Housing Price Forecasts
Illinois and Chicago PMSA, March 2015
Presented To
Illinois Association of Realtors
From
R
E
A
L
Regional Economics Applications Laboratory,
Institute of Government and Public Affairs
University of Illinois
March 23, 2015
Contact:
Geoffrey Hewings 217-333-4740 ([email protected])
Xian Fang 217-244-7226 ([email protected])
Housing Forecast
March 2015
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Housing Price Forecast: Illinois and Chicago PMSA, March 2015
The Housing Market
In February, sales decreased slightly while median housing prices grew at robust rates. 7,865
houses were sold in Illinois, down 1.2% from a month ago and 1.7% from than a year ago. In
the Chicago PMSA, 5,611 houses were sold, down 1.9% from a month ago and 1.3% from than
a year ago. The median price was $149,900 in Illinois, up 13.1% from February last year; the
comparable figure for the Chicago PMSA was $175,000, up 12.5% from this time last year.
Drawing on the foreclosure data for the Chicago PMSA, year-over-year sales changes are
dominated by decreases in foreclosure sales. 1,516 foreclosed properties were sold, 9.3% less
than last year; 4,069 regular sales were made, 2.4% more than last year. As a result, the annual
increases in median prices were primarily attributable to the regular sales. The median sale
price was $210,000 for regular property sales, 16.7% higher than last year; the comparable
figure for the foreclosed properties was $114,900, up 2.1% from this time last year.
The median price forecast still indicates steady annual increases in median prices for March,
April and May compared to a year ago. In Illinois, the median price is forecast to rise by 10.0%
in March, 10.7% in April and 9.1% in May. For the Chicago PMSA, the comparable figures are
9.7% in March, 10.2% in April and 7.5% in May. As a complement to the median housing price
index (HPI), the REAL HPI1 forecasts milder growth for both Illinois and the Chicago PMSA.
In Illinois, the REAL HPI (Jan 2008=1) is forecast to rise by 7.3% in March, 4.8% in April and
2.8% in May. The comparable figures for the Chicago PMSA are 6.7% in March, 4.3% in April
and 3.6% in May. REAL HPI takes housing characteristics into account and constructs
comparable “baskets” of homes for each month.
The sales forecast for March, April and May 2015 suggests weaker year-over-year growth
against stronger monthly growth. Annually for Illinois, the three-month average forecasts point
to a change between 7.4% and 9.5%; for the Chicago PMSA, the change will range from 8.3%
to 10.6%. On a monthly basis, the three-month average sales are forecast to increase by 21.7%27.7% for Illinois and 21.3%-27.2% for the Chicago PMSA.
Our analysis investigated the differences between regular and foreclosed sales in the Chicago
PMSA in more detail. Regular sales are concentrated in the low to medium price ranges
($100K~300K) while foreclosed sales are concentrated in the lowest price range (<$100K).
Homes with 3 bedrooms are mostly sold for both regular and foreclosed sales; but regular sales
are not as concentrated in the 3-bedrooms type as foreclosed sales; there are also a large portion
of regular sales with either 2 or 4 bedrooms. In terms of bathrooms, most of the sales have
either 1 or 2 bathrooms; foreclosed homes have about 10% more 1-bathroom sales than regular
sales. Regarding home size, the majority of regular (56%) and foreclosed sales (65%) are
between 1000 to 2000 square feet. As for property types, regular sales and foreclosed sales
changed differently over the period from January 2014 to January 2015. More single family
homes (52.6%) were sold this January but more multi-family homes (52.1%) were sold last
January; however, for foreclosed sales, the percentage of sales of these two property types were
barely changed - 53% single families and 47% multi-families (See the series of regular sales vs
foreclosed sale graphs in this report).
1
REAL HPI was developed by Esteban Lopez and Minshu Du. Contact us for further details.
Housing Forecast
March 2015
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In February 2015, the foreclosure inventory grew – there were more inflows and less outflows
of foreclosed properties. 2,501 houses were newly filed for foreclosure in the Chicago PMSA
and 1,810 foreclosures were completed.2 As of February 2015, there are 31,966 homes at some
stage of foreclosure — the foreclosure inventory. The average inventory change rates3 of the
past 3 months were positive (0.45%), which indicates that recovery of the inventory to the prebubble levels will be delayed 4 . Given the 6-month (-0.37%) and 9-month (-1.49%) rate of
change, the foreclosure inventory would return to the pre-bubble levels5 by 2035 and March
2020. Hence, it seems that the market will be experiencing a higher inventory level of
foreclosed properties for quite some time.
According to RealtyTrac, 7 million homeowners nationwide are still in severe underwater
positions – mortgage debt is at least 25% higher than the value of their homes. In Chicago
metropolitan area, 48% of severely underwater homes are also accompanied by financial stress.
High levels of negative equity together with finance stress are likely to trigger the occurrences
of foreclosures. However, as the median housing prices are forecast to continue growing, more
and more homes will move “above water.” Furthermore, the relative high anticipation of
continued job and wage growth, together with the declining gasoline prices, will contribute to
improving the households’ financial situation over the longer term. These could help reduce the
financial stress and eventually reduce future foreclosures.
The Housing Market – Current Condition
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2
In February, sales decreased slightly while median housing prices grew at robust rates.
7,865 houses were sold in Illinois, down 1.2% from a month ago and 1.7% from than a year
ago. In the Chicago PMSA, 5,611 houses were sold, down 1.9% from a month ago and
1.3% from than a year ago. The median price was $149,900 in Illinois, up 13.1% from
February last year; the comparable figure for the Chicago PMSA was $175,000, up 12.5%
from this time last year. (Reference: Illinois and Chicago PMSA Total Home Sales and
Median Home Sales Price figures; Forecast for March 2015 report table)
In February for the Chicago PMSA, the percentage of foreclosed sales (e.g. REOs) among
the total sales was 24.6%, above the 22.4% last month. 4,069 regular sales were made, 2.4%
more than last year. 1,516 foreclosed properties were sold, 9.3% less than last year. The
median price was $210,000 for regular property sales, 16.7% higher than last year; the
comparable figure for the foreclosed properties was $114,900, up 2.1% from this time last
year.
In February, at the latest average annual pending sales rate, Illinois had enough housing
inventory for 4.7 months6 (down from 5.0 months a year ago). In the Chicago PMSA, the
comparable figure was 3.5 months (a slight decrease from 3.6 months a year ago). Months
of supply are increasing for homes in all price ranges above $200~300K and decreasing for
homes below $200K in both Illinois and the Chicago PMSA. (Reference: Illinois and
Chicago PMSA Annual Months’ Supply by Price Range figures)
Including estimated foreclosure completions that are missing in the data.
The range of months used for calculating the average change rates are modified from the 6/12/24 months’
scenarios to 3/6/9 months’ scenarios since Aug 2014.
4
Average foreclosure inventory from 1997-2005
5
Average foreclosure inventory from 1997-2005
6
Months’ supply of inventory is defined as inventory of homes for sale at the end of the month divided by
the average monthly pending sales in the last twelve months.
3
Housing Forecast
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March 2015
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In February, market shares of homes priced below $200K dropped by about 5% compared to
a year ago, while comparative figures for homes in all other price ranges increased slightly.
For example, in Illinois, homes priced below $100K held a market share that decreased to
32.1% from 36.9% a year ago; for homes priced between $200K~300K, the comparative
figure increased to 17.6% from 15.2% a year ago. (Reference: Illinois and Chicago PMSA
Price Stratification figures)
The Housing Market – Forecast and Future Condition
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The median price forecast still indicates steady annual increases in median prices for March,
April and May compared to a year ago. In Illinois, the median price is forecast to rise by
10.0% in March, 10.7% in April and 9.1% in May. For the Chicago PMSA, the comparable
figures are 9.7% in March, 10.2% in April and 7.5% in May. (Reference: Forecast for March
2015 report table)
As a complement to the median housing price index (HPI), the REAL HPI7 forecasts milder
growth for both Illinois and the Chicago PMSA. In Illinois, the REAL HPI (Jan 2008=1) is
forecast to rise by 7.3% in March, 4.8% in April and 2.8% in May. The comparable figures
for the Chicago PMSA are 6.7% in March, 4.3% in April and 3.6% in May. REAL HPI
takes housing characteristics into account and constructs comparable “baskets” of homes for
each month. (Reference: Housing Price Index)
The sales forecast for March, April and May 2015 suggests weak year-over-year growth
against stronger monthly growth. Annually for Illinois, the three-month average forecasts
point to a change between 7.4% and 9.5%; for the Chicago PMSA, the change will range
from 8.3% to 10.6%. On a monthly basis, the three-month average sales are forecast to
increase by 21.7%-27.7% for Illinois and 21.3%-27.2% for the Chicago PMSA. (Reference:
Forecast for March 2015 report table)
The pending home sales index 8 is a leading indicator based on contract signings. This
February, homes put under contract increased for both Illinois and the Chicago PMSA. The
pending home sales index is 132.86 (2008=100) in Illinois, up 15.2% from last month and
13.8% from a year ago. In the Chicago PMSA, the comparable figure is 160.5, up 18.9%
from a month ago and 17.9% from a year ago. (Reference: Illinois and Chicago PMSA
Pending Home Sales Index figure)
In February 2015, 2,501 houses were newly filed for foreclosure in the Chicago PMSA (up
7.3% and 6.6% respectively from a year and a month ago). 1,810 foreclosures were
completed9 (down 64.8% and 16.8% respectively from a year and a month ago). As of
February 2015, there are 31,966 homes at some stage of foreclosures — the foreclosure
inventory. The average inventory change rates10 were 0.45% in the past 3 months, -0.37%
in the last 6 months and -1.49% in the last 9 months. Given the 9-month rate of change, the
foreclosure inventory would return to the pre-bubble levels11 by March 2020; according to
REAL HPI was developed by Esteban Lopez and Minshu Du. Contact us for further details.
The base level (100) of pending home sales is the average pending home sales of year 2008.
9
Including estimated foreclosure completions that are missing in the data.
10
The range of months used for calculating the average change rates are modified from the 6/12/24 months’
scenarios to 3/6/9 months’ scenarios since Aug 2014.
11
Average foreclosure inventory from 1997-2005
8
Housing Forecast
March 2015
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the 6-month rate, the inventory will recover until 2035 and will never recover using the 3month rate (Reference: Chicago PMSA Foreclosure Activity and Inventory figures).
The Economy
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In February 2014, according to the Bureau of Labor Statistics (BLS) Employment Situation
report, the national unemployment rate edged down to 5.5% and nonfarm payroll jobs
experienced gains of 295,000 jobs. Among all industries, food services and drinking places
added the most jobs (+59,000), followed by professional and business services (51,000),
construction (+29,000), and health care (+24,000).
In January 2014, according to the Illinois Department of Employment Security (IDES) news
release, the Illinois unemployment rate decreased to 6.1%, (it was 8.2% a year ago). But a
total of 7,100 non-farm payroll jobs were shed. Three sectors received job gains: Leisure
and Hospitality (+3,300), Education and Health Services (+2,300), and Trade,
Transportation and Utilities (+1,600).
In December 2014, the one-year-ahead forecast for Illinois indicates that the non-farm
employment will edge up at a rate between 1.03% and 1.06%, corresponding to job gains
between 60,500 and 62,200. The total gains are forecast to be contributed by five out of ten
sectors: manufacturing (5.75%; 33,300), education and health (1.55%; 13,900), professional
and business services (1.31%; 12,000), construction (5.11%; 10,800) and leisure and
hospitality (0.78%; 4,300) (not updated)
Longer-term Outlook
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In February, two consumer confidence indices both edged down from their historic high
levels in January, but still well above pre-recession levels. The Conference Board
Consumer Confidence Index decreased to 96.4 from 103.8 last month (1985=100). The
University of Michigan Consumer Sentiment Index decreased to 95.4 from 98.1 last month.
The later survey revealed that decrease in consumers’ optimism is attributed to the impact of
harsh weather on economic activities in some regions and less favorable anticipation on
wage gains.
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The Chicago Business Activity Index (CBAI) increased to 100.0 in January from 92.9 in
December. The rise is attributed to positive job growth in the nonmanufacturing and
construction sectors and to improved retail activities in the Chicago area.
“Spring has come earlier than the weather to the housing market,” noted Geoffrey J.D. Hewings,
Director of the Regional Economics Applications Laboratory, “with solid gains in prices even
with slight declines in monthly and year-over-year sales. Home buyers seem to be
differentiating between regular and foreclosed homes for sale with the former gaining increasing
shares of sales over the last year and thus propelling the increase in median prices in both
Illinois and Chicago.”
Housing Forecast
March 2015
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Forecast for March 2015 report
PERCENTAGE CHANGE FOR THE TOTAL NUMBER OF SALES
Annual
Monthly
Illinois
Chicago PMSA
Dec-14
0.5%
-2.3%
16.0%
13.7%
Jan-15
-2.7%
-3.5%
-31.1%
-29.3%
Feb-15
-1.7%
-1.3%
-1.2%
-1.9%
-1.1%
-2.4%
-7.1%
-7.2%
3 Month Avg.
Illinois
Chicago PMSA
SUMMARY OF THE FORECAST INTERVALS FOR THE TOTAL NUMBER OF SALES
Annual
Illinois
Monthly
Chicago PMSA
Illinois
Chicago PMSA
Mar-15
8.0%
10.3%
8.4%
10.8%
35.9%
45.8%
38.3%
49.0%
Apr-15
5.7%
7.3%
7.2%
9.1%
14.7%
18.8%
13.5%
17.3%
May-15
8.4%
10.7%
9.2%
11.7%
19.0%
24.3%
17.6%
22.5%
7.4%
9.5%
8.3%
10.6%
21.7%
27.7%
21.3%
27.2%
3 Month Avg.
SUMMARY OF THE FORECAST FOR THE MEDIAN PRICE
Illinois
Chicago PMSA
Illinois
Chicago PMSA
Dec-14
$154,000
$183,000
Nov-13
$144,950
$169,500
Jan-15
$150,000
$175,000
Dec-13
$148,500
$176,500
Feb-15
$149,900
$175,000
Jan-14
$135,775
$163,000
Mar-15
$162,756
$192,005
Feb-14
$132,500
$155,500
Apr-15
$171,565
$209,398
Mar-14
$148,000
$175,000
May-15
$182,673
$222,557
Apr-14
$155,000
$190,000
ANNUAL PERCENTAGE CHANGE OF THE MEDIAN PRICE
Illinois
Chicago PMSA
Illinois
Chicago PMSA
Dec-14
3.7%
3.7%
Nov-13
7.4%
9.4%
Jan-15
10.5%
7.4%
Dec-13
13.4%
17.7%
Feb-15
13.1%
12.5%
Jan-14
8.6%
16.4%
Mar-15
10.0%
9.7%
Feb-14
6.9%
11.1%
Apr-15
10.7%
10.2%
Mar-14
9.8%
12.9%
May-15
9.1%
7.5%
Apr-14
6.9%
9.9%
Housing Forecast
March 2015
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Forecast for February 2015 report
PERCENTAGE CHANGE FOR THE TOTAL NUMBER OF SALES
Annual
Monthly
Illinois
Chicago PMSA
Illinois
Chicago PMSA
Nov-14
-9.1%
-8.6%
-24.7%
-23.9%
Dec-14
0.4%
-2.4%
15.9%
13.6%
Jan-15
-4.3%
-5.2%
-32.2%
-30.4%
-4.2%
-5.3%
-15.5%
-15.2%
3 Month Avg.
SUMMARY OF THE FORECAST INTERVALS FOR THE TOTAL NUMBER OF SALES
Annual
Illinois
Monthly
Chicago PMSA
Illinois
Chicago PMSA
Feb-15
0.5%
0.7%
-1.9%
-2.5%
2.6%
3.4%
-1.0%
-1.2%
Mar-15
4.5%
5.8%
2.1%
2.8%
28.1%
36.3%
30.9%
39.9%
Apr-15
5.7%
7.4%
3.3%
4.3%
18.5%
23.9%
16.1%
20.8%
3.9%
5.1%
1.5%
2.0%
16.7%
21.6%
15.4%
19.8%
3 Month Avg.
SUMMARY OF THE FORECAST FOR THE MEDIAN PRICE
Illinois
Chicago PMSA
Illinois
Chicago PMSA
Nov-14
$155,000
$182,000
Oct-13
$150,000
$175,000
Dec-14
$154,000
$183,000
Nov-13
$145,000
$169,500
Jan-15
$150,000
$176,000
Dec-13
$148,500
$176,500
Feb-15
$147,970
$170,009
Jan-14
$135,800
$163,000
Mar-15
$160,847
$188,600
Feb-14
$132,500
$155,350
Apr-15
$169,642
$204,419
Mar-14
$148,000
$175,000
ANNUAL PERCENTAGE CHANGE OF THE MEDIAN PRICE
Illinois
Chicago PMSA
Illinois
Chicago PMSA
Nov-14
6.9%
7.4%
Oct-13
11.9%
14.7%
Dec-14
3.7%
3.7%
Nov-13
7.4%
9.4%
Jan-15
10.4%
8.0%
Dec-13
13.4%
17.7%
Feb-15
11.7%
9.4%
Jan-14
8.6%
16.4%
Mar-15
8.7%
7.8%
Feb-14
6.9%
11.0%
Apr-15
9.4%
7.6%
Mar-14
9.8%
12.9%
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