Housing Price Forecasts
Illinois and Chicago PMSA, January 2017
Presented To
Illinois Realtors®
From
R
E
A
L
Regional Economics Applications Laboratory,
Institute of Government and Public Affairs
University of Illinois
January 24, 2017
Contact:
Geoffrey Hewings 217-333-4740 ([email protected])
Jiyoung Chae 217-244-7226 ([email protected])
Housing Forecast
January 2017
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Housing Price Forecast: Illinois and Chicago PMSA, January 2017
The Housing Market
In December, median prices continued to experience moderate growth while sales declined
slightly on an annual basis. 11,629 houses were sold in Illinois, an increase of 0.9% from a
month ago and a decline of -2.8% from a year ago. In the Chicago PMSA, 8,132 houses were
sold, decreasing by -1.2% from a month ago and -3.6% from a year ago. The median price was
$174,900 in Illinois, up 6.0% from December last year; the comparable figure for the Chicago
PMSA was $215,000, up 8.3% from this time last year.
In December, for the Chicago PMSA, the percentage of foreclosed sales (e.g. REOs) among the
total sales was 13.3%, the lowest December reading since 2008. 6,953 regular sales were made,
3.0% less than last year. 1,121 foreclosed properties were sold, 8.0% less than last year. The
median price was $227,500 for regular property sales, 5.2% more than last year; the comparable
figure for the foreclosed properties was $142,500, up 13.7% from this time last year.
The median sales price in December 2008 has been adjusted to 2016 values to enable
calculation of the housing price recovery taking into account the effects of inflation. In Illinois,
the December 2008 median sales price was $155,750 (in $2008) and $178,553 (in $2016); the
current price level was 98% of the 2008 level after adjusting (112% before adjusting). In the
Chicago PMSA, the December 2008 median sales price is $203,500 (in $2008) and $233,294 (in
$2016); the comparable figure for price recovery in December 2016 is 92% after adjustment
(106% before adjusting). Using the average annual growth rates of prices in the past months, it
could take about 0.4~0.5 years (5~6 months) for Illinois and 1.2~1.6 years (15~19 months) for
the Chicago PMSA to recover to the inflation-adjusted 2008 levels.
The sales forecast for January, February and March 2017 suggests slight increases both on a
yearly basis and a monthly basis. Annually for Illinois, the three-month average forecasts point
to an increase in the range 0.4% to 0.6%; the comparative figures for the Chicago PMSA are an
increase around 0.1%. On a monthly basis, the three-month average sales are forecast to
increase in the range 0.9%-1.3% for Illinois and increase by 2.4%-3.3% for the Chicago PMSA.
The pending home sales index is a leading indicator based on contract signings. This December,
the number of homes put under contract was greater than last year. The pending home sales
index is 104.9 (2008=100) in Illinois, up 9.4% from a year ago. In the Chicago PMSA, the
comparable figure is 119.9, up 12.7% from a year ago. At the latest average annual pending
sales rate, Illinois had enough housing inventory for 3.7 months 1 (down from 4.5 months a year
ago). In the Chicago PMSA, the comparable figure was 2.7 months (down from 3.4 months a
year ago). Months of supply for homes in all price ranges experienced declines both in Illinois
and the Chicago PMSA, and homes in the low to moderate price ranges (<500K) experienced
the largest changes.
The median price forecast indicates moderate annual growth in both Illinois and the Chicago
PMSA for January, February and March. In Illinois, the median price is forecast to rise by 4.3%
1
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
January 2017
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in January, 4.3% in February and 5.1% in March. For the Chicago PMSA, the comparable
figures are 8.2% in January, 8.1% in February and 8.4% in March. As a complement to the
median housing price index (HPI), the REAL HPI 2 forecasts a stronger growth trend for Illinois
but a weaker trend for the Chicago PMSA. In Illinois, the REAL HPI (Jan 2008=1) is forecast
to rise by 8.6% in January, 8.8% in February and 8.5% in March. The comparable figures for
the Chicago PMSA are 6.0% in January, 5.7% in February and 3.3% in March. REAL HPI
takes housing characteristics into account and constructs comparable “baskets” of homes for
each month.
In December, while the broader consumer sentiments were revealed to continuously increase in
the second poll after the election, the more housing market specific sentiments were edged down.
Both consumer sentiment indices - the Conference Board Consumer Confidence Index and the
University of Michigan Consumer Sentiment Index - pointed to positive directions and reached
their historic high. According to the Conference Board Consumer Confidence Index, their
survey revealed a 13-year high record of expectations on the overall economy, including jobs,
incomes and stock prices. Moreover, this optimism was most substantial among the older
consumers. The University of Michigan Consumer Sentiment Index also reached its historic
high since January 2004. However, due to the increasing interest rates, their survey revealed an
unfavorable condition for the consumers’ buying plan toward vehicles and homes. Similarly,
Fannie Mae Home Purchase Sentiment Index edged down largely due to the tightened monetary
policy.
The Housing Market – Current Condition
•
•
•
2
In December, median prices continued to experience moderate growth while sales declined
slightly on the annual basis. 11,629 houses were sold in Illinois, changing by 0.9% from a
month ago and -2.8% from a year ago. In the Chicago PMSA, 8,132 houses were sold,
changing by -1.2% from a month ago and -3.6% from a year ago. The median price was
$174,900 in Illinois, up 6.0% from December last year; the comparable figure for the
Chicago PMSA was $215,000, up 8.3% from this time last year. (Reference: Illinois and
Chicago PMSA Total Home Sales and Median Home Sales Price figures; Forecast for
January 2017 report table)
In December, for the Chicago PMSA, the percentage of foreclosed sales (e.g. REOs) among
the total sales was 13.3%, the lowest December reading since 2008. 6,953 regular sales
were made, 3.0% less than last year. 1,121 foreclosed properties were sold, 8.0% less than
last year. The median price was $227,500 for regular property sales, 5.2% more than last
year; the comparable figure for the foreclosed properties was $142,500, up 13.7% from this
time last year. (Reference: Ratio of Foreclosed Sales over Total Sales, Sales & Median
Prices: Foreclosed vs. Regular figures)
In December, at the latest average annual pending sales rate, Illinois had enough housing
inventory for 3.7 months 3 (down from 4.5 months a year ago). In the Chicago PMSA, the
comparable figure was 2.7 months (down from 3.4 months a year ago). Months of supply
REAL HPI was developed by Esteban Lopez and Minshu Du. Contact us for further details.
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
•
January 2017
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for homes in all price ranges experienced declines both in Illinois and the Chicago PMSA,
and homes in the low to moderate price ranges (<500K) experienced the largest changes.
(Reference: Illinois and Chicago PMSA Annual Months’ Supply by Price Range figures)
In December, the market shares of homes priced at the low end (<$100K) experienced the
largest change compared to a year ago. In Illinois, the market share for homes less than
$100K decreased to 22.2% from 25.8% a year ago; the comparative figure for the Chicago
PMSA showed a decrease to 12.5% from 16.7% 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 indicates moderate annual growth in both Illinois and the Chicago
PMSA for January, February and March. In Illinois, the median price is forecast to rise by
4.3% in January, 4.3% in February and 5.1% in March. For the Chicago PMSA, the
comparable figures are 8.2% in January, 8.1% in February and 8.4% in March. (Reference:
Forecast for January 2017 report table)
As a complement to the median housing price index (HPI), the REAL HPI 4 forecasts a
stronger growth trend for Illinois but a weaker trend for the Chicago PMSA. In Illinois, the
REAL HPI (Jan 2008=1) is forecast to rise by 8.6% in January, 8.8% in February and 8.5%
in March. The comparable figures for the Chicago PMSA are 6.0% in January, 5.7% in
February and 3.3% in March. REAL HPI takes housing characteristics into account and
constructs comparable “baskets” of homes for each month. (Reference: Housing Price Index)
The sales forecast for January, February and March 2017 suggests slight increases both on a
yearly basis and a monthly basis. Annually for Illinois, the three-month average forecasts
point to an increase in the range 0.4% to 0.6%; the comparative figures for the Chicago
PMSA are an increase around 0.1%. On a monthly basis, the three-month average sales are
forecast to increase in the range 0.9%-1.3% for Illinois and increase by 2.4%-3.3% for the
Chicago PMSA. (Reference: Forecast for January 2017 report table)
The pending home sales index 5 is a leading indicator based on contract signings. This
December, the number of homes put under contract was greater than last year. The pending
home sales index is 104.9 (2008=100) in Illinois, up 9.4% from a year ago. In the Chicago
PMSA, the comparable figure is 119.9, up 12.7% from a year ago. (Reference: Illinois and
Chicago PMSA Pending Home Sales Index figure)
In December 2016, 1,806 houses were newly filed for foreclosure in the Chicago PMSA (up
8.1% and up 11.6% respectively from a year and a month ago). 1,357 foreclosures were
completed 6 (down 16.2% and down 10.8% respectively from a year and a month ago). As
of December 2016, there are 42,345 homes at some stage of foreclosure — the foreclosure
inventory. The monthly average net flows of foreclosures (foreclosure inflows - outflows)
were 239 in the past 6 months, 209 in the last 12 months and 103 in the last 24 months.
(Reference: Chicago PMSA Foreclosure Inflows and Outflows, and Inventory figures).
The Economy
4
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.
6
Including cancelled foreclosures and auctions
5
Housing Forecast
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January 2017
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In December 2016, according to the Bureau of Labor Statistics (BLS) Employment Situation
report, the national unemployment rate edged up to 4.7% and nonfarm payroll jobs
experienced a gain of 156,000 jobs. The employment gains in December were spearheaded
by health care (43,000), followed by food services and drinking places (30,000), and social
assistance (20,000).
In November 2016, according to the Illinois Department of Employment Security (IDES)
news release, the Illinois unemployment rate remained unchanged at 5.6% compared to last
month and 0.4% down from a year ago. The state added 1,700 non-farm payroll jobs. The
largest gains are in three sectors, education and health services (3,500), leisure and
hospitality (3,100) and other services (1,800). Furthermore, the job growth in October was
revised from 2,200 jobs to 3,400 jobs. (not updated)
In November 2016, the one-year-ahead forecast for Illinois indicates that the non-farm
employment will increase at a rate between 0.32% and 0.37%, corresponding to job gains
between 19,000 and 22,000. Four out of ten sectors are forecast with positive job growth:
professional and business services (2.62%; 25,000), education and health (1.67%; 15,300),
leisure and hospitality (1.46%; 8,800), and other services (0.62%; 1,600).
Longer-term Outlook
• In December, two consumer sentiment indices both continued to point positive directions
after the election. According to the Conference Board Consumer Confidence Index, it
increased to 113.7 from 109.4 last month. Their survey revealed a 13-year high record of
expectations on the overall economy, including jobs, incomes and stock prices. Moreover,
this optimism was most substantial among the older consumers. The University of Michigan
Consumer Sentiment Index increased to 98.2 from 93.8 last month, reaching the historic
high since January 2004.
•
In December, Fannie Mae Home Purchase Sentiment Index (HPSI) decreased for the fifth
month, to 80.7 from 81.2 last month. This downward pessimism was mainly driven by the
expectation of increasing mortgage rates and the lower current household income compared
to a year ago. This index uses information from their National Housing Survey collecting
consumers’ feeling and opinions on home purchasing, directions and conditions of the
housing market, finance conditions and the job market.
•
The Chicago Business Activity Index (CBAI) decreased to 94.8 in November from 97.6 in
October. The decrease is attributed to the negative job growth in the nonmanufacturing and
construction sectors in the Chicago area.
“Consumers appear to be waiting to see what the new President and Congress plan for the
economy,” noted Geoffrey J.D. Hewings, director of the Regional Economics Applications
Laboratory at the University of Illinois. “As a result, it may be several months before there is an
appreciable impact on the housing market. Prices and sales are expected to continue
experiencing modest gains over the first quarter.”
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Forecast for January 2017 report
PERCENTAGE CHANGE FOR THE TOTAL NUMBER OF SALES
Annual
Monthly
Illinois
Chicago PMSA
Illinois
Chicago PMSA
Oct-16
-3.3%
-4.2%
-10.4%
-11.3%
Nov-16
16.7%
17.9%
-9.5%
-8.1%
Dec-16
-2.8%
-3.6%
0.9%
-1.2%
2.5%
2.2%
-6.7%
-7.2%
3 Month Avg.
SUMMARY OF THE FORECAST INTERVALS FOR THE TOTAL NUMBER OF SALES
Annual
Illinois
Jan-17
0.1%
Monthly
Chicago PMSA
0.1%
-1.9%
-2.5%
Illinois
-23.5%
Chicago PMSA
-31.8%
-22.4%
-30.3%
Feb-17
3.0%
4.1%
-0.3%
-0.4%
6.2%
8.4%
2.9%
3.9%
Mar-17
-1.2%
-1.6%
1.7%
2.3%
27.6%
37.3%
34.6%
46.8%
0.4%
0.6%
0.1%
0.1%
0.9%
1.3%
2.4%
3.3%
3 Month Avg.
SUMMARY OF THE FORECAST FOR THE MEDIAN PRICE
Illinois
Chicago PMSA
Illinois
Chicago PMSA
Oct-16
$178,000
$215,000
Oct-15
$167,500
$200,000
Nov-16
$177,500
$214,500
Nov-15
$165,000
$195,000
Dec-16
$174,900
$215,000
Dec-15
$165,000
$198,250
Jan-17
$169,987
$205,519
Jan-16
$163,000
$190,000
Feb-17
$166,804
$202,643
Feb-16
$160,000
$187,500
Mar-17
$179,652
$227,569
$171,000
Mar-16
ANNUAL PERCENTAGE CHANGE OF THE MEDIAN PRICE
Illinois
$210,000
Chicago PMSA
7.5%
Illinois
Chicago PMSA
Oct-15
6.0%
8.1%
7.6%
6.0%
10.0%
Nov-15
8.3%
Dec-15
6.5%
7.1%
7.3%
8.3%
Jan-17
4.3%
8.2%
Jan-16
8.7%
8.6%
Feb-17
4.3%
8.1%
Feb-16
8.2%
7.1%
Mar-17
5.1%
8.4%
Mar-16
3.7%
4.0%
Oct-16
6.3%
Nov-16
Dec-16
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January 2017
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Median Prices and Recovery
Illinois
December 2008 Median Price
December 2016 Median Price
Price Ratio
(December 16/December 08)
[$2008]
$155,750
$152,564
Adjusted
Unadjusted
[$2016]
$178,553
$174,900
0.98
1.12
Chicago PMSA
[$2008]
[$2016]
$203,500
$233,294
$187,543
$215,000
Adjusted
0.92
Unadjusted
1.06
Recovery Forecasts using Annually Growth Rates
Current Month
Past 3 months
Past 6 months
Past 9 months
Past 12 months
Illinois
Annual
Recovery Rate*
Chicago PMSA
Years to
Recover**
Recovery Rate
Years to
Recover
4.1%
4.8%
4.4%
5.0%
5.2%
0.5
0.4
0.5
0.4
0.4
6.5%
6.8%
5.3%
5.5%
5.5%
1.3
1.2
1.6
1.5
1.5
*Annual recovery rate is the average of annual change rates in past months
** Years to recover is calculated using the following formula:
PriceDecember2016*(1+recovery rate)^years=PriceDecember2008. Prices used in the formula are
inflation adjusted. The recovery rate is applied as a constant annual change rate to recoup the
differences between the current month and its corresponding month in 2008.
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