Cherrell Brown, 33, had been trying to purchase a home since right before the pandemic.
She said she ran into some issues when a lender neglected to consider how her student debt would affect her qualifications for a mortgage. After that, COVID-19 hit and Brown lost her job as a site director at a preschool, halting her home search.
Now, employed again in a similar role, Brown restarted her search in November, pushed by inflated rent costs and a desire for more space.
At first she began looking for another place to rent. But one-bedroom apartments in West Chicago and Bronzeville had price tags of at least $1,200 to $1,300 a month, far more than the $850 she was paying for the West Chicago apartment she’d been renting for the last six years.
She decided it was time to buy.
“It felt like I was just throwing my money away with no gain on my end,” Brown said.
Brown closed Jan. 20 on her first home in the Pullman neighborhood, paying $156,000 for a 2-bedroom town home after qualifying based on her income and first-time homebuyer status for $4,680 in down payment assistance from her lender. She was assisted throughout the process by the Chicago Urban League, a nonprofit dedicated to helping the Black community. Her monthly payments are $1,070.41, including property taxes and homeowners insurance, with a mortgage rate of 6.375%.
Brown said she can’t believe she owns her own home.
“Every time I go into it, I am like ‘This is mine,’ and I say that a million times,” Brown said.
Although home prices soared over the last two years and mortgage rates have doubled since the start of 2022, Cook County rents have risen so much over the same time frame that some longtime renters like Brown are swapping their leases for mortgages. They’re finding help through down payment assistance and educational programs, many of which are geared toward Black and brown communities that have historically been denied equal access to homeownership.
While renting is still more affordable in most of the U.S., Cook County is the only county with a population greater than 1 million where the average rent for a three-bedroom rental home is more expensive than the cost of owning a similar sized property, according to Attom Data Solutions, a national property data collector. The data shows that median rents take up 40% of median local wages versus 38% of median wages for homeownership costs in the county, assuming a 20% down payment on a house.
While rents initially plummeted in Chicago in 2020, prices spiked 15% in 2021 and 6% in 2022, similar to national levels, according to data from Apartment List, an online apartment listing resource.
Rent prices are now easing, dropping 0.3% in January in the fifth straight month-over-month decline in Chicago, according to data from Apartment List.
Apartment List puts median monthly rents for a one-bedroom Chicago apartment at $1,274 , while Zillow estimates a typical one-bedroom rental to be $1,139.
Kristin Faust, executive director of the Illinois Housing Development Authority, notes Chicago’s variety of housing — from single-family homes to condos and two-flats — promotes affordability, keeping Chicago one of the remaining markets where potential homebuyers can find homes for under $300,000.
“Chicago is an undervalued city,” Faust said. “Our average housing price isn’t as bad as other areas.”
Her agency spearheads down payment assistance initiatives such as the newly restarted Opening Doors, or Abriendo Puertas, program, which offers $6,000 in forgivable loans for low-income families and families of color. The program began in December 2020, with financing secured through the state’s Rebuild Illinois capital plan. As of January, the program had aided more than 7,100 first-time and repeat homebuyers, using $43 million, according to IHDA. The latest round of funding stands at $8 million, which IHDA expects to help an additional 1,300 homebuyers this year.
Other assistance is available through the Neighborhood Housing Services of Chicago — a nonprofit mortgage lender focused on connecting South and West Side residents with homeownership opportunities; the city’s Micro Market Recovery Program, an effort to invest in historically disinvested neighborhoods; and individual banks and lenders.
Many assistance programs are set up to address large homeownership gaps among white, Latino and Black households in the Chicago area and nationally. In Chicago, the Racial Wealth Divide Initiative — a collaboration among a national group of economic- and policy-oriented organizations — puts homeownership rates for Black and Latino families at around 33% and 40%, respectively, compared with 54% for white families. In Cook County, the Metropolitan Planning Council shows homeownership rates hovering around 65% for white households, 50% for Latino households and 40% for Black households.
Many people faced greater barriers to entry for home buying during the pandemic. Borrowing costs shot up starting around a year ago, stopping the pandemic housing boom in its tracks, as the Federal Reserve tries to curb inflation.
Nationally, in 2022, 26% of homebuyers were first-time purchasers, the lowest share since the National Association of Realtors began collecting data in 1981.
The recent upside for potential buyers is that monthly mortgage payments for a home purchased for around $300,000 fell 0.8% in December to $1,552, though payments are still about 58% higher than December 2021, Zillow data shows. Freddie Mac data has national rates for a 30-year fixed-rate mortgage at 6.12% as of Feb. 9, down from the 7.08% peak Nov. 10.
Danielle Stanley, 33, purchased right before rates skyrocketed and home prices started dipping.
Like Brown, Stanley began her homebuying process just prior to the pandemic and was pushed to speed her search along when she received notice from her landlord in early 2022 that her rent was going up “exponentially” due to development in the community.
She noticed rent increases throughout her neighborhood and had experienced them herself. In six years, she saw her rent go from $900 to $1,300 a month.
“I was over being at the mercy of the landlord,” said Stanley, a lobbyist and personal trainer. “I wanted to lock in my housing costs through a mortgage.”
Stanley bought her two-bedroom condo near the Obama Presidential Center development for $121,000 in March of last year, right before mortgage rates spiked. She received educational support and $10,000 in down payment assistance through NHS Chicago’s Home for the Holidays and first-time homebuying grant programs.
Her mortgage rate is 3.5%, making her monthly payments $899 — which includes her property tax and homeowners insurance bills — plus a monthly homeowners association fee of $215.
As she approaches her one-year mark since purchasing her home, Stanley remains happy with her decision and hopes to invest in housing further.
“When I purchased my home, (I felt) a sense of completion and independence and being a single woman owning something felt like ‘I made it,” she said. “Reality has set in that owning a home is not easy … but I wouldn’t have it any other way.”
Many would-be, first-time homebuyers weren’t as fortunate as Stanley and are still getting shut out of the market, housing advocates say.
NHS Chicago is reaching out to people who have gone through its counseling process and been preapproved for a loan, as there are a large number of potential buyers at risk of losing their preapproval if they don’t ask for an extension, said Anthony Simpkins, president and CEO of NHS Chicago.
During the pandemic housing boom, Simpkins said he saw many of his clients get preapproved for loans and then lose out to out-of-state investors and local home flippers who offered cash and were increasingly present in communities of color.
“It is a tough market,” Simpkins said, whose organization was founded in response to the legacy of redlining that kept racial minority groups from homeownership. “We are trying to improve the racial wealth gap, but we need more resources to help working-class families to close that affordability gap.”
Brown, the first-time homebuyer in Pullman, told the Tribune that it wasn’t until her mother and brother purchased a two-flat together just prior to the pandemic that she saw individuals in her African American community own property.
“I never see anyone own their own home,” Brown said. “Once I saw my mother and brother do it together, (I saw that) it can be accomplished if we all work together with resources.”