THE OUTLOOK FOR HOUSING IN ILLINOIS Jonathan Smoke Chief Economist January 25, 2017
NATIONAL TRENDS 2
2000.01 2000.05 2000.09 2001.01 2001.05 2001.09 2002.01 2002.05 2002.09 2003.01 2003.05 2003.09 2004.01 2004.05 2004.09 2005.01 2005.05 2005.09 2006.01 2006.05 2006.09 2007.01 2007.05 2007.09 2008.01 2008.05 2008.09 2009.01 2009.05 2009.09 2010.01 2010.05 2010.09 2011.01 2011.05 2011.09 2012.01 2012.05 2012.09 2013.01 2013.05 2013.09 2014.01 2014.05 2014.09 2015.01 2015.05 2015.09 2016.01 2016.05 2016.09 Thousands JOB CREATION POSITIVE BUT WEAKER 229,000 jobs created by month in 2015; 180,000 average in 2016 Employment and Unemployment Nonfarm Employment Unemployment Rate 150,000 12.0 145,000 10.0 140,000 8.0 135,000 6.0 130,000 4.0 125,000 2.0 120,000 0.0 Source: Bureau of Labor Statistics 3
2000.01 2000.06 2000.11 2001.04 2001.09 2002.02 2002.07 2002.12 2003.05 2003.10 2004.03 2004.08 2005.01 2005.06 2005.11 2006.04 2006.09 2007.02 2007.07 2007.12 2008.05 2008.10 2009.03 2009.08 2010.01 2010.06 2010.11 2011.04 2011.09 2012.02 2012.07 2012.12 2013.05 2013.10 2014.03 2014.08 2015.01 2015.06 2015.11 2016.04 2016.09 VERY STRONG FALL RESALE MARKET Sales rate up to 5.61 million in November, highest since Feb 2007 Existing Home Sales and Prices EHS SAAR Med Exist Home Price 8,000,000 $300,000 7,000,000 $250,000 6,000,000 5,000,000 $200,000 4,000,000 $150,000 3,000,000 $100,000 2,000,000 1,000,000 $50,000 0 $0 Source: National Association of REALTORS Existing Home Sales Report 4
2013.02 2013.03 2013.04 2013.05 2013.06 2013.07 2013.08 2013.09 2013.10 2013.11 2013.12 2014.01 2014.02 2014.03 2014.04 2014.05 2014.06 2014.07 2014.08 2014.09 2014.10 2014.11 2014.12 2015.01 2015.02 2015.03 2015.04 2015.05 2015.06 2015.07 2015.08 2015.09 2015.10 2015.11 2015.12 2016.01 2016.02 2016.03 2016.04 2016.05 2016.06 2016.07 2016.08 2016.09 2016.10 2016.11 2016.12 INVENTORY FALLING FASTER Inventory down 11% in November and December Listings and Median Age of Inventory Listings Median Age of Inventory 2,500,000 120 2,000,000 100 1,500,000 80 60 1,000,000 40 500,000 20-0 Source: Realtor.com 5
2001.01 2001.05 2001.09 2002.01 2002.05 2002.09 2003.01 2003.05 2003.09 2004.01 2004.05 2004.09 2005.01 2005.05 2005.09 2006.01 2006.05 2006.09 2007.01 2007.05 2007.09 2008.01 2008.05 2008.09 2009.01 2009.05 2009.09 2010.01 2010.05 2010.09 2011.01 2011.05 2011.09 2012.01 2012.05 2012.09 2013.01 2013.05 2013.09 2014.01 2014.05 2014.09 2015.01 2015.05 2015.09 2016.01 2016.05 2016.09 SALES SHIFTING TOWARDS NEW Seasonally adjusted pace of sales flat y/y for pending, +17% new Home Sales (New Contracts) SAAR Pending Home Sales (Existing) New Home Sales 140.0 1,600,000 120.0 1,400,000 100.0 80.0 60.0 40.0 20.0 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0.0 0 Source: National Association of REALTORS, Commerce Department 6
2000.01 2000.05 2000.09 2001.01 2001.05 2001.09 2002.01 2002.05 2002.09 2003.01 2003.05 2003.09 2004.01 2004.05 2004.09 2005.01 2005.05 2005.09 2006.01 2006.05 2006.09 2007.01 2007.05 2007.09 2008.01 2008.05 2008.09 2009.01 2009.05 2009.09 2010.01 2010.05 2010.09 2011.01 2011.05 2011.09 2012.01 2012.05 2012.09 2013.01 2013.05 2013.09 2014.01 2014.05 2014.09 2015.01 2015.05 2015.09 2016.01 2016.05 2016.09 INVENTORY REMAINS A CONSTRAINT 51 straight months of home supply below normal; now 4.0/5.1 mos Months' Supply of Homes for Sale Existing New 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Source: National Association of REALTORS, Commerce Department 7
2013.02 2013.03 2013.04 2013.05 2013.06 2013.07 2013.08 2013.09 2013.10 2013.11 2013.12 2014.01 2014.02 2014.03 2014.04 2014.05 2014.06 2014.07 2014.08 2014.09 2014.10 2014.11 2014.12 2015.01 2015.02 2015.03 2015.04 2015.05 2015.06 2015.07 2015.08 2015.09 2015.10 2015.11 2015.12 2016.01 2016.02 2016.03 2016.04 2016.05 2016.06 2016.07 2016.08 2016.09 2016.10 2016.11 2016.12 RENT INCREASES HAVE SLOWED Asking rents down 1% y/y in Dec compared to list prices up 9% National Home Price and Rent Trends Median Existing List Price Median Asking Rent $2,000 $270,000 $250,000 $230,000 $1,900 $1,800 $1,700 $210,000 $1,600 $190,000 $1,500 $170,000 $1,400 $150,000 $1,300 Source: Realtor.com and Altos Research 8
Jan-71 Feb-72 Mar-73 Apr-74 May-75 Jun-76 Jul-77 Aug-78 Sep-79 Oct-80 Nov-81 Dec-82 Jan-84 Feb-85 Mar-86 Apr-87 May-88 Jun-89 Jul-90 Aug-91 Sep-92 Oct-93 Nov-94 Dec-95 Jan-97 Feb-98 Mar-99 Apr-00 May-01 Jun-02 Jul-03 Aug-04 Sep-05 Oct-06 Nov-07 Dec-08 Jan-10 Feb-11 Mar-12 Apr-13 May-14 Jun-15 Jul-16 AFFORDABILITY ON THE DECLINE 30-year conforming rate averaged 3.65% in 2016 Housing Affordability Index Composite (Left Axis) Average 30-Year Conforming Rate (Right Axis) 250.00 20 18 200.00 16 14 150.00 Nov 167 12 10 100.00 8 50.00 0.00 Dec 2012 3.34 Jun 3.57 Nov 3.77 Jul- Aug 3.44 Sep 3.46 Oct 3.47 Dec 4.20 6 4 2 0 Source: Moody s Analytics, Freddie Mac, and National Association of REALTORS 9
2000.01 2000.06 2000.11 2001.04 2001.09 2002.02 2002.07 2002.12 2003.05 2003.10 2004.03 2004.08 2005.01 2005.06 2005.11 2006.04 2006.09 2007.02 2007.07 2007.12 2008.05 2008.10 2009.03 2009.08 2010.01 2010.06 2010.11 2011.04 2011.09 2012.02 2012.07 2012.12 2013.05 2013.10 2014.03 2014.08 2015.01 2015.06 2015.11 2016.04 2016.09 CONFIDENCE AT 15 YEAR HIGH Plans to purchase a home also strong (3 mo ave 6.3%) Consumer Confidence and Plans to Purchase a Home Consumer Confidence Index Plans to Purchase 160 140 120 100 80 60 40 20 0 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Source: The Conference Board, Moody s Analytics 10
LIFE DRIVES HOUSING DEMAND Everyone s tired of waiting and Millennials are building families Top 10 Buying Triggers all 25-34 tired of current home favorable home prices change of family circumstance/composition 30% getting married/moving in with partner looking for a safer neighhorhood increase in family size relocated to a new city planning an increase to family size desire to live closer to good schools increase in income 26% 13% 33% 25% 13% 32% change of job/job location 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% Source: realtor.com Active Home Shopper Survey, September 2016 11
CREDIT ACCESS IMPROVING Credit access up 7% year-over-year in December; up 5% since Sep 1000 Mortgage Credit Availability Index Mar-2012=100 900 800 700 30% 600 500 400 300 200 26% 13% 25% 13% 100 0 33% 32% Source: Mortgage Bankers Association, Haver Analytics 12
IMPEDIMENTS TO PURCHASE Inventory is back on top; time and finances plague first-timers What's Getting in the Way of Making a Home Purchase? Repeat First-Time All Buyers Have not yet found a house that meets my needs Just starting to explore Cannot find a good house in my budget range 30% Haven't decided on a specific neighborhood/town Need to improve credit score 26% Lack enough funds for down payment Can't sell current home 13% Having difficulty qualifying for a mortgage Currently on a lease 33% Always overbid by other buyers 25% 13% 32% I owe more on my current home than it is worth 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% Source: Realtor.com Survey of Buyer Traffic, December 2016 13
2017 FORECAST Key economic and housing metrics from NAR and realtor.com National Association of REALTORS Macro Forecast: GDP grows 2.2% (vs. 1.6% in 2016) Nonfarm payroll employment grows 1.3% (156k per mo) Unemployment declines to 4.7% realtor.com housing forecast: Existing home prices appreciate 3.9% (down from 4.9% in 2016) Existing home sales grow 2% to 5.46 million New home sales grow 10% to 620,000 Housing starts increase 3% to 1.20 million (SF up 5%) 30-year fixed conforming rate ends 2017 at 4.5% 14
LOCATION LOCATION LOCATION 15
LIST PRICE GROWTH Half of counties in Illinois seeing list appreciation Y/Y (Dec 2016) Source: Realtor.com 16
ACTIVE INVENTORY Single Family and Condo Active Listings (December 2016) Source: Realtor.com 17
HOTTEST COUNTIES (Q4 2016) Based on Supply and Demand Source: Realtor.com 18
HOTTEST ZIPS (Q4 2016) Based on Supply and Demand Source: Realtor.com 19
BIG DATA IN ILLINOIS Interest by age groups (H1 2016) Source: Realtor.com 20
AGE INTEREST IN HOTTEST ZIPS Interest by age groups (H1 2016) Source: Realtor.com 21
HOTTEST LISTINGS IN LAST 60 DAYS Top homes get 19-35 times more views than state average 22
RENTS HIGHER IN MOST COUNTIES Rents up 5%+ Y/Y in 29% of counties Source: Realtor.com Analysis of HUD Fair Market Rents 23
RENT VS BUY Monthly costs favor buying in 90% of counties Source: Realtor.com Analysis of Nielsen Pop-Facts Demographics, HUD Fair Market Rents and Realtor.com Data 24
HOME OWNERSHIP STRONG IN STATE Overall home ownership rate in Illinois is 70% Source: Nielsen Demographics Pop-Facts 2017 25
MILLENNIAL OWNERSHIP STRONG 25-34 home ownership rate in Illinois is 50% Source: Nielsen Demographics Pop-Facts 2017 26
HOUSEHOLD GROWTH 2017-2022 Growth hot spots throughout the state Source: Nielsen Demographics Pop-Facts 2017 27
Jonathan Smoke Chief Economist realtor.com jonathan.smoke@realtor.com @SmokeonHousing Access market data, research, and presentations at research.realtor.com 28