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The dirty little secret seems to be inheritance/generational wealth, such as boomer parents gifting a sizeable sum. People don't talk about it openly, but I'm sure it happens quite a bit. The stories in the below article, which is about people in the UK, probably come up here, too.
https://www.theguardian.com/money/2022/dec/03/why-inheritance-is-the-dirty-secret-of-the-middle-classes-harder-to-talk-about-than-sex
Accenture 2 yup. You still see deed restrictions on the books, prohibiting transfers to people of color (though of course they use words like "negroes" and "coloreds"). Those restrictions are meaningless now, of course, but that stuff persisted until very recently relative to how long those communities have been around. It's crazy.
Think I disagree with the premise here.
1) Chicago area is a massive metro (3rd largest in the country) in the wealthiest country in the world. Wouldn’t you suspect there to be a lot of $1M+ homes?
2) Though there are many $1M+ homes, they make up a pretty small fraction of homes.
It’s said above, but I suspect you’re framing this a bit differently now than you will in 5-10 years. If you’re making $300k now and saving $100k+ (and growing) for the next 5-10 years, You’ll have a lot to invest (with a mortgage) in a nice home that provides a very comfortable life in an asset you expect to slightly increase in value over time.
Lots of people live beyond their means
It’s an asset until you’re underwater on your 90% mortgage and prices drop.
I sold a 500k condo in the spring and had multiple offers with 10% or less down.
My father in law is going to give us 300k that’s how I’m doing it.
I’m the one being gifted 300k no I’m not jealous
That’s quite a hefty monthly expense. Agree with B1. Lots of people living beyond their means, also might have wealthier parents willing to help
Folks could’ve locked in at low interest rates 1M two-five years ago was very different than today’s environment
Plus generational wealth
Yup. This is one factor. At the old mortgage rates, a very expensive house was very affordable. Today? Less so. Prices on these higher end homes are still going up in Chicago though, but that’s because there are far less sellers at these rates and still enough people who can do an all cash purchase. The all cash buyer at $2 million plus boggles my mind and I make more than I ever imagined…
Wealthy parents. I have a 25 year old friend who owns a 3B3B condo in the west loop that’s pretty much paid for.
The other answer beside rich parents:
Foreign investors buying houses and pied-a-terres as a legal form of money laundering.
That’s a big reason why NYC real estate is so expensive.
Look at what they actually sell for vs asking price or Zillow, etc.
Bought at $920k on combined income of $325k - being a veteran was a big deal: 0% down with no PMI for VA loans. Also having a disability rating over 70% means no property tax in IL, so that cut my mortgage payment by almost a third
Daaang. Good for you
Through long term savings strategy. Bought a small condo late 20s with 3.5% down, stayed 8 years and used equity from sale for downpayment on $900k multi-unit I moved into. Other tenants paid good percentage of mortgage so saved for down payment on SFH. Multi-unit pays for itself and part of SFH. Never did “big law” so income more in-line with other 4 year degrees. If you’re willing to live in a multi-unit for a few years it’s a quick way to build equity with other peoples money.
Agree here, best decision I ever made was buying a multi-unit (2-flat) years ago with equity I made from the sale of my first home, a condo. My husband and I continue to live there while my renter pays the mortgage+. I am happy in my unit and location and have always had great renters. Instead of opting for a SFH (we dont have kids, only 2 of us) this afforded me the extra income to buy a condo on the beach in Florida. When I retire I will live between my apt bldg in Chicago and my condo in FL, while continuing to collect rental income.
It’s not always about the parents.
A $1M property isn’t always a first time home purchase. We’re sitting on equity in our current home now. Still won’t purchase a $1M house, especially in the city, but it’s there.
Someone could have money from a business or made good investments. DINKs both with high incomes could do it as well.
A lot of Big Law attorneys, consultants, bankers, C-suites, etc that can easily afford a $1 million house. Most people I know that have purchased have two high-earners. I bought a house at $800k in 2021 and that was as much as I could stretch with one income. If my wife had a $100k/year job, we could easily have bought more house. But it works for us and our kids.
Exactly this. My sister is about to make partner in BL, bought a $1M+ house that’s gone up notably in value.
Agree with comment above! Most folks with the $1M home aren’t first time buyers. We bought our first home in burbs of Chicago for $365k. For the equity we have in it, I could easily afford an $800k home with our total combined income of $300k. Would I do that in Illinois? Eh… not sure I want to pay the $25k in taxes.
Also, I think it’s true that a lot of people live outside their means.
My single family house (probably around $700k) is at $11k property tax so your condo is most likely worth more than you think or the assessor over estimated it
Our HH is $350K and our condo is worth $320K.
We pour $100K into the stock market every year.
Can't imagine investing that much money in a $1M home but I can see the appeal.
Wife and I max out our 401k and my HSA. We also throw in $2.5K per month in a brokerage account and 1K per month in a savings account. If not $100K, probably close to it.
I bought a 675k place in Chicago 2 years into my career. Multi unit so I rent one of the units out to cut costs but put 135k down which was literally almost all I had saved to my name from living at home for a little while traveling so much. My mortgage is less than 3300 including all additional costs and escrowed property taxes. After the rental unit I pay less than 1800 a month each month to accrue equity on a place that I’ve now fixed up to the point where it’s easily close to 800k 5 years later. It’s not rocket science, it’s sweat equity. Buying a love in ready, 700k SFH would have been absolutely ridiculously stupid.
I’m hoping to do this!
Well not everyone does. There’s millions of houses in Chicago that cost 50-900k. You only see all the 1-5mil houses because that’s what your focused on. And yes there just happen to be that many wealthy people in Chicago. They certainly aren’t the majority but it can feel that way. I’m guilty of this perspective myself until recently. Honestly the people buying those expensive single family homes are simply rich from work, received windfall, or have wealthy families. Really no other explanation to it. Some are young and lucky and others may be older buyers and just have accumulated lots of $. For every 1.5mil house you see bought, think of all the other neighborhoods in this city where homes are 150-400k and that’s all many people can afford.
Many high rises are going up, 20 or so in south loop, Lake Shore East, streeterville, west loop, river north, old town, Lincoln park, etc.
Apartments are not getting scarce. Where did you see this, Accenture 4?
Don't know about $1M but I know someone who bought an $800k house on ~$200-250k salary. The house has multiple rooms and she has 2 roomates who basically pay her mortgage.
We have a combined income of ~$275K and we bought a ~$900k home in the burbs. We also locked in a 2.5% interest rate last year. I know it’s a lot of money for most people, but we value having a nicer home more than other things so we prioritize housing in our budget versus nice cars, etc. We’re also paying about the same as we were for a 2b/br in the city after considering parking spots, etc.
Why buy a house that expensive? My partner & I are @ $260k combined salary; bought a $295k condo with good note rate. It's more than enough, and very sustainable for us.
Invest the difference in something without a cost of debt associated with it.
Uptown is not the best neighborhood for raising little kids
You’re underestimating folks with wealth. But also you’re relatively very young. Those homeowners skew older.
People forget older people have more money... because they've had time to accumulate money