Households earning over $500,000 annually represent a small but influential segment of Illinois residents, making up about the top 1–2% of earners.
By 2023, the income needed to reach the top 1% in Illinois was around $660,000, while the median household income stood at approximately $80,300.
Despite their small numbers, high-income buyers have had a major impact on Illinois’ luxury housing market, particularly in the Chicago area, where homes priced at $1 million and above define the high-end segment.
In 2021, around 3,480 homes sold for $1 million or more in the Chicago metro area, accounting for about 2.5% of all sales—a 19% increase from 2020.
This reflected a growing appetite for luxury properties among wealthy buyers, driven by rising wealth and economic strength.
Over the 2018–2023 period, the homebuying behavior of Illinois’ high-income households shifted in response to economic cycles, tax policies, and the global pandemic.
Pre-Pandemic Market (2018–2019)
From 2018 to 2019, Illinois’ housing market was stable, supported by a strong economy and relatively low (but rising) interest rates.
Luxury sales were steady, continuing a post-Great Recession recovery. In 2017, Chicago’s $ 1 M+ home sales jumped 26% year-over-year, and 2018 saw continued strength.
By 2019, Illinois recorded 2,519 sales of $1 million and above in the Chicago metro area.
However, a federal tax change capping state and local tax deductions slowed some momentum, leading to a slight dip in luxury sales after years of steady growth.
Pandemic Impact (2020–2021)
The COVID-19 pandemic initially halted real estate activity in early 2020, but the market rebounded quickly.
Ultra-low interest rates, a strong stock market recovery, and the shift to remote work spurred demand for larger, more comfortable homes. In fall 2020, luxury home sales in Chicago surged 64% year-over-year.
High-income buyers sought properties with extra space for home offices, larger yards, and suburban privacy.
This trend peaked in 2021, when sales of $ 1 M+ homes in Chicago were up 19% from 2020. Ultra-high-end sales ($ 4 M+) also hit record levels, with 101 homes sold at this price point in 2022, nearly double the 2019 count.
Market Cooling (2022–2023)
By 2022, rising inflation and higher interest rates (reaching 6–7% for a 30-year mortgage) cooled the housing market.
High-end sales in the Chicago area dropped 35.3% year-over-year in late 2022. Nationwide, luxury sales experienced the largest decline since 2010.
Despite fewer transactions, luxury home prices remained strong. Wealthy buyers, often less reliant on financing, increasingly turned to cash purchases.
By late 2023, nearly half of Illinois’ luxury home sales were cash deals (around 46.5%), insulating this segment from interest rate shocks.
Luxury home prices stayed high, with values in Illinois’ top-tier market rising 8.8% year-over-year by the end of 2023, twice the growth rate of mid-priced homes.
Changing Preferences in Primary Residences
Affluent buyers upsized their homes during the pandemic, seeking more space for remote work and recreation.
Suburban areas like Naperville, Hinsdale, Winnetka, and Lake Forest saw high demand for large single-family homes, with Naperville’s average home price surpassing $500K.
Urban preferences also shifted. While downtown Chicago luxury condos were popular pre-pandemic, many high-income families moved to less crowded neighborhoods or the suburbs in 2020–2021.
Areas like West Town and Ukrainian Village became hot spots for the new construction of modern single-family homes.
By 2022–2023, as remote work declined and schools reopened, the trend toward larger homes began to reverse.
Smaller luxury homes (2,500–3,500 sq. ft.) sold 19% faster than larger ones, reflecting changing preferences.
Wealthy buyers also began returning to urban living, drawn by Chicago’s cultural amenities and competitive prices on luxury condos.
Second Home and Investment Trends
From 2020 to 2021, second-home purchases surged as wealthy buyers sought vacation properties and investment opportunities.
Nationally, vacation home sales jumped 57% year-over-year in early 2021.
Illinois’ high-income households followed this trend, buying lakefront properties in Michigan and Wisconsin, winter homes in Florida and Arizona, and estates in scenic Illinois areas like Galena.
Real estate became a favored investment strategy during this period. By 2022, over one-third of wealthy individuals ranked real estate as the safest long-term investment.
Second homes were not just for personal use—many were listed on Airbnb or similar platforms for rental income.
Comparison to 2008–2017 Trends
The 2018–2023 period differed sharply from the slower recovery following the 2008 financial crisis. Luxury sales were sluggish from 2008 to 2011, gradually improving through the mid-2010s.
The pandemic-fueled surge in 2020 was unprecedented, with luxury sales rising 61% year-over-year, far surpassing any previous cycle.
The demographic of high-income buyers also changed. Younger professionals and millennial millionaires entered the market in greater numbers.
Dual-income couples earning $250K each became a driving force behind the luxury market’s growth.
Cash became more dominant in high-end transactions. While wealthy buyers in the 2010s often used low-interest mortgages, rising rates in 2022–2023 made cash purchases more appealing. By 2023, even $1M–$2M homes were frequently bought with cash.
Price trends also shifted. Between 2008 and 2017, Illinois’ home price appreciation lagged other major markets.
But after the pandemic boom, luxury prices in Illinois outpaced mid-range prices for the first time in years, driven by limited inventory and cash-fueled demand.
Conclusion
From 2018 to 2023, Illinois’ high-income homebuyers shaped the state’s housing market through their buying power and shifting preferences.
The pandemic created an unprecedented surge in luxury sales, followed by a market correction driven by rising interest rates. High-end prices remained resilient due to cash buying and limited supply.
Affluent buyers moved from urban to suburban homes during the pandemic, but some reversed course in 2023 as city life regained its appeal.
Second-home ownership became more common, with many high-income buyers treating real estate as both an investment and a lifestyle asset.
These wealthy buyers are now a major force in Illinois’ real estate market, setting the stage for continued influence in the years ahead.
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