First-year Illinois housing costs up more than $12,717 since 2019

Rising prices and mortgage rates are making housing unaffordable for a growing number of Illinoisans. A property tax increase on the Nov. 8 ballot could make it worse.

Rising mortgage rates and sticker prices mean the costs associated with the first year of home ownership in Illinois have risen by $12,717 for the exact same home compared to 2019 levels.

Housing affordability has reached its lowest level since 2007, as massive appreciation and surging mortgage rates have increased costs for potential homebuyers. Illinois homes have appreciated by nearly 19% from the end of 2019 through the first quarter of 2022. While growth in home values has been good for current homeowners, the combination of rising prices and surging mortgage rates have made housing substantially more expensive, although Illinois’ home price appreciation has been the third slowest in the nation.

The median Illinois home sale in 2019 was $208,965. Today that same house would go for an estimated $247,926: a difference of $38,961. Thirty-year mortgage rates have increased from an average of 3.94% in 2019 to 5.41% in July 2022.

On the front end, the cost of a 20% down payment on a home – the threshold required to avoid having to pay private mortgage insurance for conventional loans – has risen by $7,792 between 2019 and 2022 for the same home. Homeowners now must put up nearly $50,000 for a standard down payment.

Annual costs have gone up, too. Mortgage payments – principal and interest only – have gone up by $3,876 annually for the same home compared to 2019 levels. At the same time, property taxes have continued to increase, costing homeowners an estimated additional $1,048. Property taxes cost recent homeowners roughly six additional mortgage payments each year.

Altogether, annual costs of homeownership have increased by nearly $5,000 compared to 2019, without even counting inflationary changes in homeowner association fees or increased repair and maintenance costs.

Increases in the cost of homeownership have vastly outpaced the growth in incomes during the past several years, making housing the least affordable it has been since before the housing market collapse of 2008. Inflation is also making other essential items more expensive, causing disposable incomes to fall precipitously for the past 15 months. As rising costs ravage family budgets, instances of foreclosure are on the rise for the first time in 12 years.

Illinois is leading the nation in foreclosure rates so far in 2022 as more than 14,000 homeowners are in foreclosure. One in every 385 housing units – or about 0.26% of homes – either received a default notice, had an auction scheduled or was repossessed by the bank. Instances of foreclosures in Illinois have nearly tripled from last year and are up 12% from two years ago.

Foreclosure rates in neighboring states are all significantly lower than in Illinois. Illinoisans are 63% more likely to be in in foreclosure than homeowners in Indiana – the neighbor with the next-highest foreclosure rate. Illinoisans are twice as likely to be in foreclosure than Michigan (0.13%) homeowners; 2.4 times more likely to be in foreclosure than Iowa (0.11%) homeowners; 2.9 times more likely to be in foreclosure than Missouri (0.09%) homeowners; 3.7 times more likely to be in foreclosure than Wisconsin (0.07%) homeowners; and 6.5 times more likely to be in foreclosure than Kentucky (0.04%) homeowners.

At the metro level, Chicago and Rockford tied for fourth place nationally with a foreclosure rate of 0.3% each.

As homeownership becomes substantially more expensive, especially as incomes fail to keep up, more homeowners will find themselves at risk of default. Foreclosing on a home does not happen overnight. People and families often struggle and fight to make what payments they can, but Illinoisans face especially tall hurdles.

Illinois has the second-highest property taxes in the country. Property taxes are the equivalent of six additional mortgage payments for recent homebuyers, meaning many Illinoisans will struggle to find room in their budgets for housing costs and everyday necessities. As many face the decision between housing and other essentials, they can fall into foreclosure.

Illinoisans will face more financial hurdles if Amendment 1 passes this November. Amendment 1 would give government unions unprecedented power and would result in a $2,149 property tax increase for homeowners. This tax hike alone would be devastating to those worried about losing their homes. But Amendment 1 would also further inflate the state’s $313 billion pension debt. More pension debt means increased taxes and revenues would be diverted to the ballooning debt instead of being used to pay for vital programs for those most in need.

While many are forced to choose between everyday essentials and paying off their growing housing expenses, Illinoisans must remember there is still hope. Before November, Illinoisans should take a hard look at Amendment 1 and its potential to increase taxes on families and businesses. Illinoisans should also continue to fight for responsible pension reform and hold politicians accountable for the tax burdens they place on their constituents’ shoulders.

Foreclosures and taxes may be high, but Illinoisans still have the power to fight for their homes, livelihoods and futures in the voting booth on Nov. 8.