The third-largest Metropolitan Statistical Area in the United States covers portions of Illinois, Indiana and Wisconsin. According to the most recent VeroFORECAST, the sprawling Chicago-Naperville-Joliet MSA not only ranks behind New York and Los Angeles in terms of population, but also in its predicted real estate appreciation through March 2019.
This VeroFORECAST from Veros Real Estate Solutions, which covers the 12 months beginning on March 1, 2018, studied statistical data on 342 MSAs and determined that the Chicago-Naperville-Joliet MSA could rise in property value at the slight rate of only +2.4% over the next year. That places the Chicago MSA 264th out of those included in the data.
Chicago Metro's low rate compares with a predicted +7.9% appreciation in the Los Angeles-Long Beach-Anaheim MSA, America's second-most-populous area that ranks 26th out of the 342 MSAs in the recent VeroFORECAST, and with the most-populous New York–Newark–Bridgeport, NY, NJ, CT, PA, which is projected to appreciate at a +4.4% rate and ranks 156th overall.
The MSA with the highest predicted appreciation through February 2019 is Seattle-Tacoma at +11% and the lowest is Atlantic City at -2.9%.
A BIGGER PICTURE
Population is one of the key contributing factors in VeroFORECAST's assessment of low appreciation for the Chicago-Naperville-Joliet MSA. The number of people living in the region has declined approximately 7% since 2000. A January 2018 Chicago Tribune editorial underscored the impact: "For four years in a row, Illinois has lost population in alarming numbers. In 2017, Illinois lost a net 33,703 residents, the largest numerical population decline of any state. That’s the size of St. Charles or Woodridge or Galesburg. Wiped off the map. In one year."
Other factors that are not helping the MSA and its state are Illinois' budget crisis and Chicago's government dysfunction, crime and violence.
Other key indicators for real estate appreciation are unemployment, which is a bit high in this MSA, at 4.8%, and housing sales, which are comparatively sluggish. The five-month supply of homes currently on the market is high among those surveyed.
While appreciation may be modest in this region, business, according to the website World Business Chicago, is benefiting from "one of the world’s largest and most diversified economies, with more than 4 million employees … generating an annual gross regional product over $609 billion."
The City of Chicago alone, it adds, "is an efficient economic powerhouse, home to more than 400 major corporate headquarters, including 34 in the Fortune 500. Among the most diverse economies in the nation, Chicago is a key player in every sector, from risk management innovation to manufacturing to information technology to health services."
THE VEROFORECAST MODEL
Metropolitan Statistical Areas were first established by the federal government in 1949 and provide nationally consistent geographic delineations for reporting statistics, including economic data. The basic concept of a Metropolitan Statistical Area is that of a core urban area, such as a city, with high population density, together with adjacent communities that have a high degree of economic and social integration with that core.
For 15 years, VeroFORECAST has provided these projections, based on data for single-family residences, condos and townhouses, to help U.S. lenders anticipate risk and facilitate loan portfolio management. The MSAs used in this first quarter 2018 survey represent approximately 82% of the nation's population, and cover nearly 1,000 counties and more than 13,600 ZIP codes.
This is my final column for this first HousingWire series on trends and specifics in MSAs across the nation. Final tabulations on the second quarter VeroFORECAST, which covers June 1, 2018 to June 1, 2019, are now being completed and soon I'll be back to provide a survey of the top and bottom ranked MSAs, as well as key metro regions across the country.