A 2019 article by Realtor.com stated that Midwest real estate is among the highest-ranked real estate market in the United States 2019. Besides its affordability to invest, several Midwestern states offer stability due to their slow pace of life. On top of that, it is also worth noting that the Midwest is currently witnessing a steady increase in rents and home values.
Midwest’s unique economic growth also provides a vast opportunity for investors to make a profit in real estate. So, keep reading to find out the reason why Midwestern states are the best location to invest in real estate.
Midwest at a Glance
The Midwest, also known as the Midwestern United States, is one of four consensus regions according to the US Census Bureau. Geographically, the region is located between the Northeastern United States and the Western United States. The region also borders Canada n the north and the Southern United States in the south.
The Midwest region is divided into two subregions, the West North Central and East North Central, with the Mississippi River as the natural dividing line between the two subregions.
It is worth noting that there are slight variations regarding the Midwest regional definitions. However, according to the most commonly used sources provided by the US Census Bureau, the Midwestern United States is comprised of 12 states, namely Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin.
In addition, some of the Big cities in the Midwest are Chicago, Cleveland, Columbus, Detroit, Indianapolis, Kansas City, Milwaukee, Minneapolis, Omaha, St. Louis, St. Paul, and Wichita.
The Midwest population and economic growth
A 2021 report by the United States Census Bureau revealed that 68,995,685 people live in the Midwest, with Iowa, Kansas, and Missouri as the most populated states in the region. In addition, the 2020 US Census revealed that Chicago, Columbus, and Indianapolis are the top three most populated cities in the Midwest. The US Census data from 2020 and 2021 shows stable population growth in the region, with 23.7% each year.
Economically speaking, the Midwest is also home to the regions with the fastest economic growth. A 2019 Manhattan Institute of Policy Research article revealed several cities in the region that are considered as outperforming regions in the US. This is based on the fact that these cities can surpass the US average metric, particularly in population growth, employment rate, GDP per capita, etc. These regions are:
- Cincinnati, Ohio
- Columbus, Ohio
- Des Moines, Iowa
- Fargo, North Dakota
- Grand Rapids, Michigan
- Indianapolis, Indiana
- Kansas City, Missouri
- Lexington, Kentucky
- Madison, Wisconsin
- Minneapolis-St. Paul, Minnesota
A monthly data provided by the US. Bureau of Labor Statistics shows a promising result for employment and unemployment rate in the Midwest. As of May 2022, the Midwest employment rate is at 33,778, a significant improvement from January 2022 with 33,263.8. On the other hand, the unemployment rate also shows a significant decrease from January 2022, with 1,317.6 at the beginning of the year and 1,187.7 in May 2022.
Farming and agriculture are one of the biggest drivers of the Midwest’s local economy, which is responsible for billions of dollars in export revenue. A 2012 book by Greyson S. Colvin and T. Marc Schober describes Midwest as the wealthiest farming land in the world. Due to the soil fertility in the region, farmers can produce an abundant harvest of corn, wheat, soybean, oats, and barley.
In addition, the region is also known as the center of the financial service and manufacturing industry. Chicago, being the largest economic and financial center in the Midwest, is home to some of the most well-known banks and insurance companies, such as the Fifth Third Bank, State Farm Insurance, and Berkshire Hathaway.
Besides being the center of the nation’s financial center, the Midwestern states are also home to leading companies in the manufacturing, and research and development industry. Some of the most famous auto manufacturers, such as General Motors, Chrysler Automobiles, and Ford Motor Company are headquartered in the Detroit area. You can also find some of the fastest-growing companies in the Midwest, such as Medlab International and Dynamic Logistic.
Reasons to invest in Midwest real estate
For many real estate investors, the Midwest is a gold mine for investment. Accordingly, several aspects make the Midwestern United States a perfect opportunity to invest in single-family rental homes or small multifamily buildings. For instance, the real estate market in the region is relatively affordable and plentiful.
Due to its relatively low cost of living, the Midwest is the perfect destination for urban citizens to settle, especially in small Midwestern cities like Des Moines, Fargo, and Madison. A Realtor article dated October 2019 revealed that the Midwest is home to several small metro areas and towns where homes are relatively affordable, resulting in a strong in-bound migration.
Besides its low cost of living, the Midwestern region is well-known for its simpler and well-contained life. Despite the simpler way of living, the Midwest is still a center of economic activity in the United States. On top of that, if coast cities like New York or Los Angeles are known for their crazy traffic and neon lights, the Midwest is known for its serene outdoors and calming nature. As a result, the Midwest seems to be the perfect escapade from the bustling city life.
Midwest real estate investing cities
As previously mentioned, the Midwest provides a unique opportunity for real estate investors. This is proven by the US Census on Quarterly Residential Vacancies and Homeownership for the first quarter of 2022. The report shows that the Midwest has the highest homeownership rate in the United States with 70.1%. However, you have to be selective in choosing the right city to invest in. So, below are the five hottest cities in the Midwest real estate market.
- Chicago, Illinois
Being the center of the financial industry is the reason why Chicago is an ideal city to invest in real estate. With around 2,696,000 populations, Chicago is one of the Midwestern cities with the highest population growth. As reported by Statista, Chicago also has the highest GDP among other Midwest states with $690 billion, 2.8% growth since 2020.
Zillow’s June 2022 report showed that Home Value Index in Chicago is around $320,442, with a median listing price of $359.000 and home value growth of 13%. Realtor.com’s 2022 report shows that the average renting fee for a 3-bedroom home is around $2,500 with rent growth of 10.7%. In addition, around 47% of Chicago households are renter-occupied.
- Cincinnati, Ohio
As of July 2021, the US Census Bureau estimates around 308,935 people live in Cincinnati, showing a 0.4% decrease from 2020. In addition, the bureau also reveals that this Midwest city achieve $152 billion in 2021, improving by 0.87% since 2020.
The 2022 Zillow reports show that the Home Value Index in Cincinnati is around $234,289 with home value growth of around 17%. Furthermore, a May 2022 report from the Cincinnati Area Board of Realtors reveals that the median listing price in the city reached $265,000, and the median sales price reached $245,000. In addition, the median rent for a 3-bedroom home is around $1,090.
- Columbus, Ohio
As of July 2021, the US Census Bureau estimates around 906,528 people live in Cincinnati, showing a 0.1% increase from 2020. In terms of the economy, the 2020 report by the US Bureau of Economic Statistic indicates that Columbus had reached $137 billion in GDP.
As of June 2022, Zillow reported that the Home Value Index in Columbus, Ohio is around $243,967, a 13.6% improvement since 2021. In addition, Redfin’s report of the same date indicates that the average sales price for all types of Midwest homes in Columbus had reached $280,000, slightly higher than the median listing price of $250,000. On the other hand, the median rent for a 3-bedroom home is around $1,682.
- Des Moines, Iowa
Des Moines, Iowa is the eighteenth Midwest city by size, with a population of only 214,778. The city experienced a slight decrease in population of 1.0% since 2020. Despite being considered a small city, the US Bureau of Economic Analysis indicated that Des Moines had reached a GDP of $56 billion in 2021, a significant 6.4% increase since 2020.
The June 2022 report by Zillow indicates that the Home Value Index for Des Moines homes is around $191.340, an 11.6% increase since 2021. In addition, the Realtor’s report of the same data revealed that the median listing price for all home types is $200,000. On the other hand, the median sales price is slightly lower at $195,000.
In 2021, the US Census Bureau indicates that around 40.4% of the house in Des Moines is renter-occupied. Meanwhile, a July 2021 report from Zumper revealed that the average rental fee for a 3-bedroom house is around $2,300, a significant increase from the previous month.
- Indianapolis, Indiana
As of July 2021, the US Census Bureau estimates around 882,039 people live in Cincinnati, showing a 0.6% decrease since 2020. In addition, the US Bureau of Economic Analysis 2021 report shows that the city experienced a significant increase in GDP with a total of $420 billion.
In terms of housing and residence, Indianapolis home values reached $227,543 according to Zillow Home Value Index Report dated June 2022. In addition, data obtained from Realtor shows the median listing price for Indianapolis homes had reached %240,000. However, there are no data on the median sales price.
The US Census Bureau report from July 2021 indicated that around 46% of houses in Indianapolis are renter-occupied. Furthermore, Zumper’s July 2022 report shows that the median rent fee for a 3-bedroom home is around $1,525. In addition, Zumper’s report of the same date indicates that rents in Indianapolis have increased by 12% year-over-year.
Midwest investment property FAQs
- Are house prices dropping in Illinois?
Put simply, the house prices in Illinois are not dropping. According to the data from Illinois Realtor, houses in Illinois sold faster in May 2022 than in May 2021 due to the rising mortgage rates and robust demand. Moreover, the median price forecast of Illinois indicates positive annual growth for June, July, and August. Furthermore, the median price is predicted to rise by 4.7% in June, followed by a steady rise of 7.4% in July, and finally, reach 8.6% in August.
- How is the real estate market in Wisconsin?
The Wisconsin Realtors Association report for March 2022 shows that the median price for a home in Wisconsin is rising by 10.2%. A Midwest real estate news report by NBC15 further clarifies that the price for a home in the same month had jumped to $253,500. So, if you wish to invest in Wisconsin real estate, you should start now before the price goes up exponentially.
- Are home prices dropping in Chicago?
It is worth remembering that Chicago is the hottest market for real estate. Data released by the Chicago Association of Realtors on May 14 revealed that the median price for single-family homes has increased by 1.5% since 2021. Realtor’s latest report dated April 2022 further revealed that the median list price of homes in Chicago was $349.9K, showing a relatively flat trend year-over-year. So, to put it simply, Home prices in Chicago are stable.
- Why are home prices so high?
It is quite common for new investors to ask about the reasons for high home prices. Historically, home prices in the US are high due to several reasons, including political, economic, and other societal changes. According to JD Esajian of Fortunebuilders, the main factors why are home prices so high are lower interest rates, an increase in local zoning regulation, higher construction costs, lower builder confidence, changing demographic, and an increase in land prices, government subsidies, and lower supply.
The Midwestern states of the United States provide a vast opportunity for real estate investors to build some fortune. The trend of investing in Midwest real estate is supported by the exponential economic growth in the region. On top of that, the Midwest seems to have certain charms that make the region a great destination for migration from the coast.
Furthermore, reports also show exponential growth in median property prices and renting fees across the Midwestern region. If the trend persists for years to come, the Midwest will sure be a gold mine for real estate investors. When you’re ready, contact a Midwest property management firm to start investing.