High-income households (earning $500,000 or more annually) represent a small elite segment of Illinois residents, yet they wield significant influence in the state’s housing market. From 2018 through 2023, this demographic’s homebuying patterns have shifted in response to economic cycles, tax changes, and an unprecedented global pandemic. Find out how these affluent buyers impact Illinois’ residential real estate landscape and how their preferences have evolved.
High-Income Homebuyers in Illinois: A Demographic Snapshot
Households earning over $500,000 per year are exceedingly rare in Illinois – roughly the top 1–2% of earners. By one 2023 estimate, joining the top 1% in Illinois requires an annual income of about $660,000. For context, the median Illinois household income is around $80,300, and only about one in ten households statewide earn above $200,000.
These high-income households tend to be homeowners who purchase properties far above the Illinois median home value (roughly $263,000). Their buying power allows them access to the luxury tier of the market – which in the Chicago area generally means homes valued around $1 million and up. In 2021, 3,480 homes sold for $1 million or more in the Chicago metro area, about 2.5% of all sales. This number was up 19% from 2020, reflecting how more high-income households entered the luxury home market amid a strong economy and rising wealth.
Pre-Pandemic Market (2018-2019)
The period 2018–2019 was largely a continuation of the post-Great Recession recovery in housing. The Illinois economy was stable, interest rates were relatively low (though rising slightly in 2018), and high-end home sales were steady. The late 2010s saw growth in luxury transactions: in the first half of 2017, Chicago saw a 26% jump in $1M+ home sales year-over-year, and 2018 continued the upward trend.
By 2019, Illinois recorded 2,519 sales at $1 million and above in the Chicago metro – a substantial increase compared to the early 2010s. However, there were signs of a cooling in 2019, partly due to a federal tax change capping state and local tax deductions. Indeed, 2019 saw a slight dip in luxury sales volume after four years of growth, indicating some affluent buyers put purchases on hold.
The Pandemic Impact (2020-2021)
Initial Market Shock and Recovery
The COVID-19 pandemic upended all expectations. Initially, real estate activity paused in spring 2020 during lockdowns. But soon after, demand from affluent buyers surged. Rock-bottom interest rates, a strong stock market rebound, and the newfound freedom of remote work enabled high-income families to act on long-delayed moves or purchase bigger homes with more amenities.
By late 2020, the luxury segment was booming: nationally, luxury home sales jumped 60.7% year-over-year for the three months ending November 30, 2020 – quadruple the growth rate of affordable home sales. Illinois mirrored this trend; in the Chicago metro, luxury sales in fall 2020 were up about 64% year-over-year.
High-end buyers, often less affected by job losses, raced to secure properties with features that the pandemic suddenly made essential: extra space for home offices, larger yards, pools, and suburban privacy.
Peak Luxury Demand
This upscale homebuying boom continued into 2021. With mortgage rates hovering around 3% for much of the year and many high-income professionals still working remotely, demand remained strong. Luxury home prices began climbing significantly as well. By mid-2021, the median sale price for a luxury home in the U.S. was up nearly 20% year-over-year.
The volume of high-end sales in the Chicago area hit record levels in 2021. In the $1M+ bracket, sales were up 19% from 2020. At the ultra-high end, more homes sold for $4 million+ in 2021 and 2022 than ever before – the Chicago region notched 101 sales at $4M and above in 2022, nearly double the count from 2019.
Market Cooling (2022-2023)
Interest Rate Impact
2022 brought a turning point. Surging inflation and the Federal Reserve’s response (rapidly rising interest rates) cooled the overall housing market – and the luxury sector was no exception. By late 2022, the cost of borrowing had jumped (30-year mortgage rates hit ~6–7%, versus ~3% a year prior), which dampened some high-end purchases.
In the last quarter of 2022, sales of Chicago-area homes priced at $1M+ plunged 35.3% compared to a year earlier. Nationwide, Q4 2022 saw the biggest drop in luxury sales since 2010 (a nearly 38% YoY decline) as the post-pandemic euphoria wore off.
In Illinois, many affluent buyers hit the pause button, either locked into ultra-low interest rates on their current homes (and thus hesitant to trade up and face a higher rate), or expecting prices to soften. Inventory at the high end also tightened as would-be sellers held off.
Rise of Cash Buyers
Despite fewer transactions, prices at the top end stayed resilient. Wealthy sellers were under little pressure to discount, and many high-income buyers began leveraging cash reserves to bypass mortgages. By late 2023, nearly half of luxury home purchases were being made in cash (about 46.5% of high-end sales in Q4 2023, a record high), effectively insulating this segment from interest-rate shocks.
2023 thus saw a bifurcated picture: transaction volumes for Illinois luxury homes were down from the frenzy of 2020–2021, but prices remained near record highs. Statewide, home price indexes showed modest growth, but the luxury tier outperformed. The typical high-end Chicago-area home continued to appreciate in value, even as sales lagged.
By Q4 2023, luxury home prices were up 8.8% year-over-year nationally – twice the pace of growth for mid-priced homes (4.6%). Illinois followed this national trend with strength at the very top of the market.
Primary Residence Preferences
Pandemic-Driven Upsizing
One clear trend from 2018–2023 is that many high-income buyers upsized their primary residences – particularly during the pandemic years. When COVID hit, affluent families craving more space drove a migration to larger homes. In 2020–2021, it was common to see $500k+ earners selling luxury condos or modest city homes and purchasing spacious suburban houses or even country estates.
The focus was on properties that could accommodate remote work and remote schooling: extra bedrooms as offices, dedicated gyms or entertainment rooms, ample outdoor space for recreation. Features like home offices and big yards shifted from “luxuries” to “necessities” for many upscale buyers in 2020.
In Illinois, this translated to high demand in suburbs such as Naperville, Hinsdale, Winnetka, and Lake Forest, where large single-family homes on sizable lots are prevalent. Naperville saw its average house price climb above $500K during this period as affluent Chicagoans relocated for more square footage and top-rated schools.
Urban vs. Suburban Shifts
Urban preferences also shifted. Within the city of Chicago, wealthier buyers in the late 2010s had gravitated toward downtown luxury high-rises and historic brownstones in neighborhoods like the Gold Coast, Lincoln Park, and Lakeview. But during 2020–2021, many high-income families pulled away from dense urban living in favor of the suburbs or less crowded city neighborhoods.
Areas on Chicago’s West Side, such as West Town and Ukrainian Village, saw a wave of teardowns of old brick walkups and construction of sleek new single-family homes to meet this demand. These gentrifying neighborhoods quickly became “hot spots for million-dollar buyers,” as they offered a middle ground – more space and a neighborhood feel, but still fairly close to downtown offices.
Return to Equilibrium
Starting in 2022 and into 2023, as pandemic effects waned, some of these patterns began to reverse or refine. Notably, the craze for ever-bigger homes cooled off. With children back in in-person school and offices reopening, a segment of wealthy buyers started to downsize or at least sought somewhat smaller primary homes than the McMansions of 2020.
An industry survey in late 2022 found that smaller luxury single-family homes (2,500–3,500 sq. ft.) were selling nearly 19% faster than larger ones. This suggests that affluent buyers’ appetite for huge houses diminished once the pandemic’s peak passed. High operating costs and the realization that much of that extra space went unused likely contributed.
By 2023, there was renewed interest in urban luxury living: some high-income households that fled cities earlier began purchasing pied-à-terre condos or moving back into Chicago, lured by cultural amenities and (relative) bargains on downtown real estate.
Property Type Preferences
In terms of property types, Illinois’s high-income households overwhelmingly prefer detached single-family homes for their primary residence. Nationally, 77% of all buyers purchase single-family houses, and for wealthy buyers that figure is likely higher – their incomes afford them the land and space that average buyers might forgo.
A minority of high-income buyers choose condominiums or townhouses as primaries, usually those who prioritize an urban lifestyle or low maintenance. The luxury condo market in downtown Chicago lagged during 2020 (some high-rise listings took price cuts amid soft demand), but by 2023 it rebounded somewhat as wealthy professionals and international buyers returned.
Still, even in the city, many of the $500k+ earners ultimately gravitate to the house lifestyle if they have families – evidenced by the tear-down/rebuild trend in neighborhoods like West Town, where contemporary 5-bedroom houses (often priced $1–1.5M) replaced older multi-unit buildings to cater to affluent family buyers.
Second Home Trends
Vacation Property Boom
Beyond primary residences, a significant portion of Illinois’s wealthy households invest in second homes or vacation properties. The 2018–2023 period included a boom in vacation-home buying, as the pandemic spurred affluent Americans to seek retreats and diversify their living locations.
Nationally, vacation home sales jumped 16.4% in 2020, far exceeding the growth in total existing home sales, and then surged by 57% year-over-year in the first four months of 2021. With remote work, some chose to split time between their primary Chicago-area home and a second home in a leisure destination.
Popular choices included lakefront getaways in Michigan or Wisconsin (e.g., Lake Michigan shore cottages, Lake Geneva WI homes) and warmer-climate escapes in Florida or Arizona during winter. Some even bought vacation properties within Illinois – for instance, estate homes in Galena (Jo Daviess County), a scenic northwest Illinois area known for second homes.
Real Estate as Investment Strategy
During 2020–2022, owning multiple homes became a form of investment and lifestyle hedge for the affluent. Real estate was seen as a safe store of value; over one-third of wealthy individuals in a 2022 survey said real estate is the safest long-term investment, above stocks or bonds.
Many acted on this belief by purchasing second or even third homes. The idea was to diversify locations (both for enjoyment and as a hedge against regional risks like climate or taxes) and to have flexibility. Some high earners also turned second homes into rental investments (taking advantage of platforms like Airbnb to generate income when they weren’t using the property).
By 2023, the vacation home craze had tempered somewhat – partly because of rule changes (e.g., higher loan fees for second homes) and the return of more normal travel options. However, the legacy of 2020–2021 is that many more Illinois high-income households now own vacation homes than before. Those who purchased during that period largely held onto their properties, even if they returned to the office.
Comparison to 2008–2017 Trends
Market Volatility
Compared to the prior decade (2008–2017), the 2018–2023 period exhibited distinctly different behaviors among high-income homebuyers in Illinois. Perhaps the most striking difference is in volume and market momentum.
Between 2008 and 2011, in the shadow of the Great Recession, luxury real estate in Illinois was sluggish. As the economy recovered in the mid-2010s, affluent homebuying picked up. By the late 2010s, the luxury market was setting post-recession records. However, that entire recovery was gradual and steady compared to the rollercoaster of 2020–2023.
The pandemic housing boom was an unprecedented surge – the 61% jump in luxury sales in late 2020 was unlike anything seen in the 2010s. Even the subsequent pullback in 2022–2023 was a sharper swing than anything in the earlier decade.
Shifting Demographics
The cohort of high-income buyers in 2018–2023 included more millennial millionaires and younger professionals coming into wealth. Many were in their 30s or early 40s, in contrast to 2008–2017 when the typical high-end buyer skewed older Gen X and Boomer.
This generational shift brought slightly different tastes (younger buyers often prefer modern design and tech-equipped homes). It also meant more high earners in dual-income households (e.g., a two-career couple each earning $250k). This rising demographic helped drive the luxury boom of the pandemic, as they reached peak homebuying age with significant savings.
Multiple Property Ownership
In terms of investing in multiple homes, wealthy people have long owned second homes, but the scale and rationale expanded in recent years. From 2008–2017, second-home buying was steady but not explosive; vacation properties were considered luxuries or retirement plans.
Post-2018, especially 2020–2021, buying additional homes became almost a mainstream strategy for the rich – whether to enjoy now (remote work) or as an investment. The idea of real estate as a safe asset gained traction after witnessing volatile financial markets and high inflation, pushing more high-net-worth individuals to hold tangible assets.
Cash vs. Financing
Another significant change: the role of cash and financing. In the 2010s, even rich buyers often took advantage of low mortgage rates to finance purchases. By late 2022, however, rates were so high that a new pattern emerged – a record share of luxury purchases went fully cash.
Affluent buyers in 2023 frequently liquidated stock or crypto gains and paid cash to remain competitive and avoid huge interest costs. Cash has always been king at the ultra-high end, but the difference in 2022–2023 is how many $1–2 million buyers (not just $10M ultra-luxe buyers) opted for cash.
Price Trajectory Differences
Finally, comparing price trajectories: From 2008 to 2017, Illinois home prices (including luxury) experienced a recovery from the crash, but Chicago in particular lagged some coastal markets in appreciation. In fact, over a 25-year span, Chicago’s home price growth was among the slowest of major U.S. cities.
But by 2023, after the pandemic run-up, Illinois luxury real estate reached new price highs. As noted, luxury prices outpaced mid-range prices for the first time in years. This is a departure from the 2010s, when the lower end appreciated faster. Now, with limited inventory of top-tier homes and wealthy cash buyers in play, the high-end segment has led price growth.
Conclusion
The 2018–2023 period for Illinois’ $500k+ earners was defined by record-breaking highs in luxury homebuying, rapid shifts due to the pandemic, and new patterns in multi-home ownership and purchase preferences. This contrasts with the prior decade’s slower, more predictable recovery and traditionally motivated moves.
High-income households are now an even more influential force in the Illinois housing market, with their behavior more dynamic and investment-oriented than before. As the market heads further into the 2020s, these affluent buyers will likely continue to shape trends – whether through cash-fueled resilience at the top end, renewed urban interest, or sustained appetite for multiple homes.
- What it takes to be among Illinois’ top 1% of earners – Axios Chicago
- What is the income of a household in Illinois? – USAFacts
- Illinois – Profile data – Census Reporter
- Chicago luxury home sales see major jump – Chicago Agent Magazine
- 2021 breaks record for luxury home sales in Chicago – Crain’s Chicago Business
- Chicago area’s 50 highest-priced home sales of 2024 – Crain’s Chicago Business
- Luxury Home Sales Soar Record 61%, Quadrupling Pre-Pandemic Growth – Redfin News
- Luxury Home Prices Hit All-Time High As Record Share of High-End Buyers Pay Cash – Redfin News
- Why more Chicago luxury homes aren’t selling – Axios Chicago
- 5 Trends That Will Shape Luxury Real Estate in 2023 – NAR Realtor Magazine
- Vacation Home Sales Surges During Pandemic – NAR Economists’ Outlook
- Luxury home sales in the Chicago area plunge – Crain’s Chicago Business
- Three places where the median home price just topped $1M – Crain’s Chicago Business
