Jonathan Smoke - 2017 Market Outlook

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CHICAGOMARKET OUTLOOKJonathan SmokeChief EconomistJanuary 12, 2017

© 2017 Move, Inc. All rights reserved. Do not copy or distribute. 4

NATIONALTRENDS


JOB CREATION POSITIVE BUT WEAKER229,000 jobs created by month in 2015; 180,000 average in 2016

5

Source: Bureau of Labor Statistics

2000.012001.022002.032003.042004.052005.062006.072007.082008.092009.102010.112011.122013.012014.022015.032016.04120,000

125,000

130,000

135,000

140,000

145,000

150,000

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Employment and UnemploymentNonfarm Employment Unemployment Rate

Thou

sand

s


VERY STRONG FALL RESALE MARKETSales rate up to 5.61 million in November, highest since Feb 2007

6

Source: National Association of REALTORS® Existing Home Sales Report

2000.012001.022002.032003.042004.052005.062006.072007.082008.092009.102010.112011.122013.012014.022015.032016.040

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

Existing Home Sales and PricesEHS SAAR Med Exist Home Price


INVENTORY FALLING FASTERInventory down 11% in November and December

7

Source: Realtor.com®

2013

.02

2013

.04

2013

.06

2013

.08

2013

.10

2013

.12

2014

.02

2014

.04

2014

.06

2014

.08

2014

.10

2014

.12

2015

.02

2015

.04

2015

.06

2015

.08

2015

.10

2015

.12

2016

.02

2016

.04

2016

.06

2016

.08

2016

.10

2016

.12 -

500,000

1,000,000

1,500,000

2,000,000

2,500,000

0

20

40

60

80

100

120

Listings and Median Age of InventoryListings Median Age of Inventory


SALES SHIFTING TOWARDS NEWSeasonally adjusted sales flat y/y for pending, +17% new in Nov

8

Source: National Association of REALTORS®, Commerce Department

2001.012002.012003.012004.012005.012006.012007.012008.012009.012010.012011.012012.012013.012014.012015.012016.010.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

Home Sales (New Contracts) SAARPending Home Sales (Existing) New Home Sales


INVENTORY REMAINS A CONSTRAINT51 straight months of home supply below normal; now 4.0/5.1 mos

9

Source: National Association of REALTORS®, Commerce Department

2000.01 2001.01 2002.01 2003.01 2004.01 2005.01 2006.01 2007.01 2008.01 2009.01 2010.01 2011.01 2012.01 2013.01 2014.01 2015.01 2016.010.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Months' Supply of Homes for SaleExisting New


STARTS UP AND DOWN IN FALLStarts up 25% y/y in October, down 7% y/y in November

10

Source: Commerce Department

2000.012001.012002.012003.012004.012005.012006.012007.012008.012009.012010.012011.012012.012013.012014.012015.012016.010

500

1,000

1,500

2,000

2,500

Residential ConstructionSingle-Family Starts Multi-Family Starts

Thou

sand

s


LISTING PRICES GREW 9% Y/Y IN DECMedian list price increases are widespread

11

Source: Realtor.com®

December 2016


RENT INCREASES HAVE SLOWEDAsking rents down 1% y/y in Dec compared to list prices up 9%

12

Source: Realtor.com® and Altos Research

2013

.02

2013

.04

2013

.06

2013

.08

2013

.10

2013

.12

2014

.02

2014

.04

2014

.06

2014

.08

2014

.10

2014

.12

2015

.02

2015

.04

2015

.06

2015

.08

2015

.10

2015

.12

2016

.02

2016

.04

2016

.06

2016

.08

2016

.10

2016

.12 $150,000

$170,000

$190,000

$210,000

$230,000

$250,000

$270,000

$1,300

$1,400

$1,500

$1,600

$1,700

$1,800

$1,900

$2,000

National Home Price and Rent TrendsMedian Existing List Price Median Asking Rent


CHEAPER TO BUY IN 52% OF COUNTIESSimple monthly cost analysis favors buying

Source: Realtor.com® Analysis of HUD Median Rents,Nielsen Pop-Facts Demographics and Realtor.com® Data

2016


Jan-7

1

May-72

Sep-73

Jan-7

5

May-76

Sep-77

Jan-7

9

May-80

Sep-81

Jan-8

3

May-84

Sep-85

Jan-8

7

May-88

Sep-89

Jan-9

1

May-92

Sep-93

Jan-9

5

May-96

Sep-97

Jan-9

9

May-00

Sep-01

Jan-0

3

May-04

Sep-05

Jan-0

7

May-08

Sep-09

Jan-1

1

May-12

Sep-13

Jan-1

5

May-16

Sep-17

0.00

50.00

100.00

150.00

200.00

250.00

0

2

4

6

8

10

12

14

16

18

20

Affordability and Mortgage RatesHousing Affordability Index Composite (Left Axis) Average 30-Year Conforming Rate (Right Axis)

30-year conforming rate averaged 3.65% in 2016AFFORDABILITY ON THE DECLINE

14

Source: Moody’s Analytics, Freddie Mac, and National Association of REALTORS®

Oct170

Jun 3.57

Dec 2012 3.34 Jul- Aug 3.44 Sep 3.46 Oct 3.47

Nov 3.77

Dec 4.20


CONFIDENCE AT 15 YEAR HIGHPlans to purchase a home also strong (3 mo ave 6.3%)

15

Source: The Conference Board, Moody’s Analytics

2000.012001.012002.012003.012004.012005.012006.012007.012008.012009.012010.012011.012012.012013.012014.012015.012016.010

20

40

60

80

100

120

140

160

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

Consumer Confidence and Plans to Purchase a HomeConsumer Confidence Index Plans to Purchase


JOB CREATION FAVORS THE YOUNG1,095,000 jobs created in last 12 months for 25-34 year olds

16

26%

13%

33%

30%

25%

13%

32%

Source: Bureau of Labor Statistics, Realtor.com® Analysis

Jan-2007 Oct-2007 Jul-2008 Apr-2009 Jan-2010 Oct-2010 Jul-2011 Apr-2012 Jan-2013 Oct-2013 Jul-2014 Apr-2015 Jan-2016 Oct-2016

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Year-Over-Year Gains in Civilian EmploymentCivilian Employment 25-34 Employment


LIFE DRIVES HOUSING DEMANDEveryone’s tired of waiting and Millennials are building families

17

26%

13%

33%

30%

25%

13%

32%

Source: realtor.com Active Home Shopper Survey, September 2016

change of job/job location

increase in income

desire to live closer to good schools

planning an increase to family size

relocated to a new city

increase in family size

looking for a safer neighhorhood

getting married/moving in with partner

change of family circumstance/composition

favorable home prices

tired of current home

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00%

Top 10 Buying Triggersall 25-34


CREDIT ACCESS IMPROVINGCredit access up 7% year-over-year in December; up 5% since Sep

18

26%

13%

33%

30%

25%

13%

32%

Source: Mortgage Bankers Association, Haver Analytics

2004.06 2005.03 2005.12 2006.09 2007.06 2008.03 2008.12 2009.09 2010.06 2011.03 2011.12 2012.09 2013.06 2014.03 2014.12 2015.09 2016.060

100

200

300

400

500

600

700

800

900

1000

Mortgage Credit Availability IndexMar-2012=100


300-4994.9 500-549

7.6

550-5999.4

600-64910.3

650-69913

700-74916.6

750-79918.2

800-85019.9

FICO Population Dis-tribution (Apr 2015)

19

YET CREDIT METRICS HAVE MOVED UPIn November the ave FICO score on a closed mortgage was 728

26%

13%

33%

13%

Source: Ellie Mae and Fair Isaac Corporation

2011

.08

2011

.11

2012

.02

2012

.05

2012

.08

2012

.11

2013

.02

2013

.05

2013

.08

2013

.11

2014

.02

2014

.05

2014

.08

2014

.11

2015

.02

2015

.05

2015

.08

2015

.11

2016

.02

2016

.05

2016

.08

2016

.11620

640

660

680

700

720

740

760

780

Average FICO Scores US and By Mortgage Type

US All Closed Loan Conv PurchFHA Purch VA Purch


IMPEDIMENTS TO PURCHASEInventory is back on top; time and finances plague first-timers

20

26%

13%

33%

30%

25%

13%

32%

Source: Realtor.com Survey of Buyer Traffic, December 2016

I owe more on my current home than it is worth

Always overbid by other buyers

Currently on a lease

Having difficulty qualifying for a mortgage

Can't sell current home

Lack enough funds for down payment

Need to improve credit score

Haven't decided on a specific neighborhood/town

Cannot find a good house in my budget range

Just starting to explore

Have not yet found a house that meets my needs

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00%

What's Getting in the Way of Making a Home Purchase?Repeat First-Time All Buyers


LOCATIONLOCATIONLOCATION


MORTGAGE RATES VARY30-Year-Fixed in IL Low of 3.4% (Sep ‘16), High of 4.3% (Dec ‘16)

22

Source: Realtor.com


EMPLOYMENT AT RECORD HIGHSUnemployment rate still a full percentage point higher than US

23

Source: BLS, Moody’s Analytics

Jan-9

0

Nov-90

Sep-91

Jul-9

2

May-93

Mar-94

Jan-9

5

Nov-95

Sep-96

Jul-9

7

May-98

Mar-99

Jan-0

0

Nov-00

Sep-01

Jul-0

2

May-03

Mar-04

Jan-0

5

Nov-05

Sep-06

Jul-0

7

May-08

Mar-09

Jan-1

0

Nov-10

Sep-11

Jul-1

2

May-13

Mar-14

Jan-1

5

Nov-15

Sep-16

3,400,000

3,600,000

3,800,000

4,000,000

4,200,000

4,400,000

4,600,000

4,800,000

0.00

2.00

4.00

6.00

8.00

10.00

12.00

Employment and Unemployment Rate in Chicago MSATotal Nonfarm Employment (SA) Unemployment Rate (% SA)


TOTAL STARTS REMAIN LOWStarts down in November but single-family up 24%

24

Source: Commerce Department, Moody’s Analytics

Jan-9

0

Oct-90

Jul-9

1

Apr-92

Jan-9

3

Oct-93

Jul-9

4

Apr-95

Jan-9

6

Oct-96

Jul-9

7

Apr-98

Jan-9

9

Oct-99

Jul-0

0

Apr-01

Jan-0

2

Oct-02

Jul-0

3

Apr-04

Jan-0

5

Oct-05

Jul-0

6

Apr-07

Jan-0

8

Oct-08

Jul-0

9

Apr-10

Jan-1

1

Oct-11

Jul-1

2

Apr-13

Jan-1

4

Oct-14

Jul-1

5

Apr-16

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

New Construction Starts in Chicago MSASingle-family Multi-family


ACTIVE INVENTORY IN REGIONCook County dominates single family and condo active listings

25

Source: Realtor.com


INVENTORY TIGHTENEDActive listings down 16.7% Y/Y in Cook County (December 2016)

26

Source: Realtor.com

Speianu, Sabrina

There is pending listing interference in August 2015. Still include chart? Replace with total listings?


AGE OF INVENTORYInventory moving fastest in Cook County (December 2016)

27

Source: Realtor.com


LIST PRICES ALSO GROWINGAsking prices up 10% Y/Y in Cook County (December 2016)

28

Source: Realtor.com


LIST PRICE APPRECIATION COOK68% of zips seeing 5%+ listing price growth Y/Y (Dec 2016)

29

Source: Realtor.com


HOTTEST ZIPS COOK COUNTY (Q3 2016)Based on Supply and Demand

30

Source: Realtor.com


HOTTEST ZIPS IN CHICAGOBased on Supply and Demand

31

Source: Realtor.com


BIG DATA IN CHICAGO Interest by age groups (H1 2016)

32

Source: Realtor.com


CHICAGO INTEREST BY AGE GROUPS Interest in hottest zips (H1 2016)

33

Source: Realtor.com


HOTTEST LISTINGS IN LAST 60 DAYSTop homes get 24-36 times more views than Chicago average

34


RENT VS BUYMonthly costs slightly favor buying in Cook County

35

Source: Realtor.com® Analysis of Nielsen Pop-Facts Demographics, HUD Fair Market Rents and Realtor.com Data


HOUSEHOLD GROWTH 2017-2022Growth hot spots in the city and suburbs of Chicago

36

Source: Nielsen Demographics Pop-Facts 2017


FOCUS ON CHICAGOGrowth hot spots in city favor urban growth areas

37

Source: Nielsen Demographics Pop-Facts 2017


• National Association of REALTORS® Macro Forecast:• GDP grows 2.2% (vs. 1.6% in 2016)• Nonfarm payroll employment grows 1.3% (156k per mo)

• realtor.com® housing forecast:• Existing home prices appreciate 3.9% (Chicago MSA 2.0%)• Total home sales grow 2.6% (Chicago MSA 2.3%)• 30-year fixed conforming rate ends 2017 at 4.5%

38

2017 FORECASTKey economic and housing metrics from NAR and realtor.com


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Jonathan SmokeChief Economist

realtor.com®

[email protected]@SmokeonHousing

Access market data, research, and presentations at research.realtor.com

Jonathan Smoke - 2017 Market Outlook

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