It Ain't All Big Hair and Cadillacs

Economic Forecast 2007
Presented by the Chicago Association of REALTORS
January 19, 2007

Close to 200 REALTORS gathered on January 19 for the "Economist Forecast 2007" sponsored by the Chicago Association of REALTORS at the Hyatt Regency in Chicago.

Speakers included Dr. Lawrence Yun, Managing Director and Senior Economist for the National Association of REALTORS, who reported that America is consumed by what is happening with the housing market currently with much sentiment driven by media reports. In evaluating the current status of the housing market, Yun reminded the audience of some of the activity that was occurring in 2003--with a booming real estate market and an increased share of speculative purchasing occurring in the market. He said that the market has returned to normalcy with reduction in speculative activity currently.

"All real estate is local. Illinois is a solid state and there should be nothing to worry about," Yun said. He added that new home sales are beginning to pop up with home builders cutting back on construction in order to boost sales of current inventory. He reported a net gain of 50,000 in new jobs in last year for the Chicago metro region and expects a similar such gain this year with overall economic growth increasing at a respectable pace and with consumer spending remaining very healthy.

He noted only modest declines in activity in Illinois as compared to other states who are witnessing sharp decreases including Virginia, Nevada, California, Florida and Arizona.
"Those markets that took off faster than others are struggling now more than others," Yun said.

"The Midwest is stable and mortgage debt ratio is healthy. The decreases the state is seeing may be more related to the psychological impact as a result of the media reports noting declines in activity in Illinois."

He reported that no correction is expected in the stock market and business spending is rebounding at a double digit rate of inflation. The only negative sign in the market is the growing level of core inflation which is still at a slightly uncomfortable level he noted. Yun does expect a change in interest rates late this year. The national housing outlook for 2007: 6.4 million existing home sales; 1.0 million new home sales; 1.5 million housing starts, 6.6 percent 30-year fixed rate mortgage.

Gail Lissner, Vice President of Appraisal Research Counselors in Chicago reported on the expansive growth of the downtown Chicago housing market mentioning specific developments underway. She reported approximately 4,200 new condo units will be delivered in the downtown Chicago real estate market in 2007 with an estimated 6,700 units in 2008.
"One quarter of the sales of new construction condos in 2006 occurred in the South Loop," Lissner stated, adding that they are seeing less speculator activity in the market today and expects an up-tick in activity after the first quarter of the year.

Sara Walker, Senior Vice President and Investment Officer for Associated Bank in Chicago, discussed the expanding investment activity on behalf of consumers and its relation to the housing market.

"We are starting to see growth in terms of existing home sales and are seeing continued investment in business construction that affects all aspects of the economy. The business sector is healthy and that bodes well for construction and employment," Walker reported. "We have witnessed 18 quarters of double digit earning growth by corporations creating some of the best balanced sheet growth ever seen."

- Report submitted by IAR Communications Director Mary Schaefer. Read "Housing + Psychology: Economists predict the Illinois housing market will find its footing in early 2007" from Illinois REALTOR Magazine's January 2007 edition.