Housing Price Forecasts Illinois and Chicago PMSA, October ... - MrEd

Housing Price Forecasts Illinois and Chicago PMSA, October 2013

Presented To

Illinois Association of Realtors From R

E

A

L

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

October 21, 2013

Contact:

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

Housing Forecast

September 2013

2

Housing Price Forecast: Illinois and Chicago PMSA, October 2013 The Housing Market In September, both Illinois and the Chicago PMSA continued to experience milder gains in sales but still strong gains in median prices on a yearly base. 13,018 houses were sold in Illinois, 19.8% more than a year ago. In the Chicago PMSA, 9,583 houses were sold, 25.6% more than last September. The median price was $157,000 in Illinois, up 12.9% from September last year. Comparable figures for the Chicago PMSA were $185,000 with an annual increase rate of 15.6%. Homes priced below $100,000 held a smaller market share compared to a year ago, in contrast with the increases in market shares for homes at all other price ranges. In response to the uncertainties brought by the government shutdown in the first half of October, the forecasts show more volatility in sales than median prices. The sales forecast for October, November and December 2013 suggests continuing but slower gains for Illinois and the Chicago PMSA, compared to the forecasts made in August. On a year-over-year basis, the three month average forecasts point to increases of 10.7% to 14.5% for Illinois and 14.1% to 19.1% for Chicago PMSA. The price forecast indicates relatively steady annual increases in median prices for October, November and December. In Illinois, the median price is forecast to rise by 12.7% in October, 11.5% in November and 12.1% in December. For the Chicago PMSA, the comparable figures are 15.1% in October, 14.5% in November and 14.9 % in December. Confirming the sales forecast, statistics of pending sales also point to a slower annual growth of sales in upcoming months. In September, the pending home sales index was 132.7 (2008=100) in Illinois with an annual growth rate of 11.5%, lower than the average growth rates of 21.9% in the past eight months. In the Chicago PMSA, the comparable figure is 157.4 with an annual growth rate of 18.6%, lower than the average value of 27.2% in the past months. The pending home sales index is a leading indicator based on contract signings. This September, homes put under contract increased on a yearly basis but decreased from a month ago. The forecasted milder growth in sales is partially related to the delay in mortgage processing interrupted by the government shutdown. For instance, the closure of the Internal Revenue Service prevents homebuyers from obtaining documents required by the lenders. But most importantly, the slower annual growth in sales is induced by the dampened consumer confidence due to the disappointing government standoff and the huge uncertainties brought into the future of the economy. Two consumer confidence indexes both revealed negative signals in September. The Conference Board Consumer Confidence Index decreased slightly by 2.6% to 79.7 (1985=100) and the University of Michigan Consumer Sentiment Index decreased to 77.5 from 82.1 on a monthly basis. According to the new National Association of Home Builders/First American Leading Markets Index (LMI), 1 Chicago PMSA housing market is still at least 25% down from its prerecessionary activity level, while most other Illinois MSAs are mostly reaching 74% to 87% of 1

The National Association of Home Builders-Eye on Housing: http://eyeonhousing.wordpress.com/2013/10/07/new-index-shows-housing-markets-back-to-normal-in-52-metros/

Housing Forecast

September 2013

3

their pre-recession levels. LMI reveals the recovery of economy activity based on construction permits, prices and employment data. As for the foreclosure inventory level, REAL projects a recovery schedule of foreclosure inventory using past change rates 2 of the foreclosure inventory.3 Given the average monthly change rates of the last 6 months (-7.3%), 12 months (4.8%) and 24 months (-2.6%), the foreclosure inventory would return to the pre-bubble levels by December 2014, August 2015 and March 2017. This projects a slower recovery than the projection from last month. By the time this report was written, an agreement had been reached in Washington and the government activity resumed. While everything seems back to normal, uncertainties are still unresolved and postponed to early next year. Consumers’ confidence may not be dampened further, but it is hard to expect positive gains in the upcoming months. The Housing Market – Current Condition  In September, both Illinois and the Chicago PMSA experienced gains in sales and median prices on a yearly base. 13,018 houses were sold in Illinois, 19.8% more than a year ago. In the Chicago PMSA, 9,583 houses were sold, 25.6% more than last September. The median price was $157,000 in Illinois, up 12.9% from September last year. Comparable figures for the Chicago PMSA were $185,000 with an annual increase rate of 15.6%. (Reference: Illinois and Chicago PMSA Total Home Sales and Median Home Sales Price figures; Forecast for September 2013 report table)  In September, at the latest average annual pending sales rate, Illinois had enough housing inventory for 5.2 months4 (down from 8.1 months a year ago). In the Chicago PMSA, the comparable figure was 3.6 months (down from 6.6 months a year ago). While most homes at all price ranges have experienced a decline in their months’ supply by 30%-40%, homes priced below $200K in the Chicago PMSA have a months’ supply that has decreased by more 50%. (Reference: Illinois and Chicago PMSA Annual Months’ Supply by Price Range figures)  In September, homes priced below $100,000 hold a smaller market share compared to a year ago, while homes at all other price ranges received varying degrees of increases in market shares. For Illinois, homes priced below $100K held a market share that decreased to 28.7% from 34.1% a year ago. The comparable figure for the Chicago PMSA was 22.3% from 28.8%. (Reference: Illinois and Chicago PMSA Price Stratification figures) The Housing Market – Forecast and Future Condition  The price forecast indicates continuing annual increases in median prices for October, November and December. In Illinois, the median price is forecast to rise by 12.7% in 2

Different from previous reports using foreclosure in/out ratio to project the recovery of the inventory level, this report applies the monthly inventory change rates. 3 Foreclosure inventory is defined as any case between new filing and foreclosure auction. Since more than half of the filed foreclosures were not closed with an auction and the data cannot track those, assumptions are made to project closing date for those cases. 4 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.

Housing Forecast

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



September 2013

4

October, 11.5% in November and 12.1% in December. For the Chicago PMSA, the comparable figures are 15.1% in October, 14.5% in November and 14.9 % in December (Reference: Forecast for September 2013 report table) The sales forecast for October, November and December 2013 suggests continuing but slower gains for Illinois and the Chicago PMSA. On a year-over-year basis, the three month average forecasts point to increases of 10.7% to 14.5% for Illinois and 14.1% to 19.1% for Chicago PMSA. (Reference: Forecast for September 2013 report table) The pending home sales index5 is a leading indicator based on contract signings. This September, homes put under contract increased on a yearly basis but decreased from a month ago. The pending home sales index is 132.7 (2008=100) in Illinois, down -17.4% from last month and 11.5% up from a year ago. In the Chicago PMSA, the comparable figure is 157.4, down -15.2% from last month and 18.6% up from a year ago. (Reference: Illinois and Chicago PMSA Pending Home Sales Index figure) In September 2013, 2,851 houses were newly filed for foreclosures in the Chicago PMSA (down 44.3% from a year ago) and 4,856 foreclosures were closed6 (up 41.0% from a year ago). The average inventory change rates were -7.3% in the past 6 months, 4.8% in the last 12 months and -2.6% in the last 24 months. Given these change rates, the foreclosure inventory would return to the pre-bubble levels by December 2014, August 2015 and March 2017. (Reference: Chicago PMSA Foreclosure Activity and Inventory figures).

The Economy 



In August 2013, according to Illinois Department of Employment Security (IDES) news release, Illinois unemployment rate remains at 9.2% and 5,900 private sector jobs were created. By August 2013, Illinois has added 251,000 new private sector jobs since January 2010 when Illinois employment growth resumed after the national recession. The leading growth sectors is Professional and Business Services (+110,400), followed by Educational and Health Services (+61,900), and Trade, Transportation and Utilities (+49,500). Government has experienced the largest job loss (-34,200). In August 2013, the one-year-ahead forecast indicates that the non-farm employment will grow at a rate between 1.00% and 1.25%, corresponding to job creations between 57,900 and 72,414. The forecast of job growth rate is led by Professional & business services (1.45%; 13,201), Education and health (0.93%; 8,341), and Financial Activities (0.92%; 3,488).

Longer-term Outlook 

5 6

Two consumer confidence indexes both revealed negative signals in September. The Conference Board Consumer Confidence Index decreased slightly by 2.6% to 79.7 (1985=100) and the University of Michigan Consumer Sentiment Index decreased to 77.5 from 82.1 on a monthly basis. According to the later, this decline is due to consumers’ expectation towards the government shutdown.

The base level (100) of pending home sales is the average pending home sales of year 2008. This is when an auction occurs, no matter what the auction results are.

Housing Forecast



September 2013

5

The Chicago Business Activity Index (CBAI) increased slightly to 90.9 in August from 90.1 in July. The rise is attributed to the nationwide employment increase in manufacturing and nonmanufacturing sectors and improved activities in retail in the Chicago region.

Housing Forecast

September 2013

6

Forecast for October 2013 report PERCENTAGE CHANGE FOR THE TOTAL NUMBER OF SALES Annual

Monthly

Illinois

Chicago PMSA

Illinois

Chicago PMSA

Jul-13

30.1%

37.9%

3.9%

6.2%

Aug-13

18.8%

25.9%

-1.3%

-1.2%

Sep-13

19.8%

25.6%

-18.7%

-19.6%

22.9%

29.9%

3.3%

5.4%

3 Month Avg.

SUMMARY OF THE FORECAST INTERVALS FOR THE TOTAL NUMBER OF SALES Annual Illinois

Monthly

Chicago PMSA

Illinois

Chicago PMSA

Oct-13

9.6%

13.0%

13.1%

17.7%

1.8%

2.5%

1.9%

2.6%

Nov-13

11.6%

15.7%

14.9%

20.1%

-6.4%

-8.6%

-6.1%

-8.2%

Dec-13

10.9%

14.8%

14.5%

19.7%

-3.5%

-4.7%

-2.8%

-3.8%

10.7%

14.5%

14.1%

19.1%

-14.8%

-20.0%

-14.9%

-20.1%

3 Month Avg.

SUMMARY OF THE FORECAST FOR THE MEDIAN PRICE Illinois

Chicago PMSA

Illinois

Chicago PMSA

Jul-13

$168,950

$200,000

Jul-12

$147,500

$170,000

Aug-13

$166,000

$197,000

Aug-12

$147,000

$170,000

Sep-13

$157,000

$185,000

Sep-12

$139,000

$160,000

Oct-13

$150,997

$175,541

Oct-12

$134,000

$152,538

Nov-13

$150,573

$177,442

Nov-12

$135,000

$155,000

Dec-13

$146,869

$172,377

Dec-12

$131,000

$150,000

ANNUAL PERCENTAGE CHANGE OF THE MEDIAN PRICE Illinois

Chicago PMSA

Illinois

Chicago PMSA

Jul-13

14.5%

17.6%

Jul-12

-2.3%

-6.0%

Aug-13

12.9%

15.9%

Aug-12

-0.7%

-2.9%

Sep-13

12.9%

15.6%

Sep-12

1.8%

0.0%

Oct-13

12.7%

15.1%

Oct-12

3.2%

2.4%

Nov-13

11.5%

14.5%

Nov-12

5.1%

3.4%

Dec-13

12.1%

14.9%

Dec-12

4.8%

3.4%

Housing Forecast

September 2013

7

Forecast for September 2013 report PERCENTAGE CHANGE FOR THE TOTAL NUMBER OF SALES Annual

Monthly

Illinois

Chicago PMSA

Illinois

Chicago PMSA

Jun-13

17.4%

21.3%

1.5%

1.7%

Jul-13

29.8%

37.6%

3.7%

6.0%

Aug-13

17.3%

24.3%

-2.2%

-2.2%

21.3%

27.5%

20.8%

23.2%

3 Month Avg.

SUMMARY OF THE FORECAST INTERVALS FOR THE TOTAL NUMBER OF SALES Annual Illinois

Monthly

Chicago PMSA

Illinois

Chicago PMSA

Sep-13

25.3%

34.2%

32.0%

43.3%

-9.2%

-12.5%

-9.2%

-12.4%

Oct-13

18.3%

24.8%

23.1%

31.3%

2.5%

3.4%

2.4%

3.3%

Nov-13

23.8%

32.3%

28.0%

37.9%

-3.8%

-5.2%

-3.9%

-5.3%

22.3%

30.2%

27.5%

37.3%

-9.1%

-12.4%

-8.6%

-11.6%

3 Month Avg.

SUMMARY OF THE FORECAST FOR THE MEDIAN PRICE Illinois

Chicago PMSA

Illinois

Chicago PMSA

Jun-13

$170,000

$205,000

Jun-12

$155,000

$181,450

Jul-13

$168,640

$200,000

Jul-12

$147,720

$170,000

Aug-13

$167,000

$197,000

Aug-12

$147,000

$170,000

Sep-13

$157,968

$186,247

Sep-12

$139,000

$160,000

Oct-13

$152,566

$176,421

Oct-12

$134,000

$152,538

Nov-13

$152,179

$179,411

Nov-12

$135,000

$155,000

ANNUAL PERCENTAGE CHANGE OF THE MEDIAN PRICE Illinois

Chicago PMSA

Illinois

Chicago PMSA

Jun-13

9.7%

13.0%

Jun-12

3.3%

0.8%

Jul-13

14.2%

17.6%

Jul-12

-2.2%

-6.1%

Aug-13

13.6%

15.9%

Aug-12

-0.7%

-2.9%

Sep-13

13.6%

16.4%

Sep-12

1.8%

0.0%

Oct-13

13.9%

15.7%

Oct-12

3.2%

2.4%

Nov-13

12.7%

15.7%

Nov-12

5.1%

3.4%

Housing Forecast

September 2013

8

Illinois Median Home Sales Price

2011

$180,000

2012 2013

Median Sales Price

$170,000 $157,000

$160,000 $151,000

Forecast

$150,573

$150,000

$150,997

$145,000

$146,869

$140,000 $130,000

$125,000 $125,000

$120,000 $110,000 Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Source: University of Illinois REAL, Illinois Association of REALTORS®

Illinois Total Home Sales 2011

18,000 15,609

16,000

16,016

15,372

14,000

Total Sales

2012

16,219

2013

13,018

12,839

12,000 10,000 8,000

10,454 8,502

8,384

6,484

6,000 5,605 4,000 Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec


Housing Forecast

September 2013

9

Chicago PMSA Median Home Sales Price $210,000

2011

$205,000

2012

$200,000

Median Sales Price

2013

$185,000

$190,000

Forecast

$180,000 $170,000

$175,541

$172,377 $177,442

$160,000 $150,000 $140,000

$140,000

$145,000

$140,000

$130,000 $120,000 Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Chicago PMSA: Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will counties Source: University of Illinois REAL, Illinois Association of REALTORS®

Chicago PMSA Total Home Sales 2011

14,000

2012

12,067 12,000

2013

11,921

11,166 11,364

Total Sales

10,000

9,583

9,310 8,066

8,000 6,350 6,000

6,068

4,564 4,000 2,000 Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec


20

Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13

IL Pending Index 20.4%

Jul-13

Apr-13

Jan-13

20%

Oct-12

Jul-12

Apr-12

Jan-12

Oct-11

Jul-11

30%

Apr-11

Jan-11

Oct-10

Jul-10

Apr-10

Jan-10

Oct-09

Jul-09

Apr-09

Jan-09

Oct-08

Jul-08

5%

Apr-08

Jan-08

Housing Forecast September 2013 10

Sales Ratio of Foreclosed Properties Chicago PMSA-3 Month Average

35%

28.6%

25%

18.9%

15%

10%

7.7%

0%

Pending Home Sales Index

260

220

180

140

100

60

Chicago Pending Index


Housing Forecast

September 2013

11

Illnois Annual Months' Supply by Price Range 5.2

Overall

8.1 9.0

700K~UP

12.9 6.0

Price by Ranges

500K~700K

9.2 5.5

300K~500K

7.8 5.2

200K~300K

7.8 4.9

100K~200K

2013 Sept

7.9

2013 Aug

4.9

0 ~100K -1.0

2012 Sept

7.8 1.0

3.0

5.0

7.0

9.0

11.0

13.0

15.0


Chicago Annual Months' Supply by Price Range 3.6 Overall

6.6 6.9

700K~UP

10.4 4.4

Price by Ranges

500K~700K

6.9 4.0

300K~500K

6.1 3.7

200K~300K

6.3 3.2

2013 Sept

100K~200K

6.6

2013 Aug

2.8

0 ~100K

2012 Sept

6.5 0.0

2.0

4.0

6.0

8.0

10.0

12.0


Housing Forecast

September 2013

12

Illinois Price Stratification 40% 34.1%

35%

Share of Total Sales

30%

2013 Sept 32.5% 32.8%

2013 Aug

28.7%

2012 Sept

25% 20%

17.8%

16.0% 13.4%

15%

11.3%

10% 4.2% 3.2%

5%

3.3% 2.6%

0% 0 ~100K

100K~200K

200K~300K

300K~500K

500K~700K

700K~UP


Chicago PMSA Price Stratification 40% 2013 Sept

35%

31.0%

30.9%

2013 Aug

28.8%

30%

Share of Total Sales

2012 Sept 25%

22.3% 20.2%

20%

18.1%

16.7% 14.3%

15% 10%

5.5% 4.4%

5%

4.4%

3.6%

0% 0 ~100K

100K~200K

200K~300K

300K~500K

500K~700K

700K~UP


Jul-07

Jul-13

Apr-13

Jan-13

Oct-12

Jul-12

Apr-12

Jan-12

Oct-11

Jul-11

Apr-11

Jan-11

Oct-10

Jul-10

Apr-10

Jan-10

Oct-09

Jul-09

Apr-09

Jan-09

Oct-08

Jul-08

Apr-08

Jan-08

Oct-07

90000

Apr-07

Jan-07

Oct-06

Jul-06

Apr-06

Jan-06

Axis Title

Jul-13

Apr-13

Jan-13

Oct-12

Jul-12

Apr-12

Jan-12

Oct-11

Jul-11

Apr-11

Jan-11

Oct-10

Jul-10

Apr-10

Jan-10

Oct-09

Jul-09

Apr-09

Jan-09

Oct-08

Jul-08

Apr-08

Jan-08

Oct-07

Jul-07

Apr-07

Jan-07

Oct-06

Jul-06

Apr-06

Jan-06

Housing Forecast September 2013 13

10000

Chicago PMSA New Foreclosure Filings and Foreclosure Sales

9000 New foreclosure filings

Foreclosure Sales

8000

7000

6000

5000

4000

3000

2000

1000

0

Chicago PMSA Foreclosure Inventory and Pre-bubble Level

100000

Foreclosure Inventory

Average Inventory 1997-2005

80000

70000

60000

50000

40000

30000

20000

10000

0

Housing Forecast

September 2013

14

Chicago PMSA Foreclosure Inventory Recover Schedule 100000

December, 2014 90000

August, 2015 80000 70000

March, 2017 60000 50000

40000 30000 20000 10000

Jul-22

Jan-23

Jul-21

Jan-22

Jul-20

Jan-21

Jul-19

Jan-20

Jul-18

Jan-19

Jul-17

Jan-18

Jul-16

Jan-17

Jul-15

Jan-16

Jul-14

Jan-15

Jul-13

Jan-14

Jul-12

Jan-13

Jul-11

Jan-12

Jul-10

Jan-11

Jul-09

Jan-10

Jul-08

Jan-09

Jul-07

Jan-08

Jul-06

Jan-07

Jan-06

0

Inventory Projection with the last 24 months' inventory change rate

Inventory Projection with last 12 months' inventory change rate

Inventory Projection with last 6 months' inventory change rate

Foreclosure Inventory

Average Inventory 1997-2005