January 25, 2019
Illinois Finance Forum
Future of Housing Trends and the Housing Market –Demographic Waves in the Region and Future of Housing
2
12.9 M 12.8 M
OUR STATE’S POPULATION
12.2
12.3
12.4
12.5
12.6
12.7
12.8
12.9
13.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Mill
ions
2000-2017
12.4 M
Increase Decrease Stable*Percent change in population by county
Source: U.S. Census; Esri; SB Friedman
3
OUR STATE’S POPULATION GROWTH FOCUSED IN FEW METROS
2000-2017Metro (Illinois counties only)
2000 Population
2017 Population
2000-2017 Population Change
CHAMPAIGN-URBANA 210,623 239,124 28,501 14%
BLOOMINGTON 167,644 188,232 20,588 12%
KANKAKEE 103,842 109,605 5,763 6%
ROCKFORD 321,033 338,291 17,258 5%
CHICAGO 8,286,664 8,662,898 376,234 5%
CARBONDALE-MARION 120,912 125,612 4,700 4%
SPRINGFIELD 201,628 208,697 7,069 4%
ST. LOUIS 672,354 688,786 16,432 2%
PEORIA 366,659 372,427 5,768 2%
QUAD CITIES 217,149 209,754 -7,395 -3%
DANVILLE 83,821 77,909 -5,912 -7%
DECATUR 114,499 105,801 -8,698 -8%
CAPE GIRARDEAU 9,684 6,315 -3,369 -35%
Increase Decrease Stable*Percent change in population by county
Source: U.S. Census; Esri; SB Friedman
4
7.9
8.0
8.1
8.2
8.3
8.4
8.5
8.6
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Mill
ions
OUR REGION GREW PRIMARILY IN COLLAR COUNTIES
8.53 M 8.51 M
+185,032
+70,907
+126,820
+48,038 +55,370
23,844 -162,155
2000-2017
8.16 M
Source: U.S. Census; CMAP; Esri; SB Friedman
5
DISTRIBUTION OF GROWTH
2000-2010 2010-2017*▪ Growth occurred at the
periphery and the core of
the region
▪ Driven by single family
development
▪ Growth occurred at the
core of the region,
including neighborhoods
within the City
▪ Driven by multifamily
development
Change in proportion of regional population by census tract
Increase Decrease Stable**
Source: U.S. Census; CMAP; Esri; SB Friedman
RESIDENTIAL BUILDING PERMITS IN CHICAGO REGION
6
0
5,000
10,000
15,000
20,000
25,000
30,000
2 0 0 0 2 0 01 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 07 2 0 0 8 2 0 0 9 2 010 2 011 2 01 2 2 01 3 2 014 2 015 2 016 2 017
Single Family Muti-FamilySource: U.S. Census
19,649 11,311 4,788 6,376
NET NEW HOUSING PRODUCT DEVELOPED SINCE 2000
7
160,000 29,000 42,00061,000
Net New Housing Units: 2000-2017
2-19 Unit 1-Unit Attached 20-49 Unit 50+ Unit1-Unit Detached
-7,000
44,000 -13,000 19,000-13,000 -1,400
2000-2010
2010-2017
PERIOD:
Source: U.S. Census; SB Friedman
Home price recovery and shortening market time signals strengthening for-sale market RESALES OF EXISTING HOMES IN CHICAGO REGION
8
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
ANNUAL MEDIAN PRICESSingle Family Detached, Attached and Condo:
100
46
254K 160K 235K
Source: Illinois Realtors
Case-Schiller Index of Repeat Sales mimics resale trendsHOME PRICES IN CHICAGO REGION
9
0
20
40
60
80
100
120
140
160
180
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
167 111 142
S&P/Case-Shiller IL-Chicago Home Price Index, Index Jan 2000=100, Monthly, Seasonally Adjusted
1,976 4,699
REGIONAL APARTMENT DELIVERIES
10
Post-recession apartment construction heaviest within the City of Chicago and near transit
72%WITHIN THE CITY OF CHICAGO
76%WITHIN A HALF MILE OF CTA OR METRA STATIONS
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Source: Costar
Slowing rent growth and increasing vacancies reflect a softening of a booming rental marketNEW CONSTRUCTION APARTMENT RENTS AND VACANCIES
11
7.6%
11.7%
2010 2018
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
CAGR:
6.3%
CAGR:
1.6%
Monthly Apartment Rent/SF of Units Built Since 2000 Apartment Vacancy of Units Built Since 2000
Source: Costar
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
1,100,000
1,200,000
1,300,000
1,400,000
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
20
27
20
28
20
29
20
30
<35 35-54 55-74 75+
12
DEMOGRAPHIC WAVES BY AGE OF HOUSEHOLDER (CHICAGO REGION)
35 -54
55 -74
4,750
59,604
37,542
75+159,820
<35
Source: Woods and Poole, US Census and SB Friedman
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
1,100,000
1,200,000
1,300,000
1,400,000
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
20
27
20
28
20
29
20
30
<35 35-54 55-74 75+
13
DEMOGRAPHIC WAVES & HOUSING CHOICE
26% 7% 66%
57% 8% 34%
61% 8% 30%
52% 8% 39%
35 -54
55 -74
4,750
59,604
37,542
75+159,820
<35
Single-Family Detached
Single-Family Attached
Multifamily
Other
Source: Woods and Poole, US Census and SB Friedman
HOMEOWNERSHIP RATE AND ITS IMPACT ON HOUSING DEMAND
Driven by:
▪ Mortgage rates
▪ Lending criteria/mortgage availability
▪ Economic growth
▪ Demographic shifts and preferences by
generation/lifestyle
Will homeownership rate tick upward or
stabilize?
A 1% increase in homeownership with modest
household growth means an additional 35,000
owner-occupied households
14
59%
60%
61%
62%
63%
64%
65%
66%
67%
68%
69%
70%
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
Chicago Region Homeownership Rate
Source: US Census and SB Friedman
HOMEOWERNSHIP RATE BY AGE
▪ For overall rates to rise, 2017 homeownership rates by age
need to increase
▪ Greatest potential for increase in overall homeownership
rate is to have Millennials buy homes as they squarely
enter family age group in the next five years
15
20%
50%
70%
75%77%
80% 80%77%
64%
13%
37%
59%
71%73%
76%77% 77%
70%
15-24 25-34 35-44 45-54 55-59 60-64 65-74 75-84 85+
2005 2017
Chicago Region Homeownership Rate by Age
Source: US Census and SB Friedman
HOMEOWERNSHIP RATE BY AGE
▪ Nationally, Millennial homeownership rate has been lower
than that of prior generations at same age group (25-34)
16
20%
50%
70%
75%77%
80% 80%77%
64%
13%
37%
59%
71%73%
76%77% 77%
70%
44%
65%
15-24 25-34 35-44 45-54 55-59 60-64 65-74 75-84 85+
2005 2017 2025
37%
45.40% 45%
Millennials Gen Xers Baby Boomers
National Homeownership at age 25-34
Chicago Region Homeownership Rate by Age
Source: US Census and SB Friedman
17
WILL MILLENNIAL’S START OWNING IN GREATER NUMBERS?
Millennial Debt Millennial Life Stage in Transition
IMPLICATIONS FOR FUTURE HOUSING DEMAND
18
Increasing single-family and townhouse home demand
▪ Sized and priced to be starter homes for Millennial's
▪ Vary product to be attractive to other generations
Increasing senior housing demand
▪ The majority of seniors will likely choose to age in place
▪ But many will want to downsize into maintenance free living of various products: condominium, apartments, townhomes, single family
▪ New paradigms for housing: age restricted vs. for all ages
Apartment boom likely to temper rather than crash
▪ Contingent on how homeownership rates and Millennial housing preferences evolve
A possible condominium comeback
▪ Market will likely be smaller than pre-recession high
▪ Contingent on construction lending criteria
▪ Recent development mostly in City but larger developments in suburbs are including condo as a possible future use
HOUSING DEMAND NOT JUST ABOUT PRODUCT, PLACE MATTERS
19
Houses with
small yards
and easy to
walk to the
places you
need to go
Houses with
large yards and
you have to
drive to the
places where
you need to go.
53%
49%
54%
53%
2015
2016
2017
42%
46%
47%
Source: National Association of Realtors, National Community and Transportation Preferences Survey, 2017
WALKABILITY VS. PRODUCT TYPE
▪ Millennials and Silent/Greatest Generation prefer walkable community and short commute even if it means
living in an apartment or townhouse
20
Own or rent an
apartment or
townhouse
and you have an
easy walk
to shops and
restaurants
and have a shorter
commute to work.
Own or rent a
detached, single-family
house
and you
have to drive
to shops and restaurants
and have a longer
commute to work.
Silent
Boomer
Gen X
Millennial
55%
45%
62%
45%
45%
55%
55%
38%
Source: National Association of Realtors, National Community and Transportation Preferences Survey, 2017
WHAT CITY PLANNERS AND MANAGERS CAN EXPECT AND DO
▪ Continued rental apartment development requests in the next 3-5 years – in downtowns, near train
stations or highway accessible locations
▪ An increasing pace of for-sale housing (townhomes and single-family) development but lower than pre-
recession highs
▪ An increasing importance of walkability makes downtown adjacent or transit adjacent locations more
important
▪ Rethink conventional subdivisions to be responsive to demand:
▪ Plan for and require corner stores, community centers and parks to be walkable and easily accessible from majority of homes
▪ Allowing for diversity of housing product within a single subdivision to appeal to a wider buyer pool
21
▪ Retail continues to be the fiscal winner
from a municipal finance perspective
▪ On a per acre basis apartments and
mixed-use typically outperform
townhomes and lower density
development
22
THE FISCAL PERSPECTIVE
▪ Prioritizing infill areas with infrastructure capacity is
fiscally prudent
▪ Greenfield development often requires extension of
infrastructure and expansion of municipal service
areas
▪ Need to consider the fiscal stress from associated
long-term maintenance and capital costs
23
FISCAL STRESS FROM INFRASTRUCTURE EXTENSIONS
Service Capacity at Infill vs. Greenfield Locations
Smart Growth is Fiscally Smart
▪ Smart growth, characterized by compact, walkable places with a mix of uses, is more responsive to market demand and is also fiscally
beneficial
▪ Smart growth vs. conventional development
▪ Requires less new infrastructure for the same amount of development
▪ Generates 10 times more tax revenue per acre than conventional suburban development
▪ Saves an average of 10% in ongoing municipal operations costs
24
BEING RESPONSIVE TO DEMAND AND FISCAL HEALTH
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