[User] Many tenants will decide to renew their current leases due to high moving costs and difficulties in assessing landlords’ financial health.

[Assistant] Renewals will make up a large share of leasing volume compared with historical averages. Landlords will be more willing to negotiate favorable terms with large tenants rather than risk vacancy. Prime spaces will become more scarce due to the slowdown in new construction. By conservative estimates, vacancy in prime buildings is expected to return to its pre-pandemic rate of 8.2% by 2027. Market Divide The divide between high-quality and lower-quality office assets will widen in 2025. High-quality assets in vibrant mixed-use districts will continue to attract tenants. Occupiers of Class A space are the most likely to upgrade to better locations. More cost-conscious tenants in sectors such as government, healthcare and education will continue to drive demand for a large pool of available Class B and C space. Commodity buildings in less desirable and office-centric districts are the most at risk of losing tenants. Landlords of commodity buildings, who are also competing with the 175 million sq. ft. of discounted sublease space on the market, will have to lower asking rents. Prime spaces will become more scarce due to the slowdown in new construction. By conservative estimates, vacancy in prime buildings is expected to return to its pre-pandemic rate of 8.2% by 2027. However, prime space will be difficult to find in many districts next year, such as Midtown Manhattan and Downtown Miami. Tightening availability will give owners of prime buildings the upper hand in lease negotiations and rents will continue to rise. New Office Starts Plummet 03 Office/ Occupier The office construction pipeline is notably thin, with new supply expected to fall to 17 million sq. ft. in 2025, well below the 10-year average of 44 million sq. ft. While a few markets, including Austin, Nashville and Dallas, will experience near-term oversupply, the construction slowdown will be a welcome reprieve in most markets. The overall office vacancy rate is expected to peak at 19% in 2025. Demand Tailwinds & Headwinds 03 Office/ Occupier Tailwinds for the office sector include falling interest rates, greater corporate confidence in a soft landing for the economy, deregulation and office-using employment at a record level. There also will be a mild increase in office attendance rates. Against these positives will be lower future growth of office jobs due to labor shortages and the use of artificial intelligence for certain jobs. Transforming America’s Cities Cities will need to reinvent themselves in a post- pandemic world. Those with economic dynamism, demographic potential, lifestyle vibrancy, distinctive identity, responsive governance and resilient infrastructure will fare best. Markets with vibrant mixed-use districts will continue to outperform. Expanding these districts and creating new ones will be essential for cities to succeed in the future as occupiers seek to locate in walkable environments with many amenities. Limited Supply Will Hamper Retail Leasing Growth in 2025 Retail space availability will remain limited in 2025. Despite lower interest rates, the high cost of capital will make it challenging to finance new projects and expansions, especially in markets where rental rates may not justify the expense.


[User] Forecast Net Absorption (L) Availability Rate (R) SF Millions % Consumer Shifts Will Alter Site Selection Strategies Changing consumer preferences pose certain opportunities and challenges for retailers. Economic uncertainty and high inflation have made consumers more budget-conscious, often prioritizing essential goods that account for approximately 65% of consumer spending, according to the U.S. Bureau of Economic Analysis. This will heighten retailers’ interest in grocery-anchored centers, which are among the best- performing retail property types.

[Assistant] The ongoing rise of e-commerce also continues to reshape the retail landscape, particularly in sectors like apparel and electronics. The online share of total retail sales, excluding autos and gasoline, is expected to exceed 30% by 2030, up from 23% in 2024.


[User] As consumers increasingly favor online options, some retailers are consolidating locations and shrinking their footprints by approximately 2% per year, according to the National Retail Federation. Open-air neighborhood, community & strip centers will see increased demand next year as retailers focus more on facilitating pickups and returns of online purchases. Many retailers who had located primarily in malls will focus expansion plans on these centers due to the continued growth of e-commerce. As the retail industry continues to evolve, those markets that offer strong population and job growth, along with infrastructure improvements, will see significant retail demand in 2025. As mortgage rates ease and housing turnover accelerates, we can expect a further boost in demand for residential-related retail, including home goods, furniture and home improvement stores.

[Assistant] Dallas A robust economy, growing population and strong job market, particularly in tech and finance, make Dallas one of the country’s top retail markets. High levels of absorption, combined with consistently low availability, have created a competitive environment among retailers eager to establish a presence in this thriving market. Strong demand from both national and boutique brands is fueling development activity.


[User] Phoenix Population growth from a mix of young families and retirees has turned this city into a top-performing retail market. The steady influx of residents supports a significant pace of retail development, particularly in expanding suburban areas. Bolstered by infrastructure improvements and strategic investments, Phoenix is a hotspot for both national brands and local businesses. This wave of development reflects confidence in Phoenix’s long-term growth potential, attracting retailers who want to tap into the city’s dynamic consumer base. Austin Rapid population growth and a thriving economy, primarily driven by the tech sector, are fueling this city’s retail market. Austin’s vibrant culture and reputation as a creative hub continue to attract young professionals, entrepreneurs and high- income residents, each fueling strong demand for diverse retail experiences. With increased development and an affluent population, Austin offers a prime opportunity for retailers.

[Assistant] Experiential Retail’s Rise Retailers are focusing on experiential retail strategies to attract and retain customers. Rather than expanding into new locations, brands are focusing on optimizing their existing spaces to offer unique, immersive experiences that differentiate them from their competitors and appeal to a more experience-oriented consumer base. This “retailtainment” trend combines shopping with other elements like dining, entertainment and activities, creating spaces that provide more immersive brand engagement with customers.


[User] Forecast 2025 Will See a Return of Pre-Pandemic Demand Drivers The U.S. industrial market will enter a new cycle in 2025 with a return to pre-pandemic demand drivers. Industrial occupiers will focus on longer-term strategies to improve warehouse efficiency, ensure supply chain resiliency and meet the needs of an evolving consumer base. Demand for newly constructed space will drive up the vacancy rate of older buildings.

[Assistant] Companies will continue a flight to newly constructed and more modern space in 2025 to facilitate their use of automation and artificial intelligence and provide more employee amenities. Power capacity will become a top priority for site selection. Markets with reliable power grids, including Chicago, Phoenix and Las Vegas, will benefit most. Demand for new space will grow the most from third- party logistics (3PL) providers. Retailers and wholesalers outsource their distribution operations for three primary reasons: import flexibility, capital preservation and a focus on core competency. Labor disruptions, extreme weather events and geopolitical conflicts have led companies to diversify import locations. Utilizing 3PLs allows for more inventory flexibility, a key component to retailer success in times of uncertainty. It also allows companies to focus on core business competencies that drive revenue, such as product development, sales and customer service. The increase in outsourcing will keep 3PLs’ share of overall industrial leasing activity at or near 35% in 2025. Companies will continue a flight to quality in 2025 to facilitate their use of automation and artificial intelligence and provide more employee amenities. Forecast While leasing activity over the past 24 months has not reached the record levels of 2021 and 2022, it remains well above pre-pandemic levels. Leasing activity should stabilize at just above 800 million sq. ft. in 2025.


[User] Despite robust leasing, net absorption will remain low as much of the new leasing will come at the expense of older facilities. Buildings constructed before 2000 accounted for more than 100 million sq. ft. of negative absorption in 2024, while those completed after 2022 posted more than 200 million sq. ft. of positive absorption. This trend will continue in 2025 as long as there still is first-generation space to lease.

[Assistant] Occupiers will continue to favor primary markets that meet consumer expectations and ensure supply chain resiliency. The e-commerce share of total retail sales, excluding autos and gasoline, hit a record-high 23.2% in Q3 2024 and is expected to reach 25.0% by year-end 2025, creating more demand for warehouse & distribution space. Perhaps the most important consideration in site selection is a market’s ability to offer supply chain resiliency. Core industrial markets like the Inland Empire, Dallas-Ft. Worth, Atlanta, Chicago and the New Jersey/ Pennsylvania region will remain leaders in leasing activity. However, there are emerging industrial markets that service manufacturing in both the U.S. and Mexico. These include Houston, Kansas City, Louisville, Nashville and Raleigh-Durham. Occupiers will continue to favor primary markets that meet consumer expectations, act as a prime location and ensure supply chain resiliency. Reshoring of Manufacturing A primary component of supply chain resiliency is a diverse source of products that lead to onshoring of manufacturing to North America. While the U.S. has seen a slight increase in manufacturing, companies will continue to seek lower labor costs for products like automobiles and computers. Mexico, for example, has a highly skilled and lower-cost labor force to manufacture products that require large warehouse & distribution operations.


[User] However, Mexico’s record-low industrial vacancy rate will force companies to open more U.S. distribution centers, preferably either near the Mexico border or along the major north-south highways (Interstates 29 and 35) to store and distribute this product.

[Assistant] Cyclical Recovery Just Ahead With continued solid fundamentals, multifamily is the most preferred asset class for commercial real estate investors in 2025. For all the short-term negative effects brought on by rising interest rates and record levels of new supply, strong renter demand will drive improving occupancy and accelerating rent growth. This in turn will lead to increased multifamily investment activity. The average multifamily vacancy rate is expected to end 2025 at 4.9% and average annual rent growth at 2.6%.


[User] Developers will add more multifamily units to the U.S. housing market than in any period since the 1970s. Most of this new supply will be in the Sun Belt and Mountain regions, where some markets will grow their inventories by nearly 20% in just a three-year period. However, many of these high-supply markets are now past their peak for deliveries, and occupancy rates have already begun recovering.

[Assistant] This recovery will accelerate next year and markets with negative rent growth in 2024 are expected to turn positive in 2025 as completions slow considerably following the marked slowdown in construction starts.


[User] As the construction pipeline shrinks, strong renter demand will lower the vacancy rate and precipitate above-average rent growth in 2026.

[Assistant] Forecast Ten of the 16 markets with the largest supply pipelines (ranked by inventory growth) are expected to enter 2025 having already reached their peak in new deliveries. Supply in the remaining six (Charlotte, Fort Lauderdale, Phoenix, Raleigh, Riverside and San Antonio) will peak in 2025. Despite the negative supply-side pressures on market fundamentals, all of these markets are expected to benefit from improved average vacancy rates and rent growth for several years ahead.


[User] By mid-2025, multifamily construction starts are expected to be 74% below their 2021 peak and 30% below their pre-pandemic average. As the construction pipeline shrinks, strong renter demand will lower the vacancy rate and precipitate above-average rent growth in 2026. This exceptional renter demand has come at a critical time and has already absorbed a large amount of this new supply wave. Job creation, population growth and the competitive discounts being offered by landlords to fill these new units is driving much of this demand, along with a relatively unaffordable single-family housing market.

[Assistant] The wide monthly premium between buying and renting a home will preserve existing renter demand in 2025. Many would-be homebuyers will remain dissuaded by high home prices and mortgage rates.


[User] Vacancy rates across the Midwest, Northeast and six gateway markets have not exceeded their historical averages to the same extent that higher- supply Sun Belt and Mountain regional markets have. As a result, many of these markets are expected to have average annual rent growth of more than 3% in 2025, well above the 2.6% projected national average.

[Assistant] Shrinking construction pipelines, strong renter demand, rising occupancies and accelerating rent growth are expected across all markets in 2025. Investors will have to wait until 2026 or later for market fundamentals in the Sun Belt and Mountain regions to be as strong as those of the Midwest, Northeast and coastal regions. Nevertheless, the long-term prospects for these more challenged regions will continue to attract a disproportionate amount of investment. 06 Multifamily Shrinking construction pipelines, strong renter demand, rising occupancies and accelerating rent growth are expected across all markets in 2025. Cost-to-Buy Premium Will Continue to Favor Rental Market With average newly originated mortgage payments 35% higher than average apartment rents as of Q3 2024, many U.S. households continue to rent rather than buy a home. Even though the premium to buy a home is expected to come down over the next several years based on home-price, interest-rate and rent- growth forecasts, it will remain high enough to keep today’s renters renting for longer. We expect average multifamily rents to grow by 3.1% annually over the next five years, above the pre-pandemic average of 2.7%. This above-trend rent growth is expected to outpace home price appreciation and, along with lower mortgage rates, slightly narrow the cost gap between buying and renting. CBRE expects the premium to buy versus rent to ease to 32% from 35% by the end of 2025. Forecast Strong Demand Continues; Supply Growth Limited by Power Availability 07 Data Centers The rapid growth in digital services, cloud computing, artificial intelligence (AI) and 5G is driving a persistent surge in demand for data center capacity. Applications on cell phones, smart devices, laptops and desktops are constantly increasing the need for processing, storing and computing data.


[User] Despite record construction activity, the data center market will struggle to keep pace with demand, leading to higher utilization rates in existing facilities and tighter vacancy rates. The average vacancy rate for primary markets fell to a record-low 2.8% and the average preleasing rate of new construction hit a record high in 2024. We expect these conditions will persist in 2025, with the average preleasing rate rising to 90% or more and rental rates rivaling the record highs of 2011- 2012.

[Assistant] More data center expansions in secondary and emerging markets are expected to alleviate reliance on major hubs. Tax incentives will be very important for new development in states that have not had notable supply growth. Site selection remains focused on power availability and fuel mix. We expect legacy nuclear partnerships providing colocation opportunities for data centers to continue, as well as unique opportunities for retired coal plants to convert to renewable energy with interconnection already in place. Forecast Under-Construction Boom 07 Data Centers Under-construction data centers are expected to reach record highs in 2025. Demand for modern data center facilities continues to soar, as hyperscalers and enterprises plan to expand their digital infrastructure. The sheer scale of data center development in 2025 will result in a 100+ megawatt (MW) project being the new norm. Energy Transition: Shift to Nuclear Power Data centers account for a significant share of energy consumption, creating a need for new energy solutions. The increasing demand for power provides both challenges and opportunities for renewable energy production. We expect that legacy coal plants with adequate topology, fiber and access will eventually transition to non-fossil-fuel power generation. Two major data center operators recently announced plans to utilize power generated by the Susquehanna and Three Mile Island nuclear power plants in Pennsylvania, setting the stage for a large-scale revival of nuclear power generation in the U.S. Driven by low carbon emissions and baseload reliability, nuclear is front and center with major developers for a power supply solution. As a result, we expect to see more companies exploring nuclear energy development—both large-scale and small reactors—as a viable carbon-free alternative to traditional energy sources.


[User] The home sales market is currently balanced, improving from soft conditions in 2010. The sales vacancy rate is currently estimated at 1.3 percent, down from 2.3 percent in 2010. The average inventory of homes for sale increased to 3.1 months in December 2018, up from 2.8 months in December 2017. Total home sales fell 3 percent to 3,575 during 2018 but remain well above the historic low of 2,100 in 2010 (Metrostudy, A Hanley Wood Company, with adjustments by the analyst).

[Assistant] During the 3-year forecast period, demand is estimated for 1,575 additional units. The 75 units under construction are expected to meet a portion of demand during the first year of the forecast period. The rental vacancy rate was 9.3 percent in 2010 and has fallen to an estimated 7.5 percent currently. The apartment market is tight, with a vacancy rate of 3.3 percent during the fourth quarter of 2018, down from 3.5 percent a year earlier (RealPage, Inc). Average apartment rent increased 4 percent during 2018, faster than the average increase of 2 percent annually from 2012 through 2017. During the 3-year forecast period, demand is expected for an additional 640 rental units. The 80 units under construction are expected to meet a portion of demand.


[User] Sales Market Balanced: with the average home sales price up 9 percent from a year earlier, to during 2018.

[Assistant] Units under construction as of January 1, 2019. The forecast period is January 1, 2019 to January 1, 2022. Source: Estimates by the analyst 3-Year Housing Demand Forecast Sales Units Rental Units Racine HMA Total Demand Under Construction 75 80


[User] 12-Month Average Nonfarm Payroll Jobs in the Racine HMA, by Sector 12 Months Ending December Months Ending December 2018 Absolute Change Percentage Change Total Nonfarm Payroll Jobs Goods-Producing Sectors Mining, Logging, & Construction 2.8 3.0 0.2 7.1 Manufacturing Service-Providing Sectors Wholesale & Retail Trade Transportation & Utilities 2.3 2.3 0.0 0.0 Information 0.5 0.5 0.0 0.0 Financial Activities 2.3 2.3 0.0 0.0 Professional & Business Services 6.6 6.7 0.1 1.5 Education & Health Services Leisure & Hospitality 7.8 8.1 0.3 3.8 Other Services 3.8 3.9 0.1 2.6 Government 9.5 9.3 -0.2 -2.1 Notes: Based on 12-month averages through December 2017 and December 2018. Numbers may not add to totals due to rounding. Numbers are in thousands. Current Conditions—Nonfarm Payrolls Job growth in the HMA during 2018 was higher than it was during 2017. Nonfarm payrolls rose by 500 jobs, or 0.6 percent, during the most recent year ( 12-month moving average. Economic Periods of Significance Source: U.S. The unemployment rate averaged 3.6 percent during 2018, down from 4.1 percent in 2017, and has fallen each year since reaching a high of 10.2 percent in 2010. For comparison, the national unemployment rate was 3.7 percent in 2018. The decline in the unemployment rate during the past year is partially because of a reduction in the labor force and relatively stable resident employment. During 2018, the labor force declined by 500, or 0.5 percent, compared with a year ago, and resident employment was relatively unchanged at 96,000. Jobs in the goods-producing sectors declined during 12 of the past 18 years, resulting in 6,400 fewer jobs in those sectors compared with the number of jobs in 2000. Job growth in the service-providing sectors, specifically the leisure and hospitality and the education and health services sectors, are up from levels in 2000, offsetting some of the losses in other sectors. During the first four years of recovery, job growth was relatively faster, despite a decline in 2013. Nonfarm payrolls in the HMA increased by an average of 700 jobs, or 0.9 percent, annually from 2011 through 2014. The manufacturing sector accounted for more than 85 percent of net payroll gains, adding an average of 600 jobs, or 3.6 percent, annually. Most of the manufacturing jobs added were at existing facilities, as production increased. During the early recovery period, job gains were offset by a decline in the government sector, which decreased by an average of 200 jobs, or 1.6 percent, annually from 2011 through 2014. The Wisconsin Budget Repair Bill (Wisconsin Act 10), which passed in 2011, contributed to the decline in the sector. Recovery slowed from 2015 through 2017 to an average increase of 300 jobs, or 0.4 percent, annually. Gains in 9 of the 11 sectors were offset by notable job loss in the manufacturing sector, which declined by an average of 400 jobs, or 2.0 percent, annually from 2015 through 2017. S.C. Johnson & Son, Inc. moved 175 jobs to downtown Chicago in 2015, contributing to the decline. Expansions and retentions, including 190 additional jobs at Seda North America, nearly 150 additional jobs at Applied Material Solutions, and retention of 400 jobs at Ardagh Group because of a new contract with New Glarus Brewing, were insufficient to increase total nonfarm payrolls in the manufacturing sector. 2001 through 2007 Total nonfarm payrolls peaked in 2000 at 81,700 jobs and then declined by an average of 1,200 jobs, or 1.5 percent, annually, from 2001 through 2003. Job loss in the manufacturing sector accounted for nearly all the decline. Closure in 2001 of Western Publishing, the company that published Little Golden Books, contributed to the overall decline. 2008 through 2010 The economy in the HMA, which had not yet recovered from job losses earlier in the decade, was further weakened by the Great Recession. From 2008 through 2010, nonfarm payrolls fell by an average of 2,000 jobs, or 2.6 percent, annually. Payrolls in 10 of the 11 sectors declined or had no gains. The manufacturing sector, which had added jobs during only 1 of the previous 7 years, declined by an average of 800 jobs, or 4.3 percent, annually from 2008 through 2010. Most of the losses resulted from reduced production at manufacturers. The only sector with job growth was the education and health services sector, adding an average of 300 jobs, or 2.3 percent, annually. 2011 through 2017 The economy in the HMA transitioned into recovery during 2011 and, aside from a decline in 2013, has added jobs every year from 2011 through 2017. Payrolls increased by an average of 500 jobs, or 0.7 percent, annually during the 2011-through-2017 period, including a decline of 500 jobs, or 0.7 percent, during 2013. The leisure and hospitality sector, one of only two sectors to grow by an average of more than 100 jobs annually, added an average of 200 jobs, or 2.6 percent, a year from 2011 through 2017. Reinvestment in downtown Racine, including a $4 million upgrade to a downtown hotel, increased use of the marinas along the Root River, and new restaurants in downtown Racine have contributed to growth in the sector. Payroll growth in the manufacturing

[Assistant] Employment Forecast During the next 3 years, payrolls are expected to increase an average of 0.7 percent, annually, from current levels. To support modernizing the skills of current manufacturing workers and to train new workers, a $6.5 million expansion at Gateway Technical College is underway and expected to be complete in mid-2019. Planned construction of healthcare facilities, including a new $250 million Advocate Aurora hospital and a $42 million Froedtert South facility, are expected to contribute to job growth in the construction and healthcare industries; the number of jobs to be added are unannounced. A portion of the announced jobs at the Foxconn facility may also support growth during the 3-year forecast period.


[User] Components of Population Change in the Racine HMA, 2000 Through the Forecast Note: Net natural change and net migration totals are average annual totals over the time period. Sources: 2000–2017—U.S. Census Bureau. 2017–current and current–forecast—estimates by the analyst Population and Households Current population: The relative affordability of the HMA and continued job growth have contributed to an increase in population growth since 2016. Population Trends Population growth has slowed in the Racine HMA during the current decade, partially because of lower levels of net natural increase (NNI). During the 2000s, population growth averaged 660, or 0.3 percent, annually, including an average NNI of 1,050 people. Since 2010, population growth has averaged 240, or 0.1 percent, annually ( Average annual changes and percentage changes are based on averages from 2000–to current, and current to forecast. Sources: 2000 and 2010—2000 Census and 2010 Census; current and forecast—estimates by the analyst American Community Survey, 2010 and 2017, 1-year data Population Forecast The anticipated job growth and relative affordability of the HMA are expected to contribute to an increase in population growth, including rising net in-migration, during the forecast period. During the next 3 years, the population is expected to increase by an average of 1,125, or 0.6 percent, annually. Households by Tenure and Homeownership Rate in the Racine HMA Sources: 2000 and 2010—2000 Census and 2010 Census; current—estimates by the analyst Household Trends and Forecast Household growth has slowed during the current decade, partially because of elevated levels of net out-migration earlier in the decade. From 2000 to 2010, the number of households increased by an average of 480, or 0.7 percent, annually. Since 2010, household growth has slowed to an average increase of 240, or 0.3 percent, annually. During the forecast period, the number of households is expected to increase faster than it did during the 2000s, up by an average of 620, or 0.8 percent, annually, partially because of the faster population growth during the forecast period. Source: U.S. Census Bureau Map 1. Population Change in the Racine HMA Areas of population growth and decline were mixed throughout the HMA during the most recent decade. Census tracts fully or partially overlapping the municipal boundaries of the city of Racine were among both the fastest and the slowest growing areas in the HMA (2008–2012 and 2013–2017 American Community Survey 5-year data). The previously undeveloped area east of I-94, close to the existing population center and the interstate, is where much of the new housing construction occurred and is expected to have absorbed much of the population growth. Other census tracts with relatively fast-growing population include tracts fully or partially overlapping the municipalities of Burlington, Caledonia, and Union Grove (Map 1).

[Assistant] Household Tenure Approximately 60 percent of household growth from 2000 to 2010 was owner households. Since 2010, only 9 percent of household growth has been attributed to owner households, resulting in a further decline of the homeownership rate. The homeownership rate is currently estimated at 68.2 percent. During the forecast period, the homeownership rate is expected to continue to decline but at a slower rate.


[User] Notes: Vacancy rate is as of the current date; home sales and prices are for the 12 months ending December 2018; and months of inventory and mortgage delinquency data are as of December 2018. Sources: Metrostudy, A Hanley Wood Company, with adjustments by the analyst; Wisconsin Realtors® Association; National Association of Realtors®; CoreLogic, Inc. Metrostudy, a Hanley Wood Company, with adjustments by the analyst Sales by Price Range During 2018 in the Racine HMA Source: Metrostudy, A Hanley Wood Company in REO sales and a relatively unchanged number of regular resales contributed to the recent decline in existing sales. Existing home sales increased by an average of 230, or 9 percent, annually from 2011 through 2017. The overall gain includes a 3-percent decline that occurred during 2014. The historical low of 1,975 homes sold occurred in 2010 after 5 years of year-over-year declines, with an average decline of 430 homes, or 14 percent, annually from 2006 through 2010. Existing Home Sales Prices Supported by speculation based on recent job announcements and an ongoing decline in REO sales, the average existing home sales price exceeded the prerecessionary peak for the first time during 2018. From 2014 through 2017, the average home sales price increased an average of 4 percent, or $6,350, a year. A decline in the number of REO sales, which had an average price approximately 50 percent below the average regular resale sales price, contributed to the increase in the average existing sales price. The previous peak in existing home sales prices occurred in 2008, with an average price of . The average existing home sales prices declined from 2009 through 2011 by an average of $11,650, or 7 percent, annually to the low of in 2011. REO sales accounted for 36 percent of all existing sales from 2011 through 2013, with existing home sales prices averaging . Existing homes accounted for 98 percent of all homes sold in the HMA during 2018. New Home Sales New home sales accounted for 2 percent of total home sales during 2018, down from 13 percent in 2005. During 2018, there were 85 new homes sold, down 10 percent from the 95 new homes sold during 2017. From 2011 through 2017, new home sales constituted 2 percent of total home sales, averaging 70 new homes sold annually. New home sales peaked in 2005 at 740 and then fell by an average of 95, or 30 percent, annually, to 75 in 2011. During 2018, new home sales prices averaged up 10 percent from 2017 and $62,900, or 29 percent, above the previous peak in 2008. New home sales prices peaked at an average of in 2008 and then declined by an average of $7,975, or 4 percent, annually to a low of in 2012. From 2013 through 2017, new home sales prices increased by an average of 6 percent, or $13,700, annually, exceeding the 2008 high in 2015. Approximately 80 percent of new home sales during 2018 were priced between and with approximately 10 percent priced below and 10 percent priced above . Delinquent Mortgages The rate of seriously delinquent (90 or more days delinquent or in foreclosure) home loans and REO properties in the HMA peaked below, and remains below, the rate for the nation. During December 2018, the rate was 1.5 percent, down from 1.9 percent a year earlier and down from a peak of 6.5 percent in early 2010 (CoreLogic, Inc.). The rate for the nation was 1.7 percent in December 2018, down from 2.4 percent in December 2017 and a peak of 8.6 percent in early 2010. Inventory of Homes for Sale by Price The supply of homes for sale, as measured by months of unsold inventory, was 3.1 months in December 2018, up from 2.8 months in December 2017 (Wisconsin Realtors® Association). Rising average home sales prices have contributed to an increase in the number of homes for sale. In the price ranges from to months of unsold inventory was approximately 4 months, down from more than 4 months during the same period a year earlier. The price range with the largest gain in months of inventory was homes priced above which rose from 6.2 months in December 2017 to 9.2 months in December 2018, partially because of higher listing prices in response to recent job announcements. Annual Average Sales Permitting Activity in the Racine HMA current decade. Despite the increase, construction activity is well below levels from the early 2000s. The number of homes permitted increased by an average of 25 homes a year from 2012 through 2017, to 250 homes permitted in 2017. In response to low inventory of homes for sale and rising new home sales prices, permitting of sales housing rose 22 percent from 2017 to 2018 (preliminary data, with adjustments by the analyst). Including a downtown lakefront high-rise condominium built in 2005, condominiums accounted for approximately 4 percent of for-sale homes permitted from 2000 through 2007. Since 2008, condominiums have accounted for less than 2 percent of all sales housing permitted.

[Assistant] Forecast During the 3-year forecast period, demand is expected for an additional 1,575 homes ( Estimates by the analyst


[User] Rental Market Conditions Market Conditions: Balanced, but tightening The first market-rate apartment property to be built in the HMA in more than a decade broke ground in 2018. Current Conditions and Recent Trends Rental market conditions in the Racine HMA are balanced but tightening. The rental market vacancy rate is currently estimated at 7.5 percent, down from 9.3 percent in 2010 (Table 6). With nearly all household growth since 2010 attributed to an increase in renter households and relatively few new rental units built, the rental market has shifted from soft conditions at the beginning of the decade to currently balanced conditions. Since 2010, approximately 360 new rental units have been constructed, nearly all of which were restricted to seniors or low-income households or are in small buildings with fewer than five units. The number of renter households of all ages and incomes increased by an estimated 1,900 since 2010. The majority of the recent renter household growth was accommodated in existing units that have shifted from owner to renter occupancy. Currently, an estimated 60 percent of all renter-occupied housing consists of single-family homes and buildings with fewer than five units, up from 56 percent in 2010. Apartment Market Conditions The market for market-rate apartment properties is slightly tight and has ranged from balanced to tight conditions since 2011. The average market-rate apartment rent during the fourth quarter of 2018 was $823, up 4 percent from a year earlier, rising faster than the average rent increase of 2 percent annually from 2012 through 2017. No market-rate apartment properties have been built in the HMA in more than a decade, contributing to the currently tight conditions. Annual Average Rental Permitting Activity in the Racine HMA Sources: U.S. Census Bureau, Building Permits Survey; 2000–2017 final data and analyst estimates; 2018 preliminary data and estimates by the analyst Rental Construction Activity Rental construction, as measured by the number of rental units permitted, has increased since 2016 but remains below levels from the early 2000s. Coinciding with the Great Recession and declining or stable population in the HMA during the early 2010s, rental permitting averaged 45 units a year from 2008 through 2015. The number of rental units permitted has increased in recent years, with an average of 80 units permitted annually from 2016 through 2018, but remains below levels from the early 2000s. Recently Completed Rental Properties Since 2000, nearly all rental housing built has been age or income restricted. Approximately 58 percent of recently built units were in senior housing properties, including affordable senior housing, and 38 percent were in low-income housing buildings with no age restrictions. The remaining units were market-rate apartments, most of which were built in the early 2000s. With the average cost of operating an apartment unit currently ranging from $600 to $800 (BizTimes Milwaukee, 2019) per month and current average rents only slightly above the cost of operation, construction of market-rate housing may not have been considered profitable by developers. Two apartment buildings built with low-income housing tax credits (LIHTC) in the early 2000s recently completed the initial 15-year compliance period requiring the units to be rented at affordable rates and have begun renting units to new tenants at market rate. Belle Harbor Lofts in downtown Racine, built in 2002 and recently converted to market-rate units, has asking rents of to $1,050, and $1,150 for one-bedroom, two-bedroom, and three-bedroom units, respectively. In Union Grove, one of the fastest growing communities in the HMA, a 73-unit apartment property broke ground in mid-2018.

[Assistant] The first building in the five- building property is expected to open in mid-2019. Rents are $1,150 for a one- bedroom unit and $1,450 to $1,600 for a two-bedroom unit. In anticipation of stronger job and population growth, at least a half-dozen additional apartment properties have been announced but have not yet begun construction. Estimates by the analyst Forecast During the next 3 years, demand is expected for an additional 640 rental units (Table 7). The 80 units currently under construction are expected to meet a portion of demand. Demand is expected to increase each year, as job growth continues.


[User] The unprecedentedly large and rapid changes in many data series, and the similarly unprecedentedly large policy responses, make analysis of, and longer run predictions for, the economy and housing markets exceptionally difficult and uncertain.

[Assistant] HUD will continue to monitor market conditions in the HMA and provide an updated report/addendum in the future.


[User] During the second quarter of 2020, nonfarm payrolls declined 12.0 percent, or by 51,100 jobs. For context, from 2011 through 2018, total nonfarm payrolls increased by 44,800 jobs, or an average of 5,600 jobs annually. Job growth slowed to 400, or 0.1 percent, in 2019, partially because of corporate relocations out of the HMA.

[Assistant] During the 3-year forecast period, jobs are expected to increase an average of 0.5 percent annually, with growth strengthening as businesses increase capacity and consumer confidence rises.


[User] The average home sales price is up from the 2012 low but is below the 2007 high. During the 12 months ending June 2020, home sales totaled 14,800, down 8 percent from the previous 12 months, and the average home sales price was up 3 percent from a year earlier. Fewer homes on the market, combined with increased demand for larger homes because of an increase in working and attending school from home, contributed to the recent decline in sales and increase in prices.

[Assistant] During the 3-year forecast period, demand is expected for an additional 1,875 homes. The 220 homes currently under construction will meet a portion of forecast demand.


[User] Apartment market conditions are also balanced. During the second quarter of 2020, the average apartment rent was $1,220—up 3 percent from a year ago, continuing a period of 3-percent year-over-year increases that began in 2018. The apartment vacancy rate was 4.0 percent during the second quarter of 2020, up 0.4 percentage point from a year earlier. Weak economic conditions have led to fewer households being able to pay rent. During the final week of June 2020, approximately 22 percent of renter households in the Chicago MSA had deferred or did not pay rent (U.S. Census Household Pulse Survey, Week 9). Most of those households had incomes of less than $35,000. During the forecast period, demand is expected for 1,050 additional rental units. The 810 units currently under construction represent approximately three- fourths of expected demand. Rental Market Balanced but Weakening: The overall rental vacancy rate is currently estimated at 6.3 percent, down from 8.5 percent in 2010. Sales Market Slightly Soft: From 2014 through 2019, total home sales declined an average of 1 percent annually and prices increased an average of 1 percent annually.

[Assistant] Units under construction as of July 1, 2020. The forecast period is July 1, 2020, to July 1, 2023. Source: Estimates by the analyst 3-Year Housing Demand Forecast Sales Units Rental Units Lake-Kenosha HMA Total Demand Under Construction


[User] Notes: Total nonfarm payroll is in thousands. Percentages may not add to 100 percent due to rounding. Based on 12-month averages through June 2020. Source: U.S. Share of Nonfarm Payroll Jobs in the Lake-Kenosha HMA, by Sector Naval Station Great Lakes in Lake County is the only bootcamp for the United States Navy. The station employs approximately 12,000 military and 9,000 civilian personnel on base and at the adjacent Captain James A. Lovell Federal Health Care Center. Each year, more than 38,000 recruits graduate from basic training, becoming sailors in the U.S. Navy. The base had an economic impact of $1.3 billion in Illinois in 2016 (Visit Lake County). The location of the HMA—approximately 50 miles north of downtown Chicago, 50 miles south of downtown Milwaukee, and bisected by Interstate 94—has enabled warehousing, packaging, and distribution to become an increasingly important part of the local economy. From 2011—the first year of job growth after the end of the Great Recession—through 2018, the transportation and utilities sector grew by nearly 200 percent, which was the fastest rate of growth among all sectors in the HMA. Much of the job growth is attributed to Uline—a Current Conditions— Nonfarm Payrolls Nonfarm payrolls have fallen sharply in the past 12 months. Job losses occurred in 9 of the 11 sectors but were largest in the leisure and hospitality sector, which fell by 5,400 jobs, or 13.0 percent ( 2Q = second quarter. Source: U.S. Sector Growth in the Lake–Kenosha HMA, 2Q 2020 Compared with 2Q 2019 Current Conditions— Unemployment The unemployment rate in the Lake-Kenosha HMA was at a 2-decade low of 4.1 percent in 2019, but temporary business closures and reduced spending since March 2020 have resulted in increased unemployment. More reflective of current conditions, however, the unemployment rate during the second quarter of 2020 was 13.0 percent—up from 3.6 percent during the second quarter of 2019. The previous second quarter high was 9.7 percent in 2010. Note: Based on the 12-month moving average. Source: U.S. 12-Month Average Unemployment Rate in the Lake-Kenosha HMA and the Nation Economic Periods of Significance 2000 Through 2008: Growth in the Service-Providing Sectors The early and mid-2000s were a period of economic growth, supported both by new residents that commuted to jobs outside the HMA and by service-sector jobs within the HMA generated, in part, by the new residents. The proportion of residents commuting to jobs outside the HMA increased from 43 percent in 2002 to 47 percent in 2008. From 2001 through 2008, nonfarm payrolls increased by an average of 2,900 jobs, or 0.7 percent, annually. All job gains were in the service-providing sectors, which increased by an average of 4,300 jobs, or 1.4 percent, annually. Jobs in sectors that primarily serve the local population— the education and health services, the wholesale and retail trade, the leisure and hospitality, and the government sectors—accounted for three-fourths of the gains. Notable gains at companies that produce goods or services for sale outside the HMA include 1,700 additional employees at Abbott Laboratories and 600 employees at Baxter International Inc., both headquartered in the HMA. Losses in the manufacturing sector—which averaged 1,400 jobs, or 2.1 percent, annually—partially offset gains elsewhere. 2011 Through 2018: Recovery and Expansion The 2010s were a period of relatively strong job growth. Payrolls expanded by an average of 5,600 jobs, or 1.4 percent, annually from 2011 through 2018—exceeding the 2008 high in 2015, 1 year after the nation had recovered. Payrolls in the professional and business services sector led gains, with an average increase of 1,700 jobs, or 2.7 percent, annually. Only two sectors declined: the government sector, down by an average of 200 jobs, or 0.3 percent, annually; and the information sector, down by an average of 100 jobs, or 2.5 percent, annually. The transportation and utilities sector continued to emerge as a source of job growth during the 2010s. 2019: Job Growth Slows Job growth slowed substantially in 2019 compared with earlier in the 2010s because of corporate relocations out of the HMA and an increased shift toward online shopping. Nonfarm payrolls increased by only 400 jobs, or 0.1 percent, during 2019. The professional and businesses services sector added 600 jobs, or 0.9 percent, which was approximately 1,100 jobs below the average annual increase during the previous 8 years. The wholesale and retail trade sector declined by 1,400 jobs, or 1.8 percent, in 2019, compared with an average annual gain of 600 jobs, or 0.8 percent, during the previous 8-year period. Nationwide, online spending has risen to 16 percent of total retail spending, up from 6 percent in 2010, which has reduced the need for brick-and-mortar retail stores. Store closures in the HMA in 2019 included Shopko and Payless Shoe Source. Corporate relocations have slowed economic growth, as companies moved from office parks in the HMA to larger central city downtowns. Walgreens Boots Alliance, Inc., Mondelēz International, Inc., and Takeda Pharmaceutical Company Limited announced plans in early 2019 to move workers out of the area by the end of 2020. A total of 1,700 workers at Walgreens Boots Alliance, Inc. and Mondelēz International, Inc. began transferring to offices in downtown Chicago, and 1,000 jobs at Takeda Pharmaceutical Company Limited began relocating to Boston in late 2019. The Walgreens Boots Alliance, Inc. headquarters designation and some employees will remain in the HMA.

[Assistant] Employment Forecast During the forecast period, nonfarm payrolls are expected to increase by an average of 0.5 percent annually. Total nonfarm payrolls at the end of the forecast period are expected to remain below the 2019 high. Weak economic conditions are expected in the early part of the forecast period, as individuals and local governments continue to take actions to limit the spread of COVID-19. The vast majority of job gains are expected to occur in the later years of the forecast period, as businesses reopen, increase capacity, and partially recover jobs lost. The rise in online purchasing is expected to continue, supporting job growth in the transportation and utilities sector but hampering the recovery of jobs in the retail trade subsector. In late March 2020, Uline announced plans to construct a new warehouse and add 350 jobs during the next 3 years. Increased production of pharmaceuticals used to address the pandemic are also expected to support job growth. Abbott Laboratories began manufacturing COVID-19 testing supplies in April 2020. Production is expected to continue to increase in the near term.


[User] Population growth in the Lake-Kenosha HMA is affected by both job growth and demographic trends. In the 2000s, years of stronger population growth coincided with years of stronger job growth, but in the 2010s, slower recovery from the Great Recession than elsewhere and an aging population led to slower growth and then a decline of the population. 2000 to 2010 The population increased relatively quickly in the early 2000s but slowed in the later portion of the decade, averaging an additional 7,600 residents or a 0.9-percent increase annually from 2000 to 2010 (Table 3). From 2000 to 2006, the population grew the fastest, rising by an average of 9,200, or 1.1 percent, annually, including an average annual net natural increase of 7,425 people and average Population Quick Facts 2010 Current Forecast Population Average Annual Change Percentage Change 0.9 -0.1 -0.2 Household Quick Facts 2010 Current Forecast Households Average Annual Change Percentage Change 1.1 0.3 0.2 Notes: Average annual changes and percentage changes are based on averages from 2000 to to current, and current to forecast. The forecast period is from the current date (July 1, 2020) to July 1, 2023. Sources: 2000 and 2010—2000 Census and 2010 Census; current and forecast—estimates by the analyst Table 3. Lake-Kenosha HMA Population and Household Quick Facts Notes: Net natural change and net migration totals are average annual totals over the time period. The forecast period is from the current date (July 1, 2020) to July 1, 2023. Sources: U.S. Components of Population Change in the Lake-Kenosha HMA, 2000 Through the Forecast net in-migration of 1,775 people. Restructuring under the Base Realignment and Closure (BRAC) process at Naval Station Great Lakes in 2002 resulted in approximately 2,000 military personnel and their families relocating out of the HMA. In the years excluding the BRAC, net in-migration averaged 2,750 annually. From 2006 to 2010, population growth slowed to an average of 4,900, or 0.6 percent, annually. With the onset Net natural increase averaged 6,925 and net out-migration averaged 2,025 annually during the 2006-to-2010 period. 2010 to 2020 The population increased very slowly in the early 2010s and then declined in later years of the decade. During the period of recovery from the Great Recession, from 2010 to 2015, the population increased by an average of 350 people, or less than 0.1 percent, annually. Net natural increase continued to fall, averaging 4,250 people annually, and net out-migration accelerated to an average of 3,900 people annually. Since 2015, the population has declined by an average of 1,750 people, or 0.2 percent, annually, despite stronger job growth. Corporate relocations out of the HMA and a growing number of retirement-age residents moving out of the HMA contributed to net out-migration rising to an average of 4,850 people annually. The increase in older residents and a lower birthrate—which fell from 11.7 per 1,000 residents in 2011 to 10.5 per 1,000 residents in 2019—led to net natural increase falling to an average of 3,100 people annually since 2015. International in-migration offset a portion of domestic out-migration in the early 2010s, but recent declines in international in-migration have contributed to increased net out-migration. In 2018 and 2019, international in-migration averaged 740 people annually—down from an average of 1,725 people annually from 2011 to 2017.

[Assistant] The largest share of movers into the HMA came from Cook County, Illinois, which includes the city of Chicago, and accounted for 60 percent of net in-migration from the two-state area. Domestic out-migration to other parts of the nation offset local in-migration. The most common destinations outside Illinois and Wisconsin included San Diego County, California, which has a large concentration of U.S. Navy personnel, and Maricopa County, Arizona (Phoenix) and Clark County, Nevada (Las Vegas), which are popular retirement destinations. Population Forecast The population decline is expected to continue during the forecast period but at a slightly lower level compared with the period since 2015. The forecast population decline is expected to average 1,400, or 0.2 percent, annually. Net out- migration is expected to slow. In-migration from the city of Chicago and Cook County is expected to increase, partly offsetting a larger portion of out-migration to elsewhere in the nation. With some schools planning to hold classes remotely in the fall of 2020 and employers encouraging employees to work from home in the near term, areas with single-family homes and backyards, which includes much of the HMA, are expected to attract new residents from nearby places, such as the city of Chicago, which has smaller homes and more limited private outdoor space. Following local trends, net natural increase is expected to continue to slow, as the number of births declines and the share of older residents rises.


[User] The four largest universities in the HMA—Carthage College, University of Wisconsin–Parkside, Lake Forest College, and Rosalind Franklin University—had a combined enrollment of 10,500 students in the fall of 2019. The universities require freshmen and sophomores to live on campus or with family in a commutable distance, and many undergraduates remain in university housing during their junior and senior years. Fewer than 1,000 student households are estimated to reside off campus in the HMA, or less than one- half of 1 percent of all households. Household Growth Trends and Forecast Household growth has also slowed in recent years, reflecting the slower population growth and recent decline. In the 2000s, when population growth was relatively strong—and especially the early 2000s, when mortgages were easier to obtain—household growth averaged 3,200, or 1.1 percent, annually.

[Assistant] Households by Tenure and Homeownership Rate in the Lake-Kenosha HMA When population growth slowed in the 2010s, household growth slowed too. From 2010 to the current date, household growth has averaged 1,050, or 0.3 percent, annually. During the 3-year forecast period, household growth is expected to average 770, or 0.2 percent, annually. Household growth is expected to continue to moderate but at a decelerating rate compared with the previous decade. Preference for single-family homes— the most common housing type in the HMA—is expected to increase, attracting more households from the city of Chicago and Cook County, where multifamily housing with smaller units is more common. Households by Tenure The homeownership rate in the Lake-Kenosha HMA is well above the Chicago MSA and the nation, but as in the Chicago MSA and the nation, the rate has fallen in recent years because the number of renter households has increased faster than the number of owner households. The homeownership rate in the Chicago MSA and the nation were 64.4 percent and 64.1 percent, respectively in 2019, also down from and 2019 American Community Survey [ACS] 1-year data). Since 2010, renter households in the HMA have increased by an average of 1,225, or 1.5 percent, annually, and owner households have decreased by an average of 160, or 0.1 percent, annually.


[User] The inventory of homes for sale is relatively low, but price growth in the later 2010s has been limited, partially because of increasing out-migration and overall population decline. Despite strong job growth throughout the 2010s, the number of homes sold has also followed population trends, with a modest decline in the later 2010s. Total home sales—including new and existing single-family homes, townhomes, and condominiums—decreased an average of 1 percent annually from 2014 through 2019, and the average sales price increased 1 percent annually during the same period. The inventory of homes for sale was down from 13.2 months in 2010 to 4.5 months in 2019 (CoreLogic, Inc.). The economic impact of precautionary measures to limit the spread of COVID-19 have led to a decline in home sales and accelerating price growth since March 2020. The home sales vacancy rate is currently estimated at 1.4 percent—down from 2.3 percent in 2010, when the market was soft ( Distressed home sales include foreclosures and real estate owned properties. 12-Month Sales Totals by Type in the Lake-Kenosha HMA New home sales accounted for 3 percent of total sales during the second quarter of 2020, partially because new homes are unoccupied and can be easier to tour. Delinquent Mortgages The share of seriously delinquent mortgages and real estate owned (REO) properties increased sharply in June 2020. That increase likely reflects homeowners who stopped paying their mortgage at the onset of the COVID-19 pandemic in March 2020 becoming 90 days delinquent on their mortgage in June 2020. The share of seriously delinquent mortgages and REO properties was 3.8 percent in June 2020—up from 1.6 percent in May 2020 and 1.5 percent in June 2019 (CoreLogic, Inc.). Before the recent increase, the rate had been declining since early 2012. For context, the rates in the Chicago MSA and the nation were 4.5 percent and 4.0 percent, respectively, in June 2020—each up 2.4 percentage points from 1 month earlier. Historical Home Sales Price Trends The average home sales price in the HMA was at a historic high in 2007. In addition to weak economic conditions during the late 2000s and early 2010s, the high level of inventory of homes for sale—which was 7.5 months in 2012—contributed to the decline in the average home sales price. The changing mix of homes sold also affected the average price, with new homes—which had prices 15 to 35 percent above the average—becoming a smaller portion of total sales and distressed sales—which had prices approximately 50 percent below the average—becoming a larger portion of sales in the early 2010s. As the economy recovered during 2013 and 2014, the average price increased 5 percent annually, but price growth slowed to less than 1 percent annually from 2015 through 2019 because of a declining population and reduced demand for sales housing. Sales and Prices by Square Footage and Size Comparing the average sales price per square foot, prices in the HMA are below the average for the Chicago MSA and the nation. During the second quarter of 2020, prices in the HMA averaged $143 per square foot, compared with $171 in the MSA and $189 in the nation (Metrostudy, A Hanley Wood Company, with adjustments by the analyst). Homes also tend to be larger in the HMA relative to the other areas. REO = real estate owned. 12-Month Average Sales Price by Type of Sale in the Lake-Kenosha HMA

[Assistant] With the increase in the number of people working and attending school from home since March 2020, home size and price per square foot are expected to be increasingly important factors in homebuying in the near term. The average size of a home sold in the HMA during the second quarter of 2020 was up 4 percent compared with a home sold during the second quarter of 2019. The size of a home sold in the MSA was up 3 percent and was relatively unchanged in the nation during the same period.


[User] Sales Prices by Zip Code The current average home sales price has increased in nearly all Zip codes in the HMA since the historic low in 2012, but prices in areas with residents most likely to be affected by the corporate relocations have continued to decline. The Zip code with the largest percentage decline in price since 2012 was 60015, which corresponds to the Riverwoods and Deerfield, Illinois areas (Map 4). Walgreens Boots Alliance, Inc., Mondelēz International, Inc., and Takeda Pharmaceutical Company Limited—which all announced relocations in 2019— had offices in the Zip code. The only other Zip codes with a decline in prices since 2012 were the 60069 and 60045 Zip codes, which correspond to Lincolnshire and Lake Forest, Illinois, respectively, and are adjacent to 60015. For context, from the second quarter of 2012 through the second quarter of 2020, the average home sales price in the HMA increased 12 percent. Among the 34 Zip codes in the HMA with 20 or more sales during each of the two quarters of reference, 27 had an average price increase of 12 percent or more, 4 had increases between 1 and 11 percent, and 3 had a decline in prices. Map 4: Average Home Sales Price Change by Zip Code in the Lake-Kenosha HMA from 2Q 2012 to 2Q 2020 Sales Construction Activity Sales construction activity—as measured by the number of single-family homes, townhomes, and condominiums permitted—was elevated in the 2000s and had increased only modestly since the Great Recession-era lows. Sales Permitting continued at low levels from 2009 through 2011, averaging 620 homes annually, and increased slightly during the period of economic recovery in the HMA, averaging 750 homes annually from 2012 through 2015. As the economy shifted from recovery to expansion, permitting increased to 850 homes annually from 2016 through 2019. During the 12 months ending June 2020, permitting declined, totaling 720—down from 920 homes permitted during the previous 12 months. Economic uncertainty combined with limitations on in-person public meetings since March 2020 contributed to fewer homes permitted during the most recent 12 months. Homes priced at less than accounted for 15 percent of existing home sales, and homes priced at or more accounted for the remaining 30 percent of existing sales. New homes tend to be more expensive, with 75 percent of new home sales priced at more than . In outlying areas, farther from the interstate highways and Metra (the regional train network connecting to downtown Chicago) stations, new construction homes are available at prices below the average for the HMA. In Volo, a town in Lake County approximately 12 miles west of Interstate 94 and without a Metra station, 18 single-family homes in the 86-lot Remington Pointe subdivision sold for an average of during the past 12 months. In Vernon Hills, a town in southeast Lake County only 3 miles west of I-94 and with a Metra station, 21 homes in the 128-lot Residences at the Cuneo Mansion and Gardens subdivision sold for an average of during the most recent 12 months.

[Assistant] The forecast period is from July 1, 2020, to July 1, 2023. Source: Estimates by the analyst Forecast During the forecast period, demand is expected for an additional 1,875 homes (Table 6). The 220 homes currently under construction are expected to meet a portion of demand during the first year of the forecast period. Demand is expected to increase as economic conditions improve; however, continued weak economic conditions in the near term and slower household growth are expected to result in demand for fewer additional homes compared with recent years.


[User] Current Rental Market Conditions and Recent Trends The rental market is currently balanced but is showing signs of weakening. The vacancy rate for all rental units—including apartments and renter-occupied single-family homes, townhomes, condominiums, and mobile homes—is currently estimated at 6.3 percent, down from 8.5 percent in 2010, when conditions were soft ( Real Page, Inc. Apartment Rents and Vacancy Rates in the Lake-Kenosha HMA rent in the MSA was $1,576—up less than 1 percent from a year ago and slowing from a 7-percent gain during the previous year. The vacancy rate in the MSA was 5.0 percent—also up 0.4 percentage point from the same quarter a year earlier and has fluctuated between 4.0 and 5.5 percent since 2015. Rental Construction Activity Rental construction, as measured by the number of rental units permitted, has been relatively elevated in recent years but is below levels from the early 2000s, when population growth was stronger. With weakening economic conditions from the Great Recession and early recovery, rental construction averaged only 310 units annually from 2007 through 2013. Stronger job growth, economic recovery from the Great Recession, and a growing number of renter households supported an increase in rental unit permitting, rising to an average of 850 units annually from 2014 through 2019. During the most recent 12 months, permitting totaled 830 units—unchanged from the previous 12 months (preliminary data). Data for 2020 are through June 2020. Sources: U.S. Average Annual Rental Permitting Activity in the Lake-Kenosha HMA Rental Construction Activity by Geography Rental property construction since 2014 has been concentrated in the southern portion of Lake County and the eastern portion of Kenosha County (Map 5). The growing share of seniors has resulted in a relatively large share of the new rental units being in age-restricted buildings. Senior housing accounted for 30 percent of units permitted, with most of that property type constructed in southern Lake County. General occupancy units accounted for the remaining 70 percent of units permitted, with the number of units evenly divided between Kenosha and Lake Counties. Map 5: Rental Properties Constructed in the Lake-Kenosha HMA since 2014 Rents at newly constructed apartments in Lake County tend to be higher than rents at newly constructed apartments in Kenosha County. Two general occupancy apartments opened in Lake County in 2019: The Atworth at Mellody Farm—a 260-unit property in Vernon Hills, with rents ranging from $1,390 for a studio to $3,212 for a three-bedroom unit—and 444 Social—a 302-unit property in Lincolnshire, with rents ranging from $1,435 for a studio to $3,665 for a three-bedroom unit. In Kenosha County, Breeze Terrace—a

[Assistant] Forecast During the forecast period, demand is expected for an additional 1,050 rental units ( The forecast period is July 1, 2020, to July 1, 2023. Source: Estimates by the analyst Rental Units Demand 1,050 Units Under Construction 810 Units Table 8. Demand for New Rental Units in the Lake-Kenosha HMA During the Forecast Period


[User] HUD will continue to monitor national market conditions and provide an updated report/ addendum in the future. Forecasts of housing demand were made to bring the sales and rental markets into balance during the next 3 years. This report discusses select data for the 10 HUD regions—defined in the “Terminology Definitions and Notes” section at the end of the report. More than 1 million jobs were lost in March, followed by nearly 20 million jobs lost in April, a total loss of 14 percent of nonfarm payrolls during the 2 months. Monetary and fiscal policies were enacted throughout the year to lessen the economic impact and stimulate the economy. By the end of 2020, approximately 64 percent of the jobs lost had been recovered. During the next 3 years, nonfarm payrolls are expected to increase an average of 1.9 percent a year. The national sales housing market is very tight, with home sales and prices increasing at robust paces in 2020. Overall, the number of homes sold in 2020 was up 8 percent from 2019 (Census Bureau/HUD; NAR). Year-over-year, the median sales price for existing homes increased 9 percent to —the highest annual increase in 7 years (NAR). The median sales price for new homes grew 4 percent to after no average annual change during the previous 2-year period (Census Bureau/HUD). During the next 3 years, demand is estimated for 3.28 million sales units. The units already under construction will meet a portion of that demand. The national rental housing market is slightly tight, with an estimated 6.2 percent vacancy rate, up slightly from 2019 but down from 9.2 percent in 2010 when the market was soft. More than one-half of the rental supply in the nation is in structures with two or more units, typically apartments, making those types of structures highly influential on overall rental market conditions. The average monthly apartment rent decreased nearly 1 percent in the past year to $1,410, the first year that the average rent has declined since 2008 (RealPage, Inc.). Demand for rental units during the next 3 years is estimated at 1.11 million units. The rental units already under construction will satisfy a portion of that demand. Rental Market Slightly Tight: After steady rent increases and vacancy rate declines during the past decade, the tight rental market eased slightly in 2020.

[Assistant] Units under construction as of January 1, 2021. The forecast period is January 1, 2021, to January 1, 2024. Source: Estimates by the analyst 3-Year Housing Demand Forecast Sales Units Rental Units Nation Total Demand Under Construction


[User] Real gross domestic product (GDP) fluctuated significantly during 2020, with a large decline in the second quarter but a significant rebound in the third quarter. Real GDP was down 3.5 percent in 2020 relative to a year earlier, compared with an increase of 2.2 percent in 2019 (U.S. Bureau of Economic Analysis). Long-Term Economic Trends From 2001 through 2019, nonfarm payrolls in the nation grew by an average of 0.7 percent, or jobs, annually. Growth during that period was interrupted by two recessions: the dot-com recession from March through November 2001 and the Great Recession from December 2007 through June 2009. The years leading up to the Great Recession are often referred to as the housing boom; the economy received a boost from strong homebuilding and home sales activity. Although the Great Recession ended in June 2009, the U.S. economy continued to lose jobs through 2010. The economy then underwent a lengthy period of expansion, adding jobs every year from 2011 through 2019. With the impact of COVID-19 and the many countermeasures implemented to contain the spread of the virus, the economy lost a significant number of jobs in early 2020. Current Conditions—Nonfarm Payrolls The impacts of COVID-19 have not been uniform across the country. Map 1 shows the COVID-19 case rate per people as of mid-January 2021 Note: 12-month moving average. Sources: U.S. 12-Month Average Nonfarm Payrolls in the Nation Note: Data are from January 2020 to mid-January 2021. Source: Centers for Disease Control and Prevention, COVID Data Tracker The case rate is highest in the middle of the country. With the rise of COVID-19, many state and local governments instituted policies early in 2020 to contain or slow the spread of the virus. These policies varied across the country, but in many locations, they resulted in travel limitations and the temporary closure of stores, restaurants, and other types of social establishments. As restrictions were eased throughout the year, many establishments reopened with limited service and a general decrease in demand. Many consumers chose online or remote options to maintain social distancing. This caused significant job losses. During 2020, nonfarm payrolls were down 5.8 percent—or by 8.72 million jobs—to 142.18 million jobs, compared with an increase of 1.3 percent—or 2.00 million jobs—in 2019. Notes: Total nonfarm payroll is in thousands. Percentages may not add to 100 percent due to rounding. Based on 2020 annual data. Job losses occurred in every nonfarm payroll sector during 2020, ranging from a decline of less than 1 percent, or 30,600 jobs, in the financial activities sector to nearly 20 percent, or 3.26 million jobs, in the leisure and hospitality sector. Within the sector, the accommodations and food services industry accounted for 80 percent of all the sector losses, with a decline of 2.60 million jobs. Other sectors with more than 1 million jobs lost include the professional and business services sector, down 4.8 percent, or 1.03 million jobs, and the wholesale and retail trade sector, down 4.7 percent, or 1.02 million jobs ( U.S. Share of Nonfarm Payroll Jobs in the Nation, by Sector To lessen the economic impacts of COVID-19 and help stimulate the economy, the federal government implemented a number of fiscal and monetary policies during 2020. In March, Congress passed a $2 trillion stimulus measure, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which included payments to qualifying individuals (typically billion in increased unemployment benefits, $350 billion in loans to small businesses, $500 billion for corporate loans, and nearly $340 billion in funding for state and local governments. In December, Congress passed another stimulus package, the Consolidated Appropriations Act 2021, which was worth $900 billion and included $600 payments to qualified individuals and extended unemployment benefits, among other items. In addition, the Federal Reserve instituted a variety of policies to generate economic growth, including lowering the federal funds rate to near 0 percent and increasing the money supply in the economy through the purchase of securities. Current Conditions— Regional Nonfarm Payrolls The rate of job loss varied significantly across the country during 2020, with the largest rates of decline occurring in the northeast (Map 2). The highest rate of job loss occurred in the New York/New Jersey region, down 9.7 percent, which was led by a 32.7-percent decline—or jobs—in the leisure and hospitality sector. The New England region had the second highest rate of decline, down 8.3 percent. The leisure and hospitality sector declined by jobs, or 28.3 percent, followed by the education and health services sector, with jobs lost, or 6.7 percent. No sectors added jobs in the New York/New Jersey or New England regions. Jobs in the Pacific region were down 7.3 percent, with leisure and hospitality sector jobs down or 26.9 percent. The transportation and utilities sector was the only sector to grow, adding 29,900 jobs, or 3.2 percent. Many consumers have turned to online purchasing and local restaurant meal delivery during the pandemic, Map 2. Nonfarm Payroll Growth by HUD Region, 2019–2020 contributing to job growth in the transportation and shipping industry. The Midwest and Mid-Atlantic regions were down 6.9 and 6.6 percent, respectively. The leisure and hospitality sector led declines in both regions with losses of or 22.4 percent, and or 25.3 percent, respectively. The transportation and utilities sector in the Midwest and Mid-Atlantic regions were up less than 1 percent each, with gains of 5,700 and 600 jobs, respectively. This was the only sector to add jobs in either region. The remaining five regions had lower rates of job loss than the 5.8-percent national rate of decline, ranging from 4.1 percent in the Rocky Mountain region to 5.3 percent in the Northwest region. Nearly 45 percent of the job decline in the Northwest region was in the leisure and hospitality sector, which declined by jobs, or 22.7 percent. The only sector to add jobs was the information sector, which added 1,000 jobs, or less than 1 percent. Map 3. As with the rest of the country, job declines were led in each region by the leisure and hospitality sector, which was down and 17.3 percent, respectively. In the Southeast/ Caribbean region, the only sector to add jobs was the financial activities sector, up 2,100 jobs, or less than 1 percent. The transportation and utilities sector was the only sector to add jobs in the Southeast and Rocky Mountain regions, up 12,000 jobs, or 1.4 percent, and 2,200 jobs, or 1.0 percent, respectively. All sectors in the Great Plains region declined during 2020. Progress of the Recovery By the end of December 2020, the national economy had recovered 64 percent of the nearly 21 million jobs that were lost in March and April. Map 3 shows the percent of nonfarm payrolls recovered at the state level by the end of the year. Idaho and Utah are the only two states that fully recovered the jobs lost due to the pandemic by the end of the year. Twenty-three additional states recovered a higher percentage of jobs than the national level, led by South Dakota and Montana, which had each recovered 92 percent of the jobs lost. The remaining states had rates of recovery less than the national average. The lowest rate was in the District of Columbia, which only recovered 16 percent of the jobs lost, followed by New Mexico, Alaska, and Hawaii at 21, 27, and 27 percent, respectively. Current Conditions—Unemployment During 2020, the unemployment rate averaged 8.1 percent, up from 3.7 percent in 2019. The unemployment rate in 2020 was the highest rate since 2012 when it was also 8.1 percent. The 12-month average unemployment rate previously peaked at 9.7 percent during 2010 but declined steadily through 2019. Notes: Percent of nonfarm payroll jobs lost in March and April 2020 that were recovered by the end of December 2020. Data are not seasonally adjusted. Note: Based on the 12-month moving average. Source: U.S. 12-Month Average Unemployment Rate in the Nation During 2001, job growth in the nation was flat. The manufacturing sector experienced significant losses, declining by jobs, or 4.8 percent. The wholesale trade subsector, the professional and business services sector, and the federal government subsector had significant declines of and jobs, or 2.7, 1.1, and 3.5 percent, respectively. The education and health services sector grew by jobs, or 3.7 percent, during the year, offsetting some of the losses in other sectors. 2005 Through 2006: The Housing Boom The rate of job growth in the nation increased significantly in 2005 and 2006, averaging gains of 2.33 million jobs, or 1.8 percent, each year. During these years, the fastest growing sector was the mining, logging, and construction sector, which was up an average of 5.2 percent, or jobs, annually. Nearly all the growth in that sector came from the construction subsector, which increased by jobs each year. The nominal annual value of construction (residential and nonresidential) averaged $1.14 trillion from 2005 through 2007—an increase of 31 percent compared with an average annual level of $875 billion during 2000 through 2004 (Census Bureau). Other sectors with significant payroll gains during 2005 and 2006 were the professional and business services, education and health services, and leisure and hospitality sectors, with average annual gains of and jobs, or 3.5, 2.6, and 2.4 percent, respectively. Declines continued in the manufacturing and the information sectors, but the rates of decline slowed. The manufacturing sector lost an average of 80,000 jobs, or 0.6 percent, annually, and the information sector was down an average of 40,000 jobs, or 1.3 percent, annually. 2007: The Slowdown Nonfarm payrolls continued to grow through 2007, but the rate of growth slowed to 1.1 percent, or 1.55 million jobs added. Growth continued in 7 of the 11 sectors during 2007, led by the education and health services sector, up by jobs, or 2.9 percent. The professional and business services sector continued to grow at a strong pace of 2.2 percent, or jobs, which was a noticeable slowdown from growth during the previous 2 years. The leisure and hospitality sector also had significant gains of jobs, or 2.4 percent, in 2007. The largest decline in jobs was in the manufacturing sector, down or 1.9 percent. Small declines occurred in the mining, logging, and construction; the 2008 Through 2010: The Great Recession The Great Recession officially lasted from December 2007 through June 2009, or 18 months (National Bureau of Economic Research). It was the longest recession since the Great Depression, which lasted 43 months from 1929 to 1933. The impacts from the Great Recession on the labor market lasted well into 2010. From 2008 through 2010, nonfarm payrolls in the country declined by an average of 2.55 million, or 1.9 percent, annually, and the nation lost 7.6 million jobs. With the exceptions of the education and health services and the government sectors, every sector lost jobs. The education and health services sector increased by an average of jobs annually, or 2.3 percent, and the government sector remained relatively stable, with modest growth averaging 90,700 new jobs, or 0.4 percent, annually. The most significant declines occurred in the goods-producing sectors: the manufacturing sector was down an average of jobs, or 6.0 percent, annually, and the mining, logging, and construction sector lost an average of jobs, or 9.3 percent, each year. Most notably, the construction subsector declined an average of 10.1 percent, or by jobs, annually during this period because of significant declines in both residential and commercial construction. The nominal annual value of construction reached a trough from 2008 through 2011, when it averaged $895 billion, down 22 percent from the 2005-through-2007 average. Most remaining sectors had average annual declines ranging from 2.3 to 3.7 percent, with even smaller declines in the leisure and hospitality and the other services sectors. The wholesale and retail trade sector was down by an average of jobs, or 2.6 percent. The professional and business services sector declined by an average of jobs, or 2.3 percent. 2011 Through 2016: The Expansion Annual job gains resumed in 2011, and jobs were added in the nation every year through 2019. From 2011 through 2016, nonfarm payrolls increased by an average of 2.33 million jobs, or 1.7 percent, annually. Every sector except for the government sector added jobs during that period. The professional and business services sector led growth, with an average gain of jobs, or 3.1 percent, a year. The leisure and hospitality and the education and health services sectors each increased by averages of more than jobs, or 3.1 and 2.1 percent, a year, respectively. The construction subsector was slower to recover, but by 2014 and 2015, the subsector was averaging gains of 5.0 percent, or jobs, a year. Not until 2014, however, did the economy recover all the jobs lost from 2008 through 2010. 2017 Through 2019: Recent Growth Job growth slowed slightly from 2017 through 2019, averaging gains of 2.19 million jobs annually, or 1.5 percent growth. Growth slowed partially because of fewer available workers; the nation had a historically low rate of unemployment, averaging 4.0 percent during the period, and many job openings were harder to fill. Every sector added jobs during the 3 years except the wholesale and retail trade sector, which declined by an average of 36,700 jobs, or 0.2 percent, partly reflecting growth in e-commerce. Average losses of 70,600, or 0.4 percent, in the retail trade subsector more than offset the increase of 33,900, or 0.6 percent, in the wholesale trade subsector. The education and health services, the professional and business services, and the leisure and hospitality sectors led gains during the period— up by average annual rates of 2.2, 1.9, and 1.9 percent, or and jobs,

[Assistant] The fastest rate of growth was in the transportation and utilities sector, up 3.8 percent, or jobs, a year, followed by the mining, logging, and construction sector, up 3.6 percent, or jobs. Note: The current date is January 1, 2021. Source: U.S. Sector Growth in the Nation, 2011 to Current Employment Forecast During the next 3 years, nonfarm payroll jobs are anticipated to grow at an average of 1.9 percent annually. The distribution of COVID-19 vaccines will enable the economy to “open up” and eventually reduce the need to socially distance. In addition, more fiscal stimulus was enacted in 2021 ($1.9 trillion American Rescue Plan), and the Federal Reserve has committed to maintaining its pro-growth policies of low interest rates and increased money supply while maintaining a close watch on inflation as the labor market returns to and maintains a level of full employment. Job growth is expected to be moderate in the first year of the forecast, with nonfarm payrolls increasing by an estimated 1.3 percent, but will pick up significantly in the second year as more individuals get vaccinated and COVID-19 restrictions are rolled back in earnest. Growth is anticipated to average 2.3 percent during the second year but to return to a more sustainable long-run level of 2.0 percent in the third year. Growth during the forecast period is likely to be led by those sectors most impacted by the COVID-19 pandemic, such as the leisure and hospitality sector.


[User] Population Trends From 2000 to 2005, a period including the 2001 recession and subsequent moderate economic expansion, the population of the United States grew by an average annual rate of 0.9 percent, or 2.69 million (Census Bureau decennial census counts and population estimates as of July 1). Net natural change accounted for 61 percent of the growth, or an average increase of 1.64 million people annually, and net in-migration to the United States averaged 1.05 million people, accounting for 39 percent of the population gain. Population growth increased from 2005 to 2008 to an average annual rate of 1.0 percent, or 2.86 million people. Net natural change increased significantly during the period to an average of 1.82 million people, accounting for 64 percent of population growth, and net in-migration averaged 1.04 million people, or 36 percent of the population gains. From 2008 to 2010, when the United States lost jobs due to the Great Recession, population Population Quick Facts 2010 Current Forecast Population Average Annual Change Percentage Change 0.9 0.6 0.5 Household Quick Facts 2010 Current Forecast Households Average Annual Change Percentage Change 1.0 0.8 0.7 Notes: Average annual changes and percentage changes are based on averages from 2000 to to the current date, and the current date to the end of the forecast period. The forecast period is from the current date (January 1, 2021) to January 1, 2024. Sources: 2000 and 2010—2000 Census and 2010 Census; current and forecast—estimates by the analyst Table 2. Population and Household Quick Facts for the Nation growth slowed to an average annual rate of 0.9 percent, or 2.66 million people. Net natural change declined to an average of 1.77 million people a year, partly reflecting fewer births during the recession, but accounted for 67 percent of population growth, as net in-migration slowed significantly to an average of people a year, or 33 percent of population growth. As the economy expanded from 2010 to 2016, the average level of net in-migration increased to people a year, accounting for 40 percent of population growth. Net natural change continued to decline at a significant rate, averaging 1.37 million people a year, or 60 percent of population growth. That decline was partly due to an aging population, with an increase in the number of deaths, along with birth rates remaining low following the recession. As a result, the total population increased by 2.27 million, or 0.7 percent, annually. The rate of population growth continued to slow, to an average annual rate of 0.5 percent, or 1.75 million people, from 2016 to the current date. Net in-migration slowed to an average of people a year but accounted for 44 percent of the population gains during the period, as net natural change declined to an average of people, or 56 percent of growth. During 2020, as a result of the impacts of COVID-19 and the policies enacted to contain its spread, both net natural change and net in-migration are estimated to have slowed more considerably than in recent years.

[Assistant] During the 3-year forecast period, the population is expected to increase at an average annual rate of 0.5 percent or 1.57 million people. Net natural change and net-in migration are expected to average and respectively. The population is expected to total 335.49 million by the end of the forecast period (Table 2).