The multifamily market in Chicago was fast and furious in the first half of 2012. Buyers entered the market at a pace not seen in 5 years, effectively absorbing most of the available income property product that was priced at market levels. The total Months Supply of Inventory for 2-4 unit buildings on the north side continued to trend down to 3.2 months supply. See the complete market statistics.
Properties that hit the market now are getting a ridiculous amount action and multiple bids are almost expected. Short sales are still prevalant but now sell at much less of a discount to what would be considered market pricing. Bank owned property (REO) is still coming to market but at a greatly reduced rate. When it does hit, it's moving fast.
More and more buyers are bidding prices of distressed properties way up. This is making it difficult for investors who seek out value-add opportunities to rehab and improve then resell at market rates for profit. I've seen a lot of less experienced investors buying into this arena with hopes of flipping for big profits. You still have to buy right, just like always.
Investors who were in the market picking up properties in 2009/2010 are in a position to flip out of many of these recent purchases but we're not seeing a lot of that just yet. I'm guessing investors who were in the market, buying at the lows, weren't expecting such a quick turn around and may not even realize how much values have trended up in some neighborhoods.
A lot of would be sellers are still hanging out on the sidelines mostly because they don't realize what a great market this is to sell into. Others have waited 5 years for a recovery so what's another 12-18 months, especially if you think the market will continue to trend up.
Watch for more buyers to get into the market through the balance of the year especially if rates continue to trend down and rents continue their steady climb. Increased competition and low inventory will keep upward pressure on pricing.