Why Is Chicago Real Estate So Cheap?

Chicago often presents a unique paradox in its real estate market. Property values within the city appear comparatively lower than those found in other major urban centers across the United States. This article explores the factors contributing to Chicago’s comparatively lower real estate values.

Economic Factors Shaping the Market

Chicago boasts a diverse economy, encompassing sectors such as finance, technology, manufacturing, and healthcare. This broad industrial base contributes to a stable job market, which is attractive to both renters and potential homebuyers. The city’s economic stability supports housing demand by providing consistent employment opportunities.

The median household income in Chicago was approximately $75,134 in 2023, with an average annual household income reaching around $112,443. The overall cost of living in Chicago is notably lower than in many coastal megacities like New York or San Francisco. This relative affordability makes the housing market more accessible to residents.

The real estate market in Chicago has historically demonstrated a more moderate pace of appreciation compared to rapid surges seen in “hotter” markets. This steady growth, rather than explosive gains, reflects a balanced market interaction between buyers and sellers. Such stability contributes to lower prices, as values do not escalate as quickly as in regions with more volatile economic cycles.

Housing Supply and Inventory Dynamics

Chicago’s housing market is characterized by substantial inventory levels, influencing pricing across various neighborhoods. As of May 2025, the city had nearly 19,890 homes available for sale, while the broader Chicago metro area reported 13,195 homes. This supply, combined with an average of around 54 days on the market for homes in July 2025, suggests a balanced environment.

New construction plays a role in replenishing the housing stock, with continuous development evident in different parts of the city. The rate of this new development contributes to the overall supply, helping to meet demand and prevent significant price escalations that might occur in markets with severe housing shortages. This ongoing addition of new units ensures a steady flow of options for buyers.

Chicago possesses a considerable inventory of older properties that can be acquired at competitive prices, offering opportunities for renovation and revitalization. Census Bureau data indicates a significant number of vacant units, with about 10.2% of dwelling units being vacant, translating to roughly 128,796 units. This available supply, whether through existing homes, new builds, or potential renovations, contributes to the market’s overall affordability by expanding choices for buyers.

Property Tax Burden

A significant factor contributing to the perceived affordability of Chicago real estate is the substantial property tax burden. While initial purchase prices might seem lower than in other major cities, the ongoing cost of property taxes is notably high. The effective property tax rate for Cook County, where Chicago is located, averages around 2.02%, which is more than double the national average. Illinois as a state also ranks among the highest for property taxes, with a statewide average effective rate of 2.11%.

This considerable annual expense can offset the advantage of a lower purchase price, as buyers must factor in the total cost of ownership over time. Property values are assessed triennially in Cook County, meaning properties are re-evaluated every three years. The assessment process begins with determining the fair market value, from which the assessed value is calculated as 10% for residential properties.

To ensure uniformity in property assessment levels across the state, the Illinois Department of Revenue applies a State Equalization Factor, or multiplier. This factor aims to bring the aggregate assessed value of all property to 33 1/3% of its fair cash value. For example, the 2024 equalization factor for Cook County was 3.0355. Exemptions, such as the General Homestead Exemption or Senior Citizens Homestead Exemption, can reduce a property’s assessed value, but the underlying high tax rates remain a considerable financial consideration for homeowners.

Population Trends and Urban Development

Changes in Chicago’s population dynamics significantly influence housing demand and real estate pricing. The city experienced a slight population decline between 2022 and 2023, decreasing by approximately 0.524%. This trend includes outward migration of residents from the city proper to surrounding suburbs or other states. For instance, an estimated 347,000 residents left Illinois for other states since April 2020, impacting the overall demand for housing within the city.

Analysis of migration patterns reveals that population losses are often concentrated in lower-income neighborhoods, while middle- and higher-income areas experience more balanced movement of residents. While some demographic segments may be leaving, other parts of the city continue to attract new residents, particularly from outside the state. The influx of international migrants has helped to temper overall population decline in the metropolitan area.

Historical urban development patterns have shaped Chicago’s housing stock and density, influencing current market dynamics. The city’s extensive infrastructure and established neighborhoods contribute to a diverse range of housing options. While some areas may see slower appreciation due to these demographic shifts, the city’s overall development and evolving preferences for urban versus suburban living continue to shape the distribution of housing values across its various communities.