A whole host of questions spring up when you think about purchasing a home. But one in particular can nag at you throughout the process: Is it actually the right year to buy? In Chicago in 2020, all signs point to yes.
First, it’s affordable: The median sale price is $288,000, far less than major cities on the coasts. Interest rates also remain at historic lows, meaning that money is inexpensive to borrow. And finally, homebuying in Chicago is predicted to get more competitive. Purchasing property this year means you might get ahead of a wave of potential millennial homeowners looking to buy in Cook County.
The downside? Chicago state and local taxes are high, especially for homeowners. Illinois has the second-highest property tax in the nation; on a $400,000 home, your average property tax bill can run almost $10,000. There are more barriers to homeownership—like a lack of equal access to financing and rising utility bills—and fewer homes priced for low-income residents. And in a diverse, segregated city that’s experiencing gentrification at a rapid rate it can be a challenging to pick a neighborhood, too.
Whether you’re an excited first-time homebuyer navigating the market or an empty nester needing to downsize, Curbed Chicago is here to help. We’ve rounded up experts—real estate agents with decades of experience, residential developers, and housing policymakers—and asked them: Should you buy in Chicago in 2020?
We collected the responses below before the outbreak of novel coronavirus in the U.S. How might its spread impact the housing market this year? Read this.
Annie Coleman
Managing broker, LivingRoom Realty
If you are planning to stay for the long term, then 2020 is a good year to buy. Rates are low and being able to lock them in will save buyers a significant amount of money. I think larger companies are going to continue to relocate downtown, and property values will continue to rise in and around the city center. I’m concerned that my client base, especially nonprofits and creatives, will get priced out of the areas they currently serve.
If someone is planning on staying less than five years, I would generally not recommend buying unless they are providing a solid value add (i.e., improvements) to the property. There is potential in the next year or two for the market to be sluggish in certain property types and areas.
“Homeownership is a proven strategy to build wealth—and Chicagoans are increasingly focused on closing the racial wealth gap … But even in 2020, many Black and Latinx Chicagoans face higher barriers to accessing mortgages.”
—MarySue Barrett
MarySue Barrett
President, Metropolitan Planning Council
Homeownership is a proven strategy to build wealth—and Chicagoans are increasingly focused on closing the racial wealth gap. Momentum is building, thanks to compelling findings from our Cost of Segregation study with the Urban Institute. But even in 2020, many Black and Latinx Chicagoans face higher barriers to accessing mortgages. And Illinois’s pension debt and Cook County’s reassessments are seeding deep uncertainty, making many renters pause as they consider buying.
Those are the downsides. The upsides are that metropolitan Chicago has many pockets of affordability. Maintaining existing affordable homes—and significantly increasing the supply—was part of the motivation to create Regional Housing Solutions and is fueling MPC’s advocacy for stronger state incentives for construction of affordable units, prioritization for building homes near transit, and zoning changes that would encourage more granny flats. It’s all about giving people more choices and more chances at success, whether they rent or own.
Jonathan McCulloch
Co-CEO, Belgravia Group
The oldest millennials are now in their late 30s, and those aged 25 to 34 represent the largest demographic cohort in Cook County. This population segment is now forming families and will enter the housing market en masse; millennial homeownership rates are already on the rise and have reached their highest level in six years in the fourth quarter of 2019.
To the same extent that this cohort has been a driving factor in sustained occupancy levels and rental price escalation in the apartment market for the past five years, a similar impact may be forthcoming over the next two to 10 years in the for-sale housing market. By buying now, you are getting ahead of this wave in demand, which has the potential to lift home values across the city, especially considering the current low cost of borrowing.
Jeff Benach
Principal, Chicago-based Lexington Homes
In the Chicago metro market, prices haven’t risen nearly as much as in other parts of the country. So, it may not be a great time to buy a new home in Chicago for the purpose of flipping for a profit. But it is a good idea if you’re wanting a new home priced similarly at resale. Buyers can still get a good value on a new-construction home compared with older, resale inventory in nearby, trendier areas.
Jason Davis
Real estate agent, ACD Group and Compass Real Estate
We have seen an uptick in buyers entering the market as interest rates continue to recede from last year to near all-time lows. The 30-year fixed mortgage rate is now averaging below 3.5 percent, which means money is relatively inexpensive to borrow. There are also more and more options for buyers to obtain conventional financing with as little as 3 to 7 percent down (the National Association of Realtors recently noted that the majority of first-time homebuyers typically put down just 7 percent).
However, buyers are facing some challenging headwinds as well. The change in tax laws under the current administration has partially removed some historical incentives for homeownership by limiting the state and local income tax deductions. At the same time, we continue to see Chicago property taxes outpace that of the broader country.
Overall, Chicago is still a very attractive place to invest in real estate over other major metro areas, as prices have started to flatten and buyers are continuing to extract greater leverage in purchase negotiations.
“I’m a suburban, soon-to-be empty-nester who’s looking to return. There will be many more like me.”
—Pete Saunders
Pete Saunders
Urbanist and writer
I wholeheartedly say yes, Chicago is a great place to buy now and well into the future. Why? First of all, Chicago remains a tremendous value relative to other large cities nationwide. The city’s Loop and north lakefront neighborhoods compare favorably in population, density, demographics, education, and amenities to San Francisco, but at a fraction of the housing costs.
Second, as the back-to-the-city movement gains traction (yes, it’s real), we’ll see city neighborhoods appreciate at a faster rate than their suburban counterparts. Homes in the city have already outpaced the post-recession rebound seen in suburban areas. Personally, I’m a suburban, soon-to-be empty-nester who’s looking to return. There will be many more like me.
Ben Creamer
Co-founder and managing broker, Downtown Apartment Company
The sun is shining on Chicago buyers. In the city center, we’re finally seeing an uptick in new condominium construction, which had been stalled in favor of rental developments over the past few years. New-construction condominium buildings now have generous amenity offerings and white-glove services similar to what renters have become accustomed.
Connie Nadia Dornan
Suburban broker, @properties
There is a lot of speculation, particularly with the upcoming election, but this is the best time to be purchasing or selling a home. We have low interest rates, the economy is stable, individual net worth is increasing, savings rates for individuals are increasing, and wages are increasing. At the end of the day, real estate is a safe place to park your money for the long term. It is a real asset and it’s tangible.
Interview responses have been lightly edited for length and clarity.