Housing Price Forecasts Illinois and Chicago PMSA, May 2014 ... - MrEd

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May 22, 2014 - Contact: Geoffrey Hewings 217-333-4740 ([email protected]). Xian Fang 217-244-7226 ([email protected]
Housing Price Forecasts Illinois and Chicago PMSA, May 2014

Presented To

Illinois Association of Realtors From R

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Regional Economics Applications Laboratory, Institute of Government and Public Affairs University of Illinois

May 22, 2014

Contact:

Geoffrey Hewings 217-333-4740 ([email protected]) Xian Fang 217-244-7226 ([email protected])

Housing Forecast

May 2014

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Housing Price Forecast: Illinois and Chicago PMSA, May 2014 The Housing Market In April, both Illinois and the Chicago PMSA continue to experience negative annual growth rates in sales and positive gains in median housing prices. 11,846 houses were sold in Illinois, 7.8% less than a year ago. In the Chicago PMSA, 8,391 houses were sold, 9.9% less than last April. The median price was $156,000 in Illinois, up 7.6% from April last year; the comparable figure for the Chicago PMSA was $190,000, up 9.9% from this time last year. The average annual sales level reached its lowest level post-recession in 2011 but has risen rose continuously at a two-digit annual growth rate to a peak in 2013. From the second half of 2011 until September 2013, sales for both Illinois and the Chicago PMSA increased at annual growth rates between 14.8% and 38.1%. Although this robust growth trend has slowed down and revealed negative (annual) growth in the past six months, the current sales levels are still higher than 2012. The sales forecast for May, June and July 2014 suggests a continuing negative growth trend on a yearly basis, but with strong positive growth on a monthly basis. Annually, the three-month average forecasts point to a decrease of between 3.6% and 4.8% for Illinois; for the Chicago PMSA, the decrease will range from 3.5% to 4.8%. On a monthly basis, the three-month average sales are forecast to increase by 44.5%-60.2% for Illinois and 47.3%-64.0% for the Chicago PMSA. The median price forecast indicates slightly milder annual increases in median prices for May, June and July compared to a year ago. In Illinois, the median price is forecast to rise by 6.4% in May, 3.5% in June and 2.2% in July. For the Chicago PMSA, the comparable figures are 11.4% in May, 4.4% in June and 7.3% in July. As a complement to the median housing price index (HPI), the REAL HPI1 forecast indicates annual growth rates that are slightly higher for Illinois and smoother for Chicago PMSA. In Illinois, the REAL HPI (Jan 2008=1) is forecast to rise by 6.9% in May, 3.7% in June and 3.5% in July. The comparative figures for the Chicago PMSA are 10.3% in May, 7.8% in June and 8.3% in July. According to a post on CRAIN’S Chicago Business, housing prices computed by CoreLogic Case-Shiller at all ZIP code levels, where data are available, experienced increases in 2013. Even though, it is still relatively cheaper to buy than rent in Chicago area compared to many other regions in this country. According to the estimates made by the real estate website Zillow Inc., the breakeven point for buying versus renting in the Chicago area is 2.8 years, lower then national breakeven point—3.1 years. When looking at submarkets by home price ranges, a more active and healthy market at the higher price end is observed compared to the lower price end. According to an article in the Chicago Tribune,2 45% of homes valued less than $103,800 in the Chicago area were still 1

REAL HPI was developed by Esteban Lopez and Minshu Du. Contact us for technique details. http://www.chicagotribune.com/classified/realestate/chi-fewer-chicagoarea-homeowners-underwater-onmortgages-20140520,0,4003503.story 2

Housing Forecast

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underwater at the end of March. Comparative figures for homes valued in the range of $103,800-$330,800 and above $330,800 are at much lower level, 28% and 13% respectively. Being underwater probably dampens homeowners’ interest in listing their homes for sale. Our months of supply data demonstrate the same phenomenon. Although there were consistent decreases in months of supply for homes in all price ranges, the driving mechanisms varied for homes with different values. For homes above $200K, the decrease was dominated by the increase in pending sales; while for homes less than $200K, decreasing inventory accounted for the declines in months of supply. Moreover, in terms of time on the market, homes at all price ranges above $100K sold more rapidly on average than a year ago while homes at the lower end of the market (