Housing Price Forecasts. Illinois MSAs. Third Quarter, 2016

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1 Housing Price Forecasts Illinois MSAs Third Quarter, 2016 Presented To Illinois REALTORS From R E A L Regional Economics Applications Laboratory, Institute of Government and Public Affairs University of Illinois August 10, 2016

2 Illinois MSA Housing Report Third Quarter, Introduction This report provides analysis of the housing market in the Second Quarter of 2016 with forecasts for the Third Quarter of Complementary analysis of the economy is provided to put the housing market into a broader perspective. The Illinois Economy Illinois lost 2,200 jobs in June 2016, compared with a revised 1,500 job loss in May Compared to June 2015, Illinois has added 41,300 jobs. The three-month moving average, a more stable measure of labor market, showed an increase of 1,000 jobs per month. The state of Illinois now has 18,400 more jobs than in December 2007 when the recent recession started. Since January 2010 when Illinois employment resumed after the national recession, Illinois has added 419,900 new jobs. The Illinois MSAs Illinois Rural area lost 5,600 jobs at -0.76% this month, compared to a revised 2,600 job gain in May At the same time, Metro added 3,400 jobs at 0.06% in June, compared to a revised 4,100 job loss in the previous month. Chicago added 3,300 jobs at 0.08% in June 2016, compared to a revised 1,500 job loss in May Meanwhile, Downstate lost 5,500 jobs at -0.29%, compared to a revised 100 job loss in the previous month. In terms of the 12-month aggregated account, Metro registered a positive 1.03% growth by adding 53,700 jobs whereas Rural lost 12,400 jobs at -1.66%. Chicago added 52,700 jobs at 1.30% whereas Downstate lost 11,400 jobs at -0.60%. Through June 2016, the cumulative job growth for Metro, Rural, Chicago and Downstate compared to January 1990 stood at 14.36%, 11.14%, 15.14% and 11.47% respectively (Table 1). Table 3 provides a league table for the MSAs. Davenport-Rock Island-Moline (2nd to 10th) experienced the deepest fall in June Chicago (3rd to 6th), Decatur (1st to 7th) and Metro-East (4th to 9th) also dropped in terms of rank from last month. The most remarkable upward move in June was recorded for Kankakee (10th to 2nd). In the 12-month growth league table, upward moves were recorded for Springfield (4th to 3rd), Kankakee (7th to 6th) and Bloomington-Normal (10th to 9th). Downward moves were recorded for Chicago (3rd to 4th), Decatur (6th to 7th) and Davenport-Rock Island-Moline (9th to 10th). In the 12-month growth league table, Davenport-Rock Island-Moline dropped to the last place while Metro-East remained in the first place.

3 Illinois MSA Housing Report Third Quarter, The Illinois MSAs Housing Market Overview In the second quarter of 2016, overall sales in Illinois increased compared to last year. It was attributed to the positive growth in all MSAs but Decatur. In the third quarter of 2016, the sales forecast indicates a more mixed growth profile. While the overall sales in Illinois and six MSAs are forecast to increase, four MSAs are forecast to experience decreases in their sales (Davenport-Moline-Rock Island, Decatur, Springfield and Peoria-Pekin. The overall median prices for Illinois and seven MSAs presented positive annual gains in the second quarter. While most of MSAs are forecast to carry their positive momentum of growth into the third quarter, Bloomington-Normal and Peoria-Pekin are forecast to continue experiencing negative changes in their trends of growth. Housing Market Conditions In the second quarter of 2016, Illinois experienced moderate changes in sales, and nine out of ten MSAs experienced annual increases in sales with varying degrees. The overall sales for Illinois decreased by 5.8% compared to a year ago. Except for Decatur (-0.3%), all the rest of MSAs experienced positive changes in sales: Chicago PMSA (6.8%), Bloomington-Normal (4.9%), Champaign-Urbana (8.2%), Davenport-Moline-Rock Island (0.6%), Metro-East (4.4%), Springfield (1.6%), Kankakee (6.0%), Peoria-Pekin (4.2%) and Rockford (4.5%). In terms of housing prices, Illinois and seven MSAs experienced gains. The overall median prices for Illinois presented significant annual gains with a growth rate of 6.8%. Davenport- Moline-Rock Island (0.0%) did not experience any change in the median price. Seven MSAs experienced positive changes in their median prices: Springfield (9.8%), Chicago PMSA (5.6%), Champaign-Urbana (1.3%), Decatur (1.1%), Metro-East (8.0%), Kankakee (7.4%) and Rockford (13.3%). Two MSAs that experienced negative changes in sales are: Bloomington-Normal (- 1.2%) and Peoria-Pekin (-4.3%). Illinois and nine out of ten MSAs experienced decreases in the quarter s supply for homes with some variations. For Illinois as a whole, the overall quarter s supply is 1.2 decreasing from 1.6 a year ago. Expect that Springfield (1.1 quarters) experienced little change in quarters of supply, all other MSAs experienced decreases: Bloomington-Normal (to 1.2 from 1.5 quarters), Champaign-Urbana (to 1.1 from 1.3 quarters), Chicago PMSA (to 0.9 from 1.2 quarters), Davenport-Moline-Rock Island (to 1.4 from 1.5 quarters), Decatur (to 2.1 from 2.4 quarters), Kankakee (to 1.6 from 2.2 quarters), Metro-East (to 1.0 from 1.5), Peoria-Pekin (to 1.6 from 1.7 quarters), and Rockford (to 1.2 from 1.6 quarters). Housing Market Forecasts Table 4 provides the median price forecasts for the Third quarter of The forecasts indicate an overall positive annual growth for the state as a whole (8.2%). Seven out of ten MSAs are forecast to experience positive changes in the third quarter of 2016: Chicago PMSA (6.2%), Champaign-Urbana (3.3%), Davenport-Moline-Rock Island (2.8%), Kankakee (3.5%), Metro-

4 Illinois MSA Housing Report Third Quarter, East (4.3%), Rockford (15.8%) and Springfield (9.8%). Three MSAs are forecast to decrease in their median prices: Bloomington-Normal (-1.9%), Decatur (-2.7%) and Peoria-Pekin (-3.6%), Table 5 provides the sales forecast for the Third quarter of The overall sales in Illinois are forecast to increase by 5.7% to 7.7% compared to a year ago. Six out of ten MSAs are forecast to experience some gains in sales: Chicago PMSA (5.6% to 7.6%), Bloomington-Normal (5.9% to 8.0%), Champaign-Urbana (2.5% to 3.4%), Metro-East (9.1% to 12.3%), Kankakee (6.7% to 9.1%), Rockford (0.4% to 0.6%). Four MSAs are forecast to decrease in their sales: Davenport- Moline-Rock Island (-1.4% to -1.9%), Decatur (-2.0% to -1.5%), Springfield (-2.1% to -1.6%) and Peoria-Pekin (-1.0% to -0.8%). Detailed current conditions and forecasts for each MSA market are present in the next section. MSA Detailed Notes (to accompany figures on median prices, sales, price stratification, and inventory) Illinois Median price forecast indicates a positive trend with annual rates of change of 6.9% to 9.3% in Q Sales volume in Q is forecast to increase by an annual rate of 5.7% to 7.7%. Median prices in Q were 6.8% higher on a yearly basis. Sales volume in Q was 5.8% higher than a year ago. In Q2 2016, the decreases in market shares are concentrated on homes priced less than 100K. Homes priced below $100K captured 18.9% of the market against 22.1% a year ago. By Q2 2016, the overall quarter s supply is 1.2 decreasing from 1.6 a year ago. Chicago Median price forecast indicates a positive trend with annual rates of change of 5.2% to 7.1% in Q Sales volume in Q is forecast to experience a change of 5.6% to 7.6% on a yearly basis. Median prices in Q were 5.6% higher on a yearly basis. Sales volume in Q was 6.8% higher than a year ago In Q2 2016, market shares of homes priced less than $100K experienced the largest change, decreasing from 14.3% a year ago to 10.7%. By Q2 2016, the overall quarter s supply is forecast to be 0.9 quarters, decreasing from 1.2 a year ago. Bloomington-Normal Median price forecast indicates mixed trend with an annual change rate of -4.1% to 1.2% in Q Sales volume in Q is forecast to experience a growth rate of 5.9% to 8.0% on a yearly basis. Median prices in Q experienced a change rate of -1.2% compared with Q

5 Illinois MSA Housing Report Third Quarter, Sales volume in Q decreased by 4.9% compared to a year ago In Q2 2016, the major change in market shares of homes appeared for homes priced in the price range of $ K (decreasing from 52.1% to 50.4%). By Q2 2016, the overall quarter s supply is 1.2 quarters, decreasing from 1.5 a year ago. Champaign-Urbana Median price forecast indicates mixed growth trend with change rates between -0.8% and 7.1% in Q Sales volume in Q is forecast to experience a change of 2.5% to 3.4% on a yearly basis. Median prices in Q experienced a change of 1.3% on a yearly basis. Sales volume in Q was 8.2% higher than a year ago In Q2 2016, the major change in market shares of homes appeared for homes priced below $100 (decreasing from 24.8% to 22.3%). By Q2 2016, the overall quarter s supply is 1.1 quarters, decreasing from 1.3 a year ago. Davenport-Moline-Rock Island Median price forecast indicates mixed growth trend with change rates of -4.0% to 9.5% in Q Sales volume in Q is forecast to experience a change of -1.9% to -1.4% on a yearover-year basis. Median prices in Q experienced little change compared with Q Sales volume in Q was 0.6% higher than a year ago. In Q2 2016, market share of homes at all price ranges kept similar levels as a year ago. By Q2 2016, the overall quarter s supply decreases to 1.4 quarters from 1.5 quarters a year ago. Decatur Median price forecast indicates mixed changes between -2.0% and 0.5% in Q Sales volume in Q is forecast to experience a change of -2.0% to -1.5%. Median prices in Q experienced a rate of change of 1.1% compared with Q Sales volume in Q was 0.3% lower than a year ago In Q2 2016, market share of homes at all price ranges kept similar levels as a year ago. By Q2 2016, the overall quarter s supply decreases to 2.1 quarters from 2.4 quarters a year ago. Kankakee Median price forecast indicates positive changes at rates of 1.4% to 5.0% in Q Sales volume in Q is forecast to experience a change of 6.7% to 9.1% on a yearly basis. Median prices in Q experienced a change rate of 7.4% compared with Q Sales volume in Q was 6.0% higher than a year ago. In Q2 2016, market shares of homes priced in the range of $0-100K experienced the largest change, decreasing from 36.0% to 31.3%. By Q2 2016, the overall quarter s supply is 1.6 quarters, decreasing from 2.2 a year ago.

6 Illinois MSA Housing Report Third Quarter, Metro East Median price forecast indicates positive change rates between 0.1% and 9.7% in Q Sales volume in Q is forecast to experience a change of 9.1% to 12.3% on an annual basis. Median prices in Q experienced a change rate of 8.0% on average compared with Q Sales volume in Q was 4.4% higher than a year ago. In Q2 2016, market shares of homes priced below $100K experienced the largest change, decreasing to 34.4% from 36.6% a year ago. By Q2 2016, the overall quarter s supply is 1.0 quarter, decreasing from 1.5 a year ago. Peoria-Pekin Median price forecast indicates mixed annual rates of change of -8.0% to 1.6% in Q Sales volume in Q is forecast to experience a change of -1.0% to -0.8% on an annual basis. Median prices in Q experienced a change rate of -4.3% compared with Q Sales volume in Q was 4.2% higher than a year ago In Q2 2016, market shares of homes priced below $100K experienced the largest change, increasing to 37.1% from 34.1% a year ago. By Q2 2016, the overall quarter s supply is 1.6 quarters, decreasing from 1.7 a year ago. Rockford Median price forecast indicates positive annual change rates between 13.1% and 17.4% in Q Sales volume in Q is forecast to experience increases by 0.4% to 0.6% on a yearly basis. Median prices in Q experienced a rate of change of 13.3% compared with Q Sales volume in Q was 4.5% higher than a year ago. In Q2 2016, market shares of homes priced in the range of $0-100K experienced a large decrease (from 50.3% to 43.1%) contrasting with the large increase (from 36.9% to 44.5%) in the range of $ K. By Q2 2016, the overall quarter s supply is 1.2 quarters, down from 1.6 quarters a year ago. Springfield Median price forecast indicates positive annual change rates between 8.0% and 11.9% in Q Sales volume in Q is forecast to experience a change between -2.1% and -1.6% on a yearly basis. Median prices in Q experienced a rate of change of 9.8% compared with Q Sales volume in Q was 1.6% higher compared to a year ago.

7 Illinois MSA Housing Report Third Quarter, In Q2 2016, market shares of homes priced in the range of $0-100K experienced a large decrease (from 34.4% to 29.0%) contrasting with the large increase (from 39.1% to 42.2%) in the range of $ K. By Q2 2016, the overall quarter s supply is 1.1 quarters, kept unchanged from a year ago.

8 Illinois MSA Housing Report Third Quarter, Table 1: Illinois, US and Rest of the Midwest (RMW) Employment Change Table 2: MSA Growth Rates, Jun 2016 and Last 12 Months

9 Illinois MSA Housing Report Third Quarter, Table 3: MSA League Tables, Non-farm Employment Growth Rate

Illinois MSA Housing Report Third Quarter, 2016 10 * The Illinois Department of Employment Security does not collect sector employment data for Metro-East MSA Definitions (Data are provided for IL

10 Illinois MSA Housing Report Third Quarter, * The Illinois Department of Employment Security does not collect sector employment data for Metro-East MSA Definitions (Data are provided for IL counties only in multi-state MSAs) Bloomington-Normal (B-N): McLean Co. Champaign-Urbana (C-U-R): Champaign Co., Ford Co. & Piatt Co. Chicago: Cook Co. IL, DeKalb Co. IL, DuPage Co. IL, Grundy Co. IL, Kane Co. IL, Kendall Co. IL, Lake Co. IL, McHenry Co. IL, Will Co. IL & Kenosha Co. WI Davenport-Moline-Rock Island (D-R-M): Henry Co. IL, Mercer Co. IL, Rock Island Co. IL & Scott Co. IA Decatur: Macon Co. Kankakee: Kankakee Co. Metro-East: Bond Co., Calhoun Co., Clinton Co., Jersey Co., Macoupin Co., Madison Co., Monroe Co. & St. Clair Co. Peoria- Pekin (Peoria): Marshall Co., Peoria Co., Stark Co., Tazewell Co. & Woodford Co. Rockford: Boone Co. & Winnebago Co. Springfield: Menard Co. & Sangamon Co.

Illinois MSA Housing Report Third Quarter, 2016 11 Table 4: Median Prices

11 Illinois MSA Housing Report Third Quarter, Table 4: Median Prices Forecast for the Third Quarter 2016 and Median Prices for the Second Quarter 2016

Illinois MSA Housing Report Third Quarter, 2016 12 Table 5: Sales Forecast

12 Illinois MSA Housing Report Third Quarter, Table 5: Sales Forecast for the Third Quarter 2016 & Sales Percentage Change for the Second Quarter 2016

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36 Illinois MSA Housing Report Third Quarter, Leading economists from the University of Illinois Regional Economics Applications Laboratory (REAL) developed the Illinois housing price forecast using an augmented distributed lag model as the framework to relate house pricing and the economic business cycle. This ARIMA model is considered a highly accurate forecasting method and one that can be easily updated with data provided by the Illinois Association of REALTORS each month and quarter and selected monthly economic data available for the state and metropolitan regions. Leading the research team is Dr. Geoffrey J.D. Hewings, director of REAL and a professor of Geography, Economics and Urban and Regional Planning.

ILLINOIS ECONOMIC REVIEW

ILLINOIS ECONOMIC REVIEW The Monthly Illinois Economic Review contains information on national, statewide, and local economic performance by measuring job, unemployment, and business activity. This information