How long do you need to save to buy a home in Chicago? 4 years, experts say

Tonnette Johnson knew it was time to purchase a home of her own during the coronavirus pandemic.

Johnson, who considers herself the matriarch of her family, was running out of space to house relatives when they needed a place to stay. Also, her landlord wasn’t handling concerns about the building.

“So I said, ‘Well, it’s time for me to have my own so that I don’t have to deal with outside things coming inside of my home,’” Johnson said.

She had always thought homeownership was out of her reach, but Johnson, 57, spent two years working on improving her credit score while saving what she could before she moved into the Roseland property she now calls home.

Two years felt like a long time for Johnson, but it’s actually less than it typically takes a Chicago household to save for a down payment.

A recently published report from RealtyHop found it would take a Chicago household with an income of about $71,000 more than four years to save up for a 20% down payment on a home listed at $339,000 — the median list price for Chicago. That translates to about $67,800.

The median household income in Chicago is about $71,000, according to the U.S. Census Bureau. Still, about 17% of the city’s population is considered to be living in poverty.

Shane Lee, a data scientist at RealtyHop, said the analysis the real estate company conducted last year determined it would take more than five years to save for a down payment, meaning the timeline has shortened.

“Because of the interest rates, the median list price for typical homes adjusted itself, and also the household income in 2023 was lower,” Lee said. “In some ways, inflation has helped families with a higher income — granted, things are also more expensive in general.”

Drussy Hernandez, president of the Chicago Association of Realtors, said the Chicago market is seeing an increase in the number of people searching for homes, possibly because of the decrease in interest rates.

“We don’t have the pool of properties we normally like to see,” Hernandez said about this year’s Chicago market. “However, with the interest rates remaining at a level that’s comfortable where the consumer confidence can increase, I think sellers will see that as an opportunity to go ahead and make that commitment to move up to another property and inventory will increase as a result.”

It takes less time for Chicago households to save a down payment versus those living in Los Angeles, — where it takes more than 15 years, — and households in New York City — more than 10 years, according to RealtyHop’s report.

“The disparity between income and home prices in Chicago is relatively more reasonable than other cities,” Lee said.

When Chicago resident Tracye Logan started apartment shopping last year, she decided to instead purchase her first home when she saw rent prices in Far North Side neighborhoods were edging toward $2,000 a month.

“If I’m going to pay $1,900, then I might as well have a mortgage,” Logan said. “That’s just the way I thought about it.”

Within two weeks, she was able to find a three-bedroom condominium in Rogers Park within her budget. Logan said she had to move quickly because the building where she rented from was sold.

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She had spent the previous three years saving while improving her credit score and reducing her debt. Logan, 57, said she also dipped into her retirement plan to come up with about $9,000 toward a down payment.

Her lender helped her secure an additional $6,000 through the Illinois Housing Development Authority’s Opening Doors program. The program provided homeowners with $6,000 that is forgivable after five years.

Her down payment added up to about 10% of the condominium’s purchase price, about $18,000, Logan said.

Johnson, who purchased a home on the Far South Side, also received $6,000 in forgivable assistance through the Opening Doors program. Using those funds and her savings, she was able to gather about 6%, about $14,000, for a down payment. One of her daughters also gave money for the down payment, she said.

Johnson said she feels good knowing she can welcome her children or grandchildren when they need a place to stay. One of her grandsons lives with her while he finishes high school.

“Just the peace of mind of knowing that this is mine,” she said.

Tyler Pasciak LaRiviere/Sun-Times

Homebuyers typically turn to family to come up with enough money for a down payment, and that means households of color have less access to capital and wealth than white households, said Kristin Faust, executive director of the Illinois Housing Development Authority. The agency sees down payment assistance programs as one way to level the playing field for potential homebuyers.

The Opening Doors program was temporary, but the agency has three other assistance programs that vary from $6,000 to $10,000. One program is forgivable after 10 years, but other programs require the buyer to eventually make a repayment. The programs require the buyer to have at least $1,000 or 1% of the home purchase price.

Some people may be discouraged from buying a home because they don’t have enough in savings to make up a 20% down payment, but Faust said it’s better for someone to buy a home with a smaller down payment if it means they could start building wealth from homeownership sooner.

“You buy your first house at 25, then you’re starting to build that equity,” Faust said. “By the time you’re 45 — whether it’s that house or you sold something in between and moved into another house — you’ve been building 20 years of equity. And if you’re 45 when you buy your first house, it’s just going to take you longer.”

When Sharee Onyezia, 35, purchased her first multiunit building in 2019, she was most concerned about how much she would have to pay as the down payment. She ended up putting down less than 5% — or about $10,000 — to purchase the property using savings from when she lived at home with her parents.

Since then, Onyezia said she’s been able to purchase a second multiunit building on the South Side. Creating generational wealth for her family through homeownership was one reason she took a chance despite having initial hesitations.

“My generation, the generation of my family that has been born in America — because I’m first-generation Nigerian — and so being here, that has been something that we want to do,” Onyezia said.