First-Year Housing Costs: Illinois Homeowners Experiencing an Increase

For many homebuyers, first-year housing costs fall out of view. However, Illinois homeowners now see an increase to the cost of living.

In fact, the cost of the first year of home ownership rose to $12,717 more than similar homes just a few years ago. When breaking down that $12,000+ increase in first-year costs, you see that the costs come from three key areas: property tax increases, higher mortgage rates, and (the largest of the three) paying bigger down payments on more expensive houses. As inflation affects the American housing market, mortgage continue to soar alongside the median home price.

First-Year Housing Costs Rise as Affordability Reaches New Low

As Illinois residents see their first-year housing costs rise, real estate affordability fell to a new low. Notably, affordability now fell to its lowest level since 2007. Additionally, 45 out of 50 states saw mortgage payments exceed the average rent. Despite the increases, inventory levels sit 50% lower than in 2019.

According to Zillow’s report, there are a couple main factors behind the increasing unaffordability of mortgage rates. First, incomes lag behind rising home prices. Over a quarter (28%) of a homeowner’s monthly income goes towards housing. This statistic falls a measly 2% lower than the 30% threshold, which indicates a financial burden for a family.

Secondly, the housing inventory continues its painfully slow recovery. After the 2008 recession, housing inventory failed to reach a 6.0 equilibrium, the number used to indicate a healthy balance between home buyers and home sellers. While demand declined from 2021 high’s, housing inventory is actually 14.2% below its level just one year below.

How do First-Year Housing Costs Impact Illinois Residents?

In 2022, Illinois experienced over 14,000 foreclosures in just the first six months. In doing so, Illinois reached the highest foreclosure rate in the nation. Essentially, this means that Illinoisans find themselves far more likely to wind up in foreclosure.

As first-year housing costs increase, this only creates a greater burden to Illinois residents. From January 2022 to June 2022, Illinois displayed a foreclosure rate of 0.26%, again the highest in the country. As a matter of fact, this rate led Ohio by a full 0.05%. More so, it represents at least a 0.20% higher than the lowest rates.

Looming Property Tax Hike for Illinois Residents

Now, Illinois legislators discuss a property tax hike with a potential $2,149 property tax increase. Should this occur, the foreclosure rate holds the potential for additional inflation as first-year housing costs increase yet again.

For legal guidance with Illinois residential and commercial transactions, contact the real estate attorney at Lee Scott Perres, P.C.