For some, distressed homes can unfortunately carry a stigma, by often times representing homes that owners simply could not maintain or afford. Sometimes these kinds of properties can be in poor conditions or they are at risk of foreclosure. Realistically speaking, in terms of the real estate market within or around the Chicago area, residential real estate distressed properties are doing better than conventional homes.

Even though many people in the past year did not see price increases in conventional home sales, banks and other real estate firms selling distressed homes did. According to Midwest Real Estate Data, the median sale price of these kind of properties rose 6.3% from last year, while the median sale price of conventional homes only rose 0.4%.

Even though real estate consumers are usually not initially drawn to distressed homes, these properties seem to be getting more popular mainly due to chicago neighborhoodtwo reasons. First, there seems to be an increased competition in this distressed market, where investors and homeowners are more educated on historical real estate data and are better equipped to negotiate better deals. Second, banks and firms listing these kind of properties are very aware of the stigma they represent, hence they are beautifying and investing on making the properties more attractive in order to fetch higher prices.

And while the distressed home market seems to be scaling up, the conventional home market is slowly drowning. Stagnant job and population growth as well as stagnant investment returns in Illinois can undoubtedly hurt the overall Chicago market. For example, Chicago-area home prices only rose 2% this year, while home prices in San Francisco, Denver, and Portland, Oregon have risen 11%.

The increasing difference between distressed and conventional home prices in Chicago is very noticeable, especially in the affluent areas. In neighborhoods like Chicago’s Near North Side, distressed homes are being sold at 2.8% more than conventional homes. Moreover in suburban neighborhood Buffalo Grove, the median price for distressed homes rose to 19%, while the median price for conventional homes is at a dire 0.1%.

To be fair, some conventional home prices manage to increase in gentrifying Chicago neighborhoods like Lincoln Square and Logan Square. They went from 3.5% last year to 4% this year. But the reality is that until Chicago’s overall economy improves the real estate marketplace may very well continue to find success just in distressed homes due to the continuous and increasing levels of foreclosures.