New research from the University of Illinois Regional Economics Applications Laboratory (REAL) finds the pre-housing bubble level of foreclosure inventory in Cook County will recover earlier than previously forecast.
The research, available from the Illinois Association of REALTORS Market Stats, uses the average inventory level of 1997-2005 as a baseline for recovery. Since the end of 2005 and early 2005, new foreclosure filings increased from all previous months.
“Foreclosures may return to pre-recession levels in 1 to 1.5 years from now, rather than 2 to 2.5 years,” Geoffrey J.D. Hewings, director of University of Illinois’ regional economics applications laboratory, told the Chicago Tribune. “That’s going to be very important to support pricing recovery and the overall housing market, which has significant ripple effects in the overall economy.”
According to REAL’s latest Illinois housing market forecast, in June 2013, 2,181 houses were newly filed for foreclosures in the Chicago PMSA (65.9 percent down from a year ago) and 5,122 foreclosures were closed (35.9 percent up than a year ago). The foreclosure inventory decreased by 41.0 percent to 46,721.
The ratio of foreclosure starts to foreclosure closes reflects the speed of adding or removing the foreclosures from the inventory. A ratio less than 1 indicates a decline in the foreclosure inventory and the smaller the value, the faster it is removed. The average ratio was 0.64 in the past 12 months, 0.79 in the last 24 months and 0.94 in the last 30 months. Given these ratios, the foreclosure inventory would return to the pre-bubble levels by September 2013, December 2013 and April 2015.
(REAL Definitions: In/out ratio: foreclosure starts/foreclosure completions. Recovery schedule: Projection of the time by which foreclosures reaching the recovery level under three assumptions using the average in/out ratio of (a) the last 12 months (b) last 24 months and (c) last 30 months.)
About the REAL Forecast: The Illinois Association of REALTORS® has affiliated with the University of Illinois Regional Economics Applications Laboratory (REAL) to develop a housing forecasting model based on Multiple Listing Service sales reported by 31 participating Illinois REALTOR® local boards and associations. The research links economic indicators with real estate trends and indicators for the state of Illinois as a whole and the Chicago PMSA. Leading the research team is Dr. Geoffrey J.D. Hewings, director of REAL, professor of Geography, of Economics and of Urban and Regional Planning for the University of Illinois Department of Economics.