Housing Price Forecasts. Illinois MSAs. Third Quarter, 2017

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1 Housing Price Forecasts Illinois MSAs Third Quarter, 2017 Presented To Illinois REALTORS From R E A L Regional Economics Applications Laboratory, Institute of Government and Public Affairs University of Illinois August 9, 2017

2 Illinois MSA Housing Report Third Quarter, Introduction This report provides analysis of the housing market in the Second Quarter of 2017 with forecasts for the Third Quarter of Complementary analysis of the economy is also provided to place the housing market into a broader perspective. The Illinois Economy Illinois added 8,600 jobs in June 2017, compared with a revised 11,300 job gain in May Compared to June 2016, Illinois has added 54,100 jobs. The three-month moving average, a more stable measure of labor market, showed an increase of 4,200 jobs per month. The state of Illinois now has 63,900 more jobs than in December 2007 when the recent recession started. Since January 2010, when Illinois employment growth resumed after the national recession, Illinois has added 465,400 new jobs. The Illinois MSAs Illinois Rural area lost 12,600 jobs at -1.70% this month, compared to a revised 50-job gain in May At the same time, Metro added 21,200 jobs at 0.40% in June, compared to a revised 11,300-job gain in the previous month. Chicago added 17,000 jobs at 0.41% in June 2017, compared to a revised 9,300-job gain in May Meanwhile, Downstate lost 8,400 jobs at %, compared to a revised 2,000-job gain in the previous month. In terms of the 12-month aggregated account, Metro registered a positive 1.19% growth by adding 62,500 jobs whereas Rural lost 8,400 jobs at -1.14%. Chicago added 50,800 jobs at 1.24% and Downstate added 3,300 jobs at 0.18%. Through June 2017, the cumulative job growth for Metro, Rural, Chicago and Downstate compared to January 1990 stood at 15.54%, 9.78%, 16.50% and 11.30% respectively (Table 1). Table 2 provides the monthly and 12-motnh changes for each of the metro areas; only Davenport-Rock Island-Moline lost jobs in June and only Rockford has recorded a 12 month decrease in the number of jobs. Table 3 provides a league table for the MSAs. Peoria (4th to 9th) experienced the deepest fall in June Rockford (1st to 2nd), Metro-East (2nd to 4th), Kankakee (5th to 6th), and Davenport-Rock Island-Moline (7th to 10th) also dropped in terms of rank from last month. The most remarkable upward move in June was recorded for Bloomington-Normal (6th to 1st). In the 12-month growth league table, upward moves were recorded for Bloomington-Normal (3rd to 1st) and Metro-East (6th to 4th). Downward moves were recorded for Kankakee (1st to 2nd), Springfield (2nd to 3rd) and Peoria (4th to 6th). In the 12-month growth league table, Rockford remained in the last place while Bloomington-Normal climbed to the first place. The Illinois MSAs Housing Market Overview In the Second quarter of 2017, overall sales in Illinois increased compared to last year. Positive growth was recorded in five MSAs and negative growth in the other five MSAs. For the Third quarter of 2017, the overall sales in Illinois are forecast to continuously increase at a mild growth

3 Illinois MSA Housing Report Third Quarter, rate. Five MSAs are forecast to experience increase in their sales, while the other five MSAs are forecast to experience year-over-year decreases (Bloomington-Normal, Champaign-Urbana, Kankakee, Peoria-Pekin, and Rockford). The overall increasing median price for Illinois is found in seven MSAs (Bloomington-Normal, Chicago PMSA, Champaign-Urbana, Davenport-Moline-Rock Island, Decatur, Peoria-Pekin, and Rockford) in the Second quarter. The overall median price for Illinois is forecast to increase with positive growth in seven MSAs (Chicago PMSA, Champaign-Urbana, Davenport-Moline- Rock Island, Decatur, Kankakee, Peoria-Pekin, and Rockford). Housing Market Conditions In the Second quarter of 2017, Illinois experienced increases in sales, and five out of ten MSAs experienced annual increases in sales with varying degree. The overall sales for Illinois increased by 1.3% compared to a year ago. Five MSAs experienced positive changes in sales: Chicago PMSA (2.3%), Davenport-Moline-Rock Island (2.8%), Kankakee (5.7%), Metro-East (0.2%), Springfield (0.1%); five MSAs experienced negative changes in sales: Bloomington- Normal (-2.3%), Champaign-Urbana (-7.4%), Decatur (-5.2%), Peoria-Pekin (-12.7%), and Rockford (-1.1%). In terms of housing prices, the overall median prices for Illinois presented significant annual gains with a growth rate of 7.7%. The positive growth was led by seven MSAs: Bloomington- Normal (1.2%), Champaign-Urbana (3.7%), Chicago PMSA (6.0%), Davenport-Moline-Rock Island (1.4%), Decatur (9.3%), Peoria-Pekin (2.4%), and Rockford (7.5%). Three MSAs experienced negative changes: Springfield (-9.2%) experienced substantial change in their median prices. Kankakee (-3.1%) and Metro-East (-1.5%) were the two MSAs that experienced mild negative changes. Illinois and six 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 1.1 decreasing from 1.3 a year ago. Bloomington-Normal remains the same level at 1.3 as a year ago. Three MSAs experienced increases in quarters of supply: Decatur (to 2.8 from 2.2 quarters), Peoria-Pekin (to 1.9 from 1.6 quarters), and Springfield (to 1.2 from 1.1 quarters). The rest of the MSAs experienced decreases: Champaign-Urbana (to 1.1 from 1.2 quarters), Chicago PMSA (to 0.8 from 1.0 quarters), Davenport-Moline-Rock Island (to 1.2 from 1.4 quarters), Kankakee (to 1.2 from 1.7 quarters), Metro-East (to 1.0 from 1.1 quarters), and Rockford (to 1.0 from 1.3 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 (7.9%). Seven out of ten MSAs are forecast to experience positive changes in the Third quarter of 2017: Chicago PMSA (4.6%), Champaign-Urbana (4.7%), Davenport-Moline-Rock Island (2.3%), Decatur (1.3%), Kankakee (1.6%), Peoria-Pekin (1.2%), and Rockford (11.4%). Two MSAs are forecast to decrease in their median prices: Bloomington-Normal (-0.1%), Metro-East (-0.5%). Springfield (0.0%) is forecast to remain at the same level.

4 Illinois MSA Housing Report Third Quarter, Table 5 provides the sales forecast for the Third quarter of The overall sales in Illinois are forecast to edge up by 3.9% to 5.3% compared to a year ago. Five MSAs are forecast to experience losses in sales: Bloomington-Normal (-1.4% to -1.9%), Champaign-Urbana (-1.2% to -1.6%), Kankakee (-0.4% to -0.6%), Peoria-Pekin (-0.1% to -0.2%) and Rockford (-3.1% to - 4.2%). The rest of the MSAs are forecast to increase their sales: Chicago (6.2% to 8.4%), Davenport-Moline-Rock Island (5.3% to 7.2%), Decatur (3.5% to 4.7%), Metro-East (1.6% to 2.1%), and Springfield (1.4% to 1.9%) 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 Chicago Median price forecast indicates a positive trend with annual rates of change of 7.1% to 8.6% in Q Sales volume in Q is forecast to increase by an annual rate of 3.9% to 5.3%. Median prices in Q were 7.7% higher on a yearly basis. Sales volume in Q was 1.3% higher than a year ago. In Q2 2017, the decreases in market shares are concentrated on homes priced less than 100K. Homes priced below $100K captured 16.2% of the market against 18.9% a year ago. By Q2 2017, the overall quarter s supply is 1.1 decreasing from 1.3 a year ago. Median price forecast indicates a positive trend with annual rates of change of 4.2% to 5.1% in Q Sales volume in Q is forecast to change by 6.2% to 8.4% on a yearly basis. Median prices in Q were 6.0% higher on a yearly basis. Sales volume in Q was 2.3% higher than a year ago In Q2 2017, market shares of homes priced less than $100K experienced the largest change, decreasing from 10.8% a year ago to 7.8%. By Q2 2017, the overall quarter s supply is forecast to be 0.8 quarters, decreasing from 1.0 a year ago. Bloomington-Normal Median price forecast indicates mixed trend with an annual change rate of -6.3% to 3.6% in Q Sales volume in Q is forecast to change by -1.4% to -1.9% on a yearly basis. Median prices in Q experienced a change of 1.2% compared with Q Sales volume in Q was 2.3% lower than a year ago.

5 Illinois MSA Housing Report Third Quarter, In Q2 2017, market shares of homes prices at different ranges remain at similar levels as a year ago. By Q2 2017, the overall quarter s supply remains at 1.3 quarters as a year ago. Champaign-Urbana Median price forecast indicates positive growth trend with rates of change between 3.1% and 6.5% in Q Sales volume in Q is forecast to change by -1.2% to -1.6% on a yearly basis. Median prices in Q were 3.7% higher on a yearly basis. Sales volume in Q was 7.4% lower than a year ago. In Q2 2017, market shares of homes priced in the range of $ K experienced the largest change, decreasing from 48.2% a year ago to 44.9%. By Q2 2017, the overall quarter s supply remains at a similar level as a year ago. Davenport-Moline-Rock Island Decatur Kankakee Median price forecast indicates mixed growth trend with rates of change between -2.1% and 10.7% in Q Sales volume in Q is forecast to experience a change of 5.3% to 7.2% on a yearover-year basis. Median prices in Q experienced a change of 1.4% on a yearly basis. Sales volume in Q was 2.8% higher than a year ago. In Q2 2017, market shares of homes priced less than $100K experienced the largest change, decreasing from 46.2% a year ago to 44.0%. By Q2 2017, the overall quarter s supply is 1.2 quarters, decreasing from 1.4 a year ago. Median price forecast indicates mixed rates of change between -6.0% and 11.9% in Q Sales volume in Q is forecast to experience a change of 3.5% to 4.7%. Median prices in Q experienced a change of 9.3% on a yearly basis. Sales volume in Q was 5.2% lower than a year ago. In Q2 2017, market shares of homes priced less than $100 experienced the largest change, decreasing from 52.2% to 49.0%. By Q2 2017, the overall quarter s supply is 2.8 quarters, increasing from 2.2 a year ago. Median price forecast indicates mixed growth trend with rates of change between 5.4% and 6.9% in Q Sales volume in Q is forecast to change by -0.4% to -0.6% on a yearly basis. Median prices in Q experienced a change of -3.1% on a yearly basis.

6 Illinois MSA Housing Report Third Quarter, Sales volume in Q was 5.7% higher than a year ago. In Q2 2017, market shares of homes priced in the range of $ K experienced the largest change, decreasing from 46.1% to 43.9%. By Q2 2017, the overall quarter s supply is 1.2 quarters, decreasing from 1.7 a year ago. Metro East Peoria-Pekin Rockford Springfield Median price forecast indicates mixed rates of change between -1.5% and 0.3% in Q Sales volume in Q is forecast to change between 1.6% to 2.1% on an annual basis. Median prices in Q experienced a change of -1.5% on a yearly basis. Sales volume in Q was 0.2% higher than a year ago. In Q2 2017, market shares of homes priced at different ranges remain at similar levels as a year ago. By Q2 2017, the overall quarter s supply remains at a similar level as a year ago. Median price forecast indicates mixed rates of change between -0.6% and 4.4% in Q Sales volume in Q is forecast to change by -0.1% to -0.2% on an annual basis. Median prices in Q experienced a change of 2.4% on a yearly basis. Sales volume in Q was 12.7% lower than a year ago. In Q2 2017, market shares of homes prices less than $100 experienced the largest change, decreasing from 37.3% to 35.3%. By Q2 2017, the overall quarter s supply is 1.9 quarters, increasing from 1.6 a year ago. Median price forecast indicates positive annual rates of change between 9.6% and 12.6% in Q Sales volume in Q is forecast to decrease by -3.1% to -4.2% on a yearly basis. Median prices in Q experienced a change of 7.5% on a yearly basis. Sales volume in Q was 1.1% lower than a year ago. In Q2 2017, market shares of homes priced in the range of $0-100K experienced the largest change, decreasing from 43.0% to 39.0%. By Q2 2017, the overall quarter s supply is 1.0 quarter, down from 1.3 quarters a year ago.

7 Illinois MSA Housing Report Third Quarter, Median price forecast indicates mixed rates of change between -4.7% and 4.5% in Q Sales volume in Q is forecast to change between 1.4% and 1.9% on a yearly basis. Median prices in Q experienced a change of -9.2% on a yearly basis. Sales volume in Q was 0.1% higher compared to a year ago. In Q2 2017, market shares of homes priced in the range of $0-100K experienced the largest change, increasing from 28.9% to 32.2%. By Q2 2017, the overall quarter s supply remains at similar levels as 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, June 2017 and Last 12 Months

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

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.

11 Illinois MSA Housing Report Third Quarter, Table 4: Median Prices Forecast for the Third Quarter 2017 and Median Prices for the Second Quarter 2017 IL State Bloomington-Normal Champaign- Urbana Chicago PMSA Davenport-Moline- Rock Island Decatur Kankakee Metro-East Peoria-Pekin Rockford Springfield 2017 Q3 Forecast Price (forecast) Annually 2017 Q2 Price Annually Jul , % Apr , % Aug , % May , % Sep , % Jun , % 3M Average 204, % 3M 210, % Jul , % Apr , % Aug , % May , % Sep , % Jun , % 3M Average 161, % 3M 159, % Jul , % Apr , % Aug , % May , % Sep , % Jun , % 3M Average 153, % 3M 152, % Jul , % Apr , % Aug , % May , % Sep , % Jun , % 3M Average 238, % 3M 249, % Jul , % Apr , % Aug-17 99, % May , % Sep , % Jun , % 3M Average 102, % 3M 106, % Jul-17 98, % Apr , % Aug-17 99, % May-17 89, % Sep-17 93, % Jun , % 3M Average 97, % 3M 100, % Jul , % Apr , % Aug , % May , % Sep , % Jun , % 3M Average 132, % 3M 130, % Jul , % Apr , % Aug , % May , % Sep , % Jun , % 3M Average 129, % 3M 133, % Jul , % Apr , % Aug , % May , % Sep , % Jun , % 3M Average 127, % 3M 127, % Jul , % Apr , % Aug , % May , % Sep , % Jun , % 3M Average 125, % 3M 118, % Jul , % Apr , % Aug , % May , % Sep , % Jun , % 3M Average 135, % 3M 129, %

12 Illinois MSA Housing Report Third Quarter, Table 5: Sales Forecast for the Third Quarter 2017 & Sales Percentage Change for the Second Quarter 2017 IL State Bloomington-Normal Champaign- Urbana Chicago Davenport-Moline-Rock Island Decatur Kankakee Metro-East Peoria-Pekin Rockford Springfield 2017 Q3 Forecast Annual Monthly 2017 Q2 Annual Monthly Jul % 6.3% -8.0% -10.9% Apr % 4.8% Aug % 2.7% -0.5% -0.7% May % 22.4% Sep % 7.2% -10.1% -13.7% Jun % 10.0% 3M 3.9% 5.3% -6.3% -8.5% 3M 1.3% 64.3% Jul % -2.8% -10.4% -14.1% Apr % 20.3% Aug % -3.5% -7.3% -9.9% May % 22.9% Sep % 1.3% -11.3% -15.3% Jun % 8.1% 3M -1.4% -1.9% -9.7% -13.1% 3M -2.3% 81.5% Jul % 0.2% -5.6% -7.5% Apr % -2.2% Aug % -9.7% -10.6% -14.4% May % 38.1% Sep % 7.5% -18.3% -24.7% Jun % 20.2% 3M -1.2% -1.6% -11.1% -15.0% 3M -7.4% 74.2% Jul % 9.9% -6.8% -9.3% Apr % 4.6% Aug % 5.3% -1.5% -2.0% May % 23.0% Sep % 10.6% -11.2% -15.2% Jun % 10.9% 3M 6.2% 8.4% -6.5% -8.8% 3M 2.3% 67.6% Jul % 17.7% -16.7% -22.7% Apr % 16.5% Aug % 2.2% 3.6% 4.9% May % 9.4% Sep % 2.8% -8.6% -11.7% Jun % 23.3% 3M 5.3% 7.2% -8.0% -10.8% 3M 2.8% 53.7% Jul % 15.5% 13.1% 17.8% Apr % -17.6% Aug % -7.0% -14.0% -19.0% May % 65.2% Sep % 5.9% 5.2% 7.0% Jun % -23.1% 3M 3.5% 4.7% 0.6% 0.9% 3M -5.2% 60.1% Jul % 1.9% -15.5% -20.9% Apr % 26.0% Aug % -3.2% 11.5% 15.5% May % 28.9% Sep % -0.1% -6.6% -8.9% Jun % 6.4% 3M -0.4% -0.6% -4.4% -6.0% 3M 5.7% 87.8% Jul % 5.3% -6.5% -8.7% Apr % 11.1% Aug % -2.9% 0.7% 0.9% May % 3.7% Sep % 4.6% -10.6% -14.4% Jun % 13.8% 3M 1.6% 2.1% -5.5% -7.5% 3M 0.2% 53.9% Jul % 0.8% -10.4% -14.1% Apr % 20.3% Aug % -5.9% -7.3% -9.9% May % 22.9% Sep % 5.8% -11.3% -15.3% Jun % 8.1% 3M -0.1% -0.2% -6.6% -9.0% 3M -12.7% 54.9% Jul % -3.3% -5.4% -7.3% Apr % 15.1% Aug % -5.8% 1.7% 2.3% May % 15.3% Sep % -3.2% -3.6% -4.9% Jun % -3.9% 3M -3.1% -4.2% -2.5% -3.4% 3M -1.1% 52.1% Jul % 4.3% -15.5% -20.9% Apr % -3.6% Aug % -1.0% -1.0% -1.3% May % 39.9% Sep % 2.4% -6.6% -8.9% Jun % 9.3% 3M 1.4% 1.9% -8.2% -11.1% 3M 0.1% 78.1%

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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.