Chicago Housing: Cheaper, Still Unaffordable
None of them can afford an ordinary home in Chicago.
This sorry excuse for a joke comes courtesy of the recent findings from a study released by the Center for Housing Policy, which concludes that owning a dream home might be a pipe dream for many workers in the Chicago area and across the country.
There's good news and bad news in the study, titled "Paycheck to Paycheck: Wages and the Cost of Housing in America." Let's start with the good.
The median home price in Chicago was $210,000 in 2009, a 6.7 percent drop from $225,000 in 2008. This makes the city the 40th most expensive market in the U.S., the same spot it held last year.
As expected, this decline in prices has opened up the doors for bargain hunters looking for a good deal and in Chicago, they're buying. According to the Illinois Association of Realtors, 1,225 homes were sold in the city of Chicago in February, up 41.5 percent from the 866 homes that were sold in the same month last year.
"The tax credit has been a tremendous help for those home buyers on the fence," said Genie Birch, president of the Chicago Association of Realtors and a broker associate with Koenig & Strey GMAC, Chicago. "With interest rates still favorable, and a month left before the tax credit expires, those considering making a purchase should do so now, to take advantage of these great opportunities while they're still available."
OK, enough of the fluffy stuff. In the words of Al Pacino, "Here comes the pain!"
Under the assumptions that no more than 28 percent of household income should be used to pay off a mortgage, property taxes and insurance, along with a 10 percent down payment, the Center for Housing Policy estimates that the annual income necessary for owning a home in Chicago was $62,686 at the end of 2009, down 14.3 percent from $73,104 last year.
Though the qualifying income threshold has dropped considerably, it doesn't do much for many of the city's workers. Using salary figures from Salary.com, the study indicates that elementary school teachers ($55,376), police officers ($54,720) and paralegals ($58,217) in Chicago would have a hard time owning a median-priced home. Accountants, electricians, fire fighters and news reporters are also among the many workers who fall below the $62,686 income level.
This means that seemingly humble homes like this and this would be difficult to own for Chicago residents in many professions.
The study also highlighted green economy workers, who earn relatively higher wages than their non-green counterparts. However, in Chicago, insulation workers, HVAC mechanics, environmental engineering technicians, electrical engineering technicians, and maintenance and repair workers all earn salaries that fall short of the annual income needed to afford a typical home.
In reality, however, this doesn't change the fact that Americans seem willing to cut spending elsewhere to make sure they can afford a mortgage, even if it means reaching beyond the traditionally recommended 30 percent threshold of a household's annual income.
According to 2008 U.S. Census data, 43.8 percent of homeowners in the Chicago area spent 30 percent or more of their household incomes on their mortgages, while 17.8 percent spent 50 percent or more. Nationwide, 37.7 percent of homeowners spent 30 percent or more on their mortgages, while 14.7 percent spent 50 percent or more. That's a dangerous proposition in our shaky job market.
See homes for sale in Chicago at AOL Real Estate.