Illinois REALTOR® Magazine | October 2012
By Geoffrey J.D. Hewings, Ph.D. | Director, Regional Economics Applications Laboratory (REAL), University of Illinois
Despite mixed signals for the future pace of economic recovery, the Illinois statewide and Chicagoland PMSA housing sales and price forecasts suggest that the market will maintain positive momentum into the fall.
The forecast shows that the year-over-year median prices are expected to decrease slightly for August and September and increase for October for both the Chicagoland PMSA and Illinois.
Median prices by October are forecast to be $132,582 compared to $129,900 in October 2011. The forecast for total sales from August to October are expected to be 25 to 33 percent higher than the total sales from August to October in 2011 for both Illinois and Chicagoland PMSA. (Note: the Chicagoland PMSA covers the nine-county region including Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will.)
The slow-down in job creation appears not to have dampened real estate activity. The combination of a smaller inventory for sale and higher sales rates are reducing time on the market. However, the continuing addition of foreclosed properties maintains downward pressure on median prices.
In July, at the current annual sales rate, Illinois had enough housing inventory for 8.3 months (down from 12.4 a year ago). In the Chicagoland PMSA, the comparable figure was 7.8 months of inventory (down from 12.9 a year ago).
The decreasing months’ supply figures result from both low housing inventory levels and higher sales rates. About 60 percent of the total is attributed to low housing inventory levels and 40 percent is the result of higher sales rates. A housing supply shortage could become an issue.
The national labor market situation and consumer confidence show contrary signals with regard to economic recovery. According to the Bureau of Labor Statistics (BLS) Employment Situation report for July, nonfarm payrolls increased by 163,000, while the unemployment rate inched up to 8.3 percent.
The Conference Board Consumer Confidence Index® reported a slight increase in consumer confidence in July. Consumers were generally more optimistic about the short-term outlook and labor market conditions. However, consumers’ appraisal of current conditions declined slightly in July and the proportion of consumers expecting an increase in their income declined.
Similar contrary signals are seen in Illinois. According to the Illinois Department of Employment Security, in July 2012, the Illinois unemployment rate inched upward 0.2 to 8.9 percent.
This increase was largely contributed by a sharp cut of 7,900 jobs in local school positions. In contrast, some of the private sectors, such as professional and business services, manufacturing, and educational and health services are leading the expansion of the private employment base in Illinois.
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