The Housing Market
In February the Illinois and Chicago housing markets remained at the same level as they were in January in terms of sales volume.
In Illinois 5,575 houses were sold, 1.3 percent more than January 2011 and 10.0 percent less than February 2010 when 6,194 houses were sold; the comparable figures for the nine-county Chicago* region were 3,769 houses in February, 2011, down 8.8 percent from the 4,134 houses sold last in the same month in 2010 and down -2.0 percent from January 2011.There is no doubt that some of this decline can be attributed to the stimulus effect of the housing credits that elevated sales in the first quarter of 2010.
The economy continues to provide some positive signs. The Bureau of Labor Statistics reported that the national non-farm payroll added 192,000 jobs in February. State and national government shed 30,000 jobs, while the private sectors added 222,000 jobs. Over the last three months, the private has added an average of 152,333 jobs per month. National job gains in the last 12 months have amounted to 1.3 million, or an average of 106,000 jobs per month. Illinois added 64,200 jobs in the last year, or an average of 5,350 jobs per month. Over the year, payroll employment increased in nine out of 10 metropolitan areas. Particularly encouraging was the decline in the number of discouraged workers in February, by 184,000 compared to the same month in 2010. The national unemployment rate (8.9%) and the number of unemployed persons (13.7 million) changed very little in February.
For the state of Illinois, unemployment rates dropped in every county for the second consecutive month. Unemployment rates also fell in every metropolitan area for the fifth month in a row. Most analysts agree that a strong labor market will be the key to housing market recovery. The Census Bureau noted that in January, private residential construction spending rose 5.3% to $245.6 billion from an upwardly revised $233.2 billion in December; however, most of this spending was focused on home improvement spending which rose 10.5% to $124.4 billion.
The continuing concerns center on the size and impact of the “shadow inventory;” estimates of the impact range from minor to very profound. In large part, the magnitude of the impact centers on the way in which homeowners react to continuing price declines and the realization that they may owe more their home than the property’s current value. Negative equity becomes a problem when a homeowner attempts to sell the property—but it can also have an impact on consumption, potentially depressing consumption or at least delaying purchases of major items (such as automobiles, appliances and so forth).
A further concern centers on the degree to which negative equity in a home influences the operation of the labor market by limiting job mobility; this concern will become more important as the job market rebounds and opportunities for advancement in the labor market present themselves.
Housing Market Forecast – Sales
The February annual sales rate for Illinois and Chicago* are down by 10.0% and 8.9%, respectively. The annual sales forecast for the Chicago area for the next three months suggests a decline of 8-13%. Meanwhile, the sales forecast for Illinois predicts a decline of 12-19% when compared with the same month last year. The sales volume decrease is not an extremely negative signal for Illinois and Chicago housing markets, taking into consider that the early 2010 housing market was inflated by the homebuyer tax credit by 16.5%. This impact is reflected in the fact that we are expecting to see significant month-to-month sales increases for the next three months (March, April, May) for both Chicago and Illinois.
Information provided by the Illinois Association of Realtors