So, you’ve decided to put down stakes in the Windy City and buy some property. Chicago will be happy to have you, but there are some unique quirks to the the city’s real estate market that you should keep in mind before you fork over a downpayment and sign on the dotted line — and it has nothing to do with the notoriously bone-chilling winters.
Chicago’s a relative bargain.
Though some neighborhoods will of course be pricier than others, taken as a whole, Chicago’s real estate stock is considered slightly undervalued—and therefore, relatively more affordable—when compared to cities like New York, San Francisco and Los Angeles.
A recent analysis conducted by SmartAsset, a personal finance website, found that prospective homeowners in the Windy City need an annual salary of about $48,000 to comfortably afford the average monthly home payment of about $1,450 (mortgage, taxes and homeowners insurance included). That number is markedly lower than the $128,598 salary estimated for San Francisco homeowners, and it’s also practically half the $96,000 salary another study claimed is needed to afford to rent a Chicago two-bedroom apartment alone.
Prices are rising and homes are selling faster.
According to the most recent available sales data, homes in Chicago are selling faster—in an average of 44 days—and at a higher median sales price than they were a year ago.
The housing supply seems to have stagnated in the city, with more sellers choosing to stay and their homes and wait a bit longer to sell at a better price. The city’s supply of smaller units like studios and one-bedroom condos is also particularly waning, so the property of your dreams in a high-demand area might go fast while the market is cooler in other neighborhoods.
Taxes are on the rise.
Taxes have been trending upward for Chicago properties in recent years, and it’s important to factor that cost into the calculation of how much house you can afford. In 2018, some homeowners reported that their property tax assessments rose up to 60 percent over the previous assessment period.
Put into a national perspective, property taxes in Cook County are higher than 94 percent of the 1,414 U.S. counties with 10,000 or more single-family homes.
Beware of condo fees and parking prices.
Another key factor to keep in mind when deciding how much house you can afford in Chicago is whether the property comes with a homeowner’s association (HOA) fee. HOA fees in some Chicago buildings can run higher than your mortgage payment itself, and can surge even higher if a building association’s reserve fund isn’t properly funded to pay for any repairs or updates the building might need after you move in.
In addition, be sure to check and see what your building’s parking situation is and what it might cost. Reserved and especially covered parking might come in particularly handy when it’s a particularly snowy winter and you’re not feeling up to shoveling and navigating the long-standing Chicago tradition of “dibs.”
If you’ll mostly be biking or relying on public transit instead, also be sure to consider any potential home’s access to bike-friendly routes, bike-share stations, bus stops and train stations.
Know your neighborhoods.
Chicago is known as a city of neighborhoods, and when you’re buying your new home it’s especially important to find the right fit amid the 77 options. It’s like dating—you didn’t just go ahead and put a ring on the first person you shared an appetizer with, right?
Be sure to spend time researching and spending time—and ideally renting a place first—in any neighborhood you’re considering buying in. Some neighborhoods that have been recently identified as “hot” include Bronzeville, the South Loop, Old Irving and Beverly.