Oct 21, 2023 - Real Estate

Mortgage rates lock up Gen X wealth in Chicago homes

Illustration of a safe with a roof like a house.

Illustration: Brendan Lynch/Axios

Roughly seven in 10 Gen Xers own their homes, but accessing that equity isn't easy.

Why it matters: Chicagoland median home values jumped nearly 37% in the past five years, Redfin figures show, which should be a boon to homeowners.

What's happening: Most people aren't touching the $31.7 trillion of home equity U.S. homeowners are sitting on unless they need cash, housing finance experts tell Axios.

Between the lines: Gen X is stressed about money. Nearly half of Gen Xers say they feel behind on retirement savings, according to a Bankrate study.

  • Roughly two-thirds of Gen Xers say they're uncomfortable with their level of emergency savings, and 22% have no emergency savings at all, per the study.

The big picture: Roughly nine in 10 home loan refinances nationwide were cash-out refinances in the first half of 2023, per Freddie Mac.

Zoom in: Albany Park homeowner Jerry LoProto prefers to pay by credit card for small yearly renovations such as kitchen updates and siding repairs.

  • "As long as the balance is paid off on the credit card, the total investment cost is less" than a home equity loan, LoProto tells Axios.

Zoom out: Consolidating debt is a big reason people are tapping into their home equity, Loan Pronto CEO Roger Moore tells Axios.

  • Borrowers are also opting to expand or renovate their current home instead of moving, he says. People with a 700+ credit score can use HELOCs or HELOANs to keep their primary mortgage rate and access additional cash/credit.
Data: Zillow; Note: Calculations assume typical increases in home values, 3% closing costs paid at purchase and 1% home maintenance fees, 6% closing costs, and 6% agent fees paid at sale; Chart: Erin Davis/Axios Visuals

The intrigue: It can take up to about 20 years for Chicago homeowners to break even.

  • That's how long you have to stay in your house before you can sell and make a profit.

Context: Historically, experts say you need to stay in your home at least five years to break even.

Go deeper: Why mortgage rates are so high

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