Illinois Real Estate Markets

Illinois is a two-state story — Chicago and everywhere else — and both halves underwrite very differently. Price-to-income 2.49, cap rate proxy 5.3%, median home $260,426, across 12,692,653 residents and 13 metros. The two numbers that reframe the whole pitch: 2.12% effective property tax (highest in the Midwest cohort) and −0.27% net migration. Cash flow works in specific pockets; at the state level, the math fights you.

The FHFA HPI is up 42.0% over five years and 4.5% last year — below the Midwest peer pace. Builders pulled 19,089 permits TTM at 1.5 per 1,000 residents — a slow pipeline. Net IRS migration lost over 21,000 returns in the latest vintage — the steepest outflow in the peer cohort. Unemployment sits at 5.4% with median household income at $83,872.

The metros split into three tiers by cash-flow math. Chicago-Naperville-Elgin ($302K median, 4.6% cap, 9.6M pop, straddles IL-IN-WI) is the anchor — institutional depth, employment diversity, but tighter cash-flow math and the state's property-tax ceiling. Danville ($93K, 8.4% cap) and Decatur ($122K, 6.8% cap) are the deep-value pair — cap rates high enough to absorb the property-tax hit. Peoria, Rockford, Springfield, Kankakee round out the mid tier at $160K–$186K with 5%+ cap rates.

Against Ohio and Indiana, Illinois loses on property tax, income tax, and migration trend — the three lines that define Midwest cash-flow underwriting. What Illinois offers that neither Ohio nor Indiana does: cap rate proxies north of 6.5% in Danville and Decatur, and Chicago's institutional labor market. The worst-case read is assuming state-level averages apply to your target metro — Chicago and Danville share almost nothing.

Operating environment is mixed. 45-day eviction timeline — longer than the Midwest 30-day norm. Rent control is locally allowed (Chicago caps deposits at 1.5 months; elsewhere, no cap). 67.1% homeownership, 7.9% vacancy. Insurance averages $1,328/yr. 4.95% flat state income tax on all rental income.

So what does an investor do?

• Cash flow: Downstate is the play. Danville and Decatur have cap rate proxies above 6.5% — generous enough to absorb the property-tax drag. Peoria, Rockford, Springfield round out the secondary set. Model the 2.12% property tax as a first-line expense, not a footnote.
• Appreciation: Chicago suburbs only. The state's HPI of 42.0% is well behind the Midwest peers; downstate metros don't have the forward-demand thesis to justify tighter math.
• Out-of-state: Illinois is the Midwest state most likely to surprise — in both directions. Danville at an 8.4% cap reads nowhere else in the country at that entry price. But the tax and migration drag mean per-property underwriting is mandatory; the state averages lie. Compare a specific metro directly against Indiana or Ohio before committing.