% year over year in June, according to the latest S&P CoreLogic Case-Shiller index of home prices. In the nation’s 20 largest metro areas, the jump was 19.1% with prices now at record highs in all of those cities except Chicago.

Chicago hasn’t broken home price records partly because the metro region’s growth slowed to a crawl over the past decade, meaning there’s less demand for housing than there would be in rapidly growing cities, said Bill Adams, senior economist for PNC.

Many of the record-setting cities are geographically constrained, unlike the Chicago area. And home prices dropped more severely in Chicago during the foreclosure crisis than in the nation as a whole, he said.

“Relative to the rest of the country, even a strong housing market in Chicago is not as hot as housing markets in other major metro areas,” he said.

Prices rose the most in Phoenix — 29.3% compared with a year earlier — followed by San Diego, with a 27.1% increase, and Seattle, at 25%, according to S&P CoreLogic Case-Shiller 20-city home price index. Chicago’s year-over-year increase stands at 13.32%.

Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, said some perspective is necessary here: Chicago’s market is little more than 1% below its peak in September 2006 and experts believe it will meet if not exceed that peak.

“A couple of good months and you’ll be there (at record levels) without really, to me, … much doubt,” Lazzara says.

In question is whether the pandemic and burst of demand for bigger homes led to the spike in prices, Lazzara says. He points to lockdowns that prompted residents of major metropolitan areas in smaller digs to begin looking for larger places to serve as both home and office.

At the same time, some who follow the track of living single in the city, then marrying and moving to the suburbs may have moved up their schedule from a few years down the road to now.

“Was that just an acceleration of demand that would have happened anyway?” Lazzara said. With the shutdown, “the attractiveness of being in the city where … cultural stuff is here and sports — all of that was diminished because of the shutdown. And so people who might have moved in 2022 or 2023 decided, ‘I’m gonna move now in 2020 or 2021,'” he said.

How much home prices continue to rise will depend on when a larger supply of homes comes on the market, PNC’s Adams said. Many potential sellers, especially older Americans considering moving into retirement homes, are waiting for the pandemic to come under control before they sell.

He predicts prices will continue to rise, but said the increase might slow after the coming months.

Rising prices have created concerns about home affordability, especially for those who haven’t purchased homes yet. But the uptick might also be good news for Chicago-area homeowners, especially those hit hard by the drop in prices more than a decade ago, he said.

“That’s bolstering household balance sheets and household finances, and is going to fuel spending power in the region’s economy,” he said.

The Associated Press contributed.

sfreishtat@chicagotribune.com

ldonovan@chicagotribune.com

Twitter @byldonovan

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