[User] 2024 The inflation rate will start the year at around 4% but fall steadily to around 2.7% by year-end. A weaker global economy will keep commodity prices muted, while a return to pre-pandemic supply chain efficien- cy will buoy the auto industry and an increase in labor supply will temper wage growth to more sustainable levels. Core inflation could even surprise on the downside due to tight credit conditions and broad- er weakness in the global economy. Upside risks to headline inflation include geopolitical conflicts and oil production cuts. Construction cost growth that has been limiting new development will ease in 2024.

[Assistant] 2024 Despite the risk of higher headline inflation if oil prices rise in 2024, the U.S. Federal Reserve will mainly focus on core inflation, which excludes food and energy prices, and the broader risks from the global economy and the banking sector. The Fed will reduce short-term interest rates to around 4.25% by year-end 2024 and to 3.5% in 2025. This would be a much slower pace than during previous rate-reduction cycles due to the resilience of the U.S. economy. If the downside risks materialize, the Fed can lower rates more quickly due to the decline in inflation. Gently falling interest rates amid generally solid real es- tate fundamentals will revive real estate capital markets activity above its currently very depressed levels. How- ever, the federal deficit, which ended fiscal year 2023 at 7.5% of GDP, likely will not be reduced by much in 2024, keeping the 10-year Treasury yield high relative to the past decade, even as inflation eases. 2024 Capital Markets 2024 We expect that commercial real estate investment activity will begin to pick up in the second half of 2024, although an uncertain macro environment and elevated interest rates will continue to weigh on investor and lender sentiment. We also expect losses in the banking sector due to decreases in real estate values. Even though charge-offs will be spread out over the course of the next several years, some banks will fail and their appetite to lend to commercial real estate will remain muted throughout 2024. It will remain extremely difficult to finance office properties, particularly for non-Class A assets. Select multifamily, industrial and grocery-anchored retail as- sets can still be financed but asset quality and existing relationships with borrowers will be key considerations for lenders. Notable amounts of equity capital remained on the side- lines at the end of 2023, particularly for value-add and opportunistic strategies. We expect that some of this capital will be deployed throughout 2024. 2024 Real estate values for most property types are unlikely to fully stabilize until mid-2024. Cap rates, excluding those for office assets, increased by roughly 150 basis points (bps) between early 2022 and late 2023 depend- ing on market and asset type. Office cap rates rose by at least 200 bps. This implies a 20% decline in values for most property types. We think cap rates will expand by another 25 to 50 bps in 2024, with a corresponding 5% to 15% decrease in values. 2024 Multifamily and industrial assets will be most favored by investors in 2024. Both property types have relatively strong fundamentals (demand, vacancy, rent growth, etc.) and long-term tailwinds that bolster their attrac- tiveness. Retail fundamentals also look strong, although the sector will inevitably suffer from a slowing econo- my. The higher-for-longer outlook for interest rates will cause some owners of Class B and C office assets to sell due to further erosion in values. There will be notable opportunities in 2024 for all-cash buyers such as sovereign wealth funds and endow- ments, as the higher cost of debt capital will reduce competition for prime assets. A large amount of capital has been raised in the private credit market for oppor- tunistic investments, as traditional sources of credit— particularly banks—pull back. We expect that the lowest pricing for assets will be during the first half of the year. 2024 Total investment volume is expected to decrease by only 5% year-over-year in 2024, stabilizing after a 45% drop in 2023. Lower levels of investment activity are directly tied to expectations that the 10-year Treasury yield will remain elevated throughout the year. This will lead to some distress for Class B and C office buildings and for certain assets that were highly leveraged using floating-rate debt amid ultra-low rates. However, CBRE Research forecasts an average 10-year Treasury yield of 3.3% from 2025 to 2028, which will support investment activity and asset prices over the medium term. 2024 — Cap rates will continue to rise through midyear and stabilize thereafter, marking a trough in asset pricing. — Industrial and multifamily assets will likely remain most favored by investors due to relatively strong fundamentals. Office/Occupier 2024 An economic slowdown in the first half of the year and the normalization of hybrid working arrangements will continue to limit office demand in 2024. CBRE forecasts that the overall office vacancy rate will peak at 19.8% by year-end as below-average leasing activity persists and new construction deliveries continue to come to market, albeit at a slower pace. More than half of the respondents to CBRE’s 2023 U.S. Office Occupier Sentiment Survey said they plan to further reduce their office space in 2024. The flight-to-quality trend of recent years will continue to support demand for newer, prime office product with the best amenities. Since 2017, absorption in newer post-2010 assets has been positive and we expect this will continue in 2024. For pre-2010 buildings, absorption has been negative for the past four quarters. Quarterly demand for post-2010 buildings is expected to begin outpacing new supply added to the market by Q4 2024. A recent increase in tenants that are actively looking for space across major markets suggests that leasing activity will rise by 5% in 2024 but will remain between 20% and 25% below pre-pandemic levels. 2024 High interest rates and limited demand, along with re- cord-high vacancy, will deter developers from breaking ground in 2024. The 36.1 million sq. ft. in total construc- tion completions expected in 2024 would be the lowest annual amount since 2014. CBRE forecasts that average prime office asking rent will increase by as much as 3%, a slower rate than in recent years. However, the shrink- ing supply pipeline is expected to improve office funda- mentals and reduce supply-side risk to vacancy. Nearly 40% of respondents to CBRE’s 2023 U.S. Office Occupier Sentiment Survey think office utilization will increase marginally in 2024, while 60% said they have already reached a steady state of office attendance. This suggests that more occupiers will be comfortable making long-term leasing decisions, resulting in a mod- est improvement in leasing activity. Small occupiers with requirements of less than 20,000 sq. ft. made up 60% of leasing volume by count through Q3 2023 and will continue to account for the bulk of leasing activity. Smaller space requirements will boost the flexible office market, with more landlords offering flexible space options, such as pre-built spec suites, directly to tenants rather than through third-party oper- ators. Tenant-favorable market conditions will persist in 2024, as the margin between asking and taking rents reached a post-pandemic-era high in 2023. However, the spread is expected to narrow slightly in 2024, as asking rents are forecast to drop by 3.4% from their Q3 2023 aver- age. Concessions in the form of free rent and tenant improvement allowances are expected to moderate in 2024 as asking rents decrease.


[User] 2024 Office location, quality, flexibility and amenities will be more important than ever to attract occupiers. While economic headwinds and the prevalence of hybrid work- ing will play a major role in occupiers’ decisions in 2024, those that do lease space will flock to submarkets with an abundance of walkable amenities that help attract and retain the best talent. Hard-hit gateway markets, such as Manhattan, Los Angeles and Chicago, may recover at a faster pace than previous years and see increased demand in certain submarkets with a higher percentage of prime office space and amenities. CBRE surveys show that public transportation access is the most important building amenity for occupiers. To increase office attendance, companies will need to offer employees top-notch ame- nities both in and around the workplace, boosting de- mand in the most desirable and accessible submarkets.

[Assistant] 2024 Many older buildings that lack modern amenities will struggle to attract tenants in 2024, so a higher percent- age of them likely will undergo conversion to other uses. As of Q3 2023, approximately 8% of total U.S. office supply by square footage was less than 50% occupied. Even though vacancy is forecast to grow another 160 bps in 2024, we do not expect this statistic to materially change.


[User] 2024 Nashville The market has seen five consecutive quarters of positive net absorption through Q3 2023, which has bolstered rent growth. Office em- ployment grew by 4.2% in 2023, well above the 1.2% national average.

[Assistant] Demand for newly deliv- ered prime office space is expected to remain strong.


[User] Miami Average asking rent increased by 6.0% year- over-year in Q3 2023—one of the highest rates in the country. A wave of new-to-market ten- ants led to positive rolling-four-quarter net absorption through Q3 2023 and a 1.8-percent- age-point drop in the vacancy rate. For these reasons, Miami’s office market is expected to remain healthy in 2024. Las Vegas The 4.5% year-over-year growth in office-using employment in Q3 2023 was fueled by an influx of companies that have either relocated or ex- panded due to the business friendly and favor- able tax environment. Las Vegas recorded posi- tive rolling four-quarter net absorption through Q3 2023. With a recent uptick in leasing activity and strong preleasing at planned speculative projects , the Las Vegas office market is poised for further growth in 2024.

[Assistant] 2024 Retail 2024 Retail real estate fundamentals are expected to remain strong in 2024 due to the long-running dearth of new construction deliveries over the past several years. The retail availability rate is expected to fall by 20 basis points and end the year at 4.6%. Asking rent growth will dip below 2% for the first three quarters of 2024 but rise above 2% in Q4. Demand for open-air suburban retail centers will increase at a faster pace than other retail formats, as traditionally mall-based retailers explore new formats for expansion. High costs in 2023 discouraged construction starts and will ensure the scarcity of new development deliveries in 2024. Quoted construction costs currently range from $300 per sq. ft. for a junior anchor box to $500 per sq. ft. for a multi-tenant pad site. Only a few markets can demand asking rents that are high enough to justify the new construction. CBRE’s Cost Consultancy Group re- ports that retail construction costs rose by 6.5% in 2023 and are expected to increase further in 2024, albeit at a slower rate. Only a few markets can command asking rents that are high enough to justify new construction. 2024 Consumers will face certain headwinds in 2024, includ- ing a lack of affordable housing, high interest rates and the resumption of student-loan payments. The National Association of Realtors Home Affordability Index fell to a 29-month low in August 2023, while the Federal Reserve Bank of New York estimates almost $1.6 trillion of outstanding student-loan debt. This likely will curb discretionary consumer spending in coming years. CBRE Research forecasts that retail sales growth will moderate to around 2.6% in 2024. Asking rent growth is expected to decrease in early 2024 but rebound in the second half of the year. 2024 Net absorption of retail space is expected to fall to 28 million sq. ft. in 2024 from 35 million sq. ft. in 2023. Nev- ertheless, the retail availability rate is expected to reach a record-low 4.6% due to a lack of new supply. Only 14 million sq. ft. of new multi-tenant retail space is sched- uled for delivery in 2024—half the amount of projected demand. 2024 Luxury brands that once focused only on space in high-street districts such as Beverly Hills’ Rodeo Drive, New York’s Fifth Avenue and Miami’s Design District are taking fresh looks at resort markets like Las Vegas, Hono- lulu, Charleston and West Palm Beach. With a slowing Chinese economy, expansion-mind- ed luxury retailers will return to the U.S. for expansion. Texas markets like Dallas and Houston that have long been underserved by high-end brands will see new interest. Luxury Brands Look Farther Afield Demand for open- air suburban retail centers will increase at a faster pace than other retail formats, as traditionally mall- based retailers explore new formats for expansion.


[User] 2024 Orlando Year-to-date through Q3 2023, Orlando led all U.S. markets with over 2 million sq. ft. of net absorption, lowering its retail availability rate to just 3.5%. San Francisco Despite a hobbled downtown market, Greater San Francisco, which includes Marin and San Mateo counties, is projected to have one of the largest drops in overall retail availability in 2024 due to continued tech job growth.

[Assistant] Industrial & Logistics


[User] 2024 The U.S. industrial market is expected to stabilize in 2024, with net absorption on par with 2023 levels and taking rent growth moderating to 8%. Construc- tion deliveries will taper off by midyear and finish at half of 2023’s total. New deliveries in the early part of the year will cause the overall vacancy rate to rise to around the 10-year average of 5.0% before falling slightly in the second half of the year. New develop- ment will remain low for the foreseeable future due to tight lending conditions, economic uncertainty and an oversupply of large warehouse and distribution facilities in certain markets.

[Assistant] Annual leasing activity should remain around 750 million sq. ft. for the next several years at least. Lease renewals will dominate total activity in the first half of 2024, but new leasing may increase in the second half of the year if economic growth improves. Three demand drivers will affect occupier decision-mak- ing: supply chain resiliency, e-commerce growth and population growth.


[User] 2024 Occupiers are focused on strengthening their supply chains by adding more import locations, onshoring or nearshoring more manufacturing operations and ad- equately staffing their distribution centers. Look for companies to explore alternative seaport and airport markets to hold more inventory. Strong demand for manufacturing and distribution facilities will be sus- tained by a projected 7.5% increase in U.S. industrial production over the next five years, according to Ox- ford Economics. Well-trained, affordable and available labor will remain an important factor in site selection. Markets with labor pools that meet these criteria in- clude Memphis, the PA I-78/81 Corridor, Indianapolis, Louisville, the Inland Empire and Savannah.

[Assistant] E-commerce will continue its slow steady growth over the next decade, leading retailers and their sup- pliers to add more warehouse and distribution space. This will be particularly prevalent in the U.S. South, with many growing population centers. 2024 With pandemic-driven demand waning, occupiers will focus more on energy savings for their facilities. Requirements for sustainable energy sources like solar and wind will grow in 2024. Commercial use of solar panels, for example, is expected to grow by 13% in 2024, according to the Solar Energy Industries Association. 2024 Central Texas Austin and San Antonio will continue to merge into one large industrial market, with robust logistics advantages, a growing population and a burgeoning manufacturing sector. Salt Lake City The Mountain West is expected to overtake the Southwest as the top western region for popu- lation growth, further solidifying Salt Lake City as the region’s primary distribution hub.


[User] Central Florida This region checks all the boxes for occupiers, with strong population growth, excellent logis- tics drivers and one of the most attractive labor markets in the country.

[Assistant] The biggest wave of new apartment supply in decades will temper rent growth and improve affordability for renters in 2024. With delivery of new units ex- pected in 2024 and more than currently under construction, the overall vacancy rate is expected to rise and rent growth to decelerate.


[User] Of the 69 markets tracked by CBRE, 17 are poised to grow their inventories by more than 7% in 2024 and 2025. Construction completions have already peaked in several markets, including Chicago, Washington, D.C. and Las Vegas. Completions will peak in most other markets in 2024.

[Assistant] We expect weaker average rent growth of 1.2% in 2024. Supply headwinds limited recent record rent growth to just 0.7% year-over-year in Q3 2023.


[User] Despite near-term economic weakness and vacancy rates that will rise further above their pre-pandemic averages in 2024, enough demand should keep the aver- age occupancy rate above 94%. Markets with the largest supply pipelines (e.g., Austin, Dallas, Nashville and Atlanta) have the highest job growth projections.

[Assistant] 2024 Multifamily real estate is playing a more important role in alleviat- ing a severe shortage (at least 3.1 million) of single-family homes that is contributing to homeownership challenges, particularly in a high-interest-rate environment. The premium for an average monthly mortgage payment of a newly purchased home vs. average monthly rent is expected to remain above 35% in 2024 versus 52% in 2023. Multifamily construction starts are down substantially in response to overall weakening fundamentals and the rapid increase in interest rates. We expect starts will fall by 45% in 2024 from their pre-pandemic average and by 70% from their 2022 peak. This decline in starts means that new deliveries will be reduced to less than half the current level by 2026, paving the way for a strong recovery in both occupancy and rent growth. In the near-term, rent growth and occupancy will remain strongest in the Midwest and Northeast regions, as well as the mature urban hubs of New York, Boston, Chicago and Washington, D.C. Many of these markets had more modest rent growth in 2021 than those in the Sun Belt and Mountain regions and have less supply pressure. Although many markets in the Mountain and Sun Belt regions are expected to continue having negative rent growth through mid- 2024, this should bolster rental demand by attracting in-migration. Many of the markets struggling with imbalanced supply and demand are expected to outperform in the long-term. Local and regional economic drivers will continue to favor large secondary markets across the Sun Belt, as well as most large coastal markets. 2024 Softer fundamentals and higher borrowing costs have negatively affected property values and created significant buying opportunities for investors. With investment activity expected to remain muted in 2024, investors have an opportunity to consider their longer-term investment strategy. A typical five-to- seven-year hold period implies they could market these assets to a buyer with a similar investment horizon. The Midwest and Northeast regions offer the best opportunity for positive leverage in 2024. With cap rates typically 25 to 50 basis points higher than else- where and with stronger rent growth expected next year, buyers in these two regions can more easily underwrite to positive leverage. Cap rates are nearing their peak, so the window for favorable pricing oppor- tunities won’t last long. Local regulatory environments (e.g., rent control poli- cies) and other factors like climate risks, public safety and infrastructure are becoming more important con- siderations for multifamily investors. Market selection and underwriting are becoming more complicated. The recent increase in both cost and availability of real estate insurance for some coastal states high- lights the growing importance of these long-term factors for buyers, sellers and lenders. 2024 Midwest/Northeast Supply-and-demand dynamics across the Midwest and Northeast are expected to remain balanced in 2024. This will support rent growth throughout the year, while many markets facing supply pressures will have several quarters of negative rent growth. San Diego Supply growth remains muted, averaging only 3.1% over the past two years and forecast at just 2.4% in 2024. Strong demand-side fundamentals like high-quality and durable life sciences jobs will help San Diego outper- form the overall market next year. Boston Market fundamentals are buoyed by the growing tech and life sciences sectors, as well as a limited construc- tion pipeline. Balanced fundamentals will support rent growth throughout 2024.


[User] New York City The post-pandemic resurgence of New York’s multi- family market is expected to continue in 2024. With one of the lowest overall vacancy rates in the country, it's clear developers have struggled to keep pace with renter demand as the city continues to add jobs and residents.

[Assistant] Dallas Even as the pace of new supply lowers rent growth, Dallas has remained the biggest multifamily investment market over the past several years. Additionally, it is the largest market with the lowest average prime multi- family cap rate. These trends are expected to continue, making Dallas the most liquid market for multifamily property investment in 2024. Given the prevailing headwinds, CBRE expects RevPAR growth of just 3.0% in 2024, supported by a 40-ba- sis-point increase in occupancy and a 2.3% increase in ADR. Urban hotels are expected to outperform in 2024, while airport hotels will benefit from the increase in inbound international travelers. Resort properties, which were a bright spot during the pandemic and benefited from outbound international travel constraints, are ex- pected to see the slowest growth. 2024 On average during economic downturns, RevPAR falls less and recovers more quickly in the up- per-midscale chain scale than in other chain scales as guests trade down. We expect this will be the case in 2024 as the U.S. experiences an economic slowdown.


[User] With a forecast of 3.0% overall RevPAR growth in 2024, we expect that margins, profits and cash flows will fall due to wage inflation, higher food & beverage and non-operating costs, increased renovation costs and high interest rates.

[Assistant] Hotel cap rates averaged 8.0% in Q3 2023, while the average hotel CMBS loan carried an 8.4% interest rate. This spread between hotel cap rates and borrowing costs is narrower than other real estate classes, making hotel assets relatively attractive. Nonetheless, heightened risks to RevPAR growth, an expected decline in profits, deferred capex and higher cost of cap- ital will result in less hotel investment activity. We expect trophy assets, newer select-service assets in markets with modest supply growth and hotels focused on group travel in markets with a solid mix of business and leisure demand will be the most attractive for investors. Investment Activity Will Remain Muted 2024 Baseline Forecast 2024 Downside Forecast RevPAR (Growth) 3.00% -5.20% ADR (Growth) 2.30% -3.30% Occupancy 0.70% -2.00% Margins* 35.7% 33.6% Valuation (price per key)* With a forecast of 3.0% overall RevPAR growth in 2024, we expect that margins, profits and cash flows will fall due to wage inflation, higher food & beverage and non-operating costs, increased renovation costs and high interest rates. 2024 Los Angeles The local hotel industry should see a boost from more Asian visitors and an end to the strike by entertainment workers. San Diego Group travel to the city is expected to improve due to resurgent convention business and the 17% increase in government per diems in 2024. The data center industry is undergoing significant transformation that is making it an attractive invest- ment opportunity. Historically, data centers were predominately utilized for hard drive storage, comput- ing and network connectivity. While these traditional uses remain, data centers now incorporate new appli- cations like artificial intelligence and machine learning, high-performance computing for genome sequencing or high-frequency trading, as well as other more effi- cient cloud-based solutions.


[User] Data center pricing continues to rise due to limited supply and strong demand.

[Assistant] Following a projected 16% year-over-year increase in pric- ing for 250-to-500-kW requirements in 2023, we expect another 10% to 15% pricing increase in 2024. This is due to supply constraints and continued strong demand across all markets. Operators may be willing to lower lease pric- ing for legacy assets with vacancy, but this discount will not apply to artificial intelligence workloads that require high power density. Demand for new data center development likely will attract more institutional investment in 2024, as investors are under-allocated to digital infrastructure by 1.5% to 3% compared with other asset classes. Power supply in primary markets increased by 19.2% year-over-year in H1-2023, leading to a 25% increase in new data center construction activity. We expect con- struction activity in primary markets to surpass 3,000 MW in 2024. Construction completion timelines have been extended by 24 to 72 months due to power supply delays. We believe that Austin-San An- tonio and Omaha will continue to see significant interest from investors and developers due to land availability, power infrastructure develop- ment and tax incentives. 2024 As AI becomes more prevalent, there will be an increased need for high-bandwidth network connections to facilitate higher data transfer rates. Large Language Models (LLMs) used in generative AI will require significantly more network bandwidth than currently exists. Major cloud-service providers are becoming more interested in less-expensive rural areas to provide their clients with AI training solutions, although many of these sites require new fiber connectivity. 2024 Northern Virginia This will remain the top market in North America for new supply. 2024


[User] Analysis of the Madison, Wisconsin Housing Market as of October 1, 2003 Foreword This analysis has been prepared for the assistance and guidance of the U.S. The factual information, findings, and conclusions also may be useful to builders, mortgagees, and others concerned with local housing market conditions and trends. The analysis does not purport to make determinations regarding the acceptability of any particular mortgage insurance proposals that may be under consideration in a particular locality or the housing market area. The factual framework for this analysis follows the guidelines developed by HUD’s Economic and Market Analysis Division. The analysis and findings are as thorough and current as possible based on information available on the “as-of” date from both local and national sources. As such, any findings or conclusions may be modified by subsequent developments. HUD wishes to express its appreciation to those industry sources and state and local government officials who provided data and information on local economic and housing market conditions.

[Assistant] This analysis takes into consideration changes in the economic, demographic, and housing inventory characteristics of the market area during three periods: from 1990 to 2000, from 2000 to the as-of date of the analysis (Current date), and from the Current date to a Forecast date. The analysis presents counts and estimates of employment, population, households, and housing inventory as of the 1990 Census, 2000 Census, Current date, and Forecast date. For the purposes of this analysis the forecast period is 24 months.


[User] Analysis of the Madison, Wisconsin Housing Market as of October 1, 2003 Housing Market Area The Madison, Wisconsin Housing Market Area (HMA) is defined as the Madison Metropolitan Statistical Area and includes Dane County in its entirety. For purposes of this analysis, the HMA has been divided into two submarkets, the City of Madison and the remainder of Dane County, referred to in this report as the Remainder of the HMA. Summary The Madison HMA has a diverse and vital economy that has registered strong, steady job growth since 1990. Between 1990 and 2000, resident employment increased by an average of 4,950 annually, or 2.3 percent. Since 2000, resident employment has grown by 6,900 annually. In 2002, the unemployment rate was at 2.7 percent. The population of the HMA has increased at an annual rate of 1.6 percent since 1990 to total as of the Current date. In-migration has been responsible for slightly more than half of the increase in population. Since 1990, the number of households has increased at an annual rate of 2.1 percent, with households reaching as of the Current date. As a result of a strong job market and historically low home mortgage interest rates, the percent of owner-occupied units increased from 55 percent in 1990 to 59 percent as of October 1, 2003. Conditions in the Madison HMA sales market continue to be very strong for both new and existing homes. Economy of the Area The Madison HMA has a diverse and growing economy. Government and education, however, are still the major forces of the local economy. Madison is the home of the state capital and the University of Wisconsin, which together are responsible for about a quarter of the jobs in the HMA. Nearly 8 percent of the employment in the area is in high technology. The University of Wisconsin has the third highest research expenditure of any university in the nation, more than $370 million annually. In June 2003, a university- commissioned study estimated that the annual economic impact of the university on the local economy was $4.3 billion. From 1990 to 2000, total resident employment increased at a rate of 2.3 percent annually. Resident employment has increased every year since 1990, with the exception of 1999, when the number of persons employed in the HMA declined by 2,500. During the first half of the 1990s, the unemployment rate was between 2.1 and 2.4 percent. Throughout the second half of the decade, the unemployment rate was less than 2.0 percent, reaching a low of 1.4 percent in 1999. Between 1990 and 2000, resident employment increased annually by 4,950, a rate of 2.3 percent. Between 2000 and 2002, employment increased by 6,900 annually, or a rate of 2.6 percent. During the most recent 12-month period, employment has increased by 10,400 jobs. The unemployment rate during the 12 months 3 Population Between 1990 and 2000, the population in the Madison HMA increased at an annual rate of 1.6 percent, with a population of in 2000. Since that time, population has continued growing at the same 1.6-percent rate, reaching an estimated persons as of October 1, 2003. During the 1990s, the City of Madison grew at a rate of 0.9 percent, increasing to persons; over this same period, the population for the Remainder of the HMA grew by 2.4 percent, reaching persons in 2000. As of the Current date, it is estimated that the population in the City of Madison is and the population in the Remainder of the HMA totals persons. During the 1990s, net natural increase (resident births minus resident deaths) accounted for 46 percent of the population increase in the HMA; in-migration was responsible for the rest of the growth. Between 2000 and the Current date, net natural increase accounted for 42 percent of the population growth for the HMA. The University of Wisconsin, whose main campus is located in the City of Madison, has had only modest increases in enrollment during the past several years. Student enrollment as of the Current date stands at approximately 41,600 students, compared with 41,300 students in 2000. Approximately 11,000 students live on campus in various types of student housing. Table 3 presents population change trends from 1990 to the Forecast date for the HMA and the two submarkets. Analysis of the Madison, Wisconsin Housing Market as of October 1, 2003 Households Growth in the number of households parallels growing employment. The number of households has increased at a faster rate than the population. As a result, average household size in the HMA dropped from 2.46 in 1990 to 2.31 as of the Current date. Since 1990, the number of households in the HMA has been growing at an annual rate of 2.1 percent. Households in the HMA increased from in 1990 to in 2000. As of the Current date, households are in the HMA. Approximately 60 percent of the increase in households since 1990 has occurred in the Remainder of the HMA.

[Assistant] This proportion is expected to remain the same through the forecast period. It is estimated that approximately 9,000 households, or slightly less than 5 percent of all households in the HMA, are composed solely of university students. Table 3 presents trends in households from 1990 through the Forecast date for the HMA and the two submarkets. Housing Inventory Since 1990, the healthy economy of the Madison HMA has led to substantial increases in household growth and demand for new housing. As of the Current date, the HMA has housing units. Between 1990 and 2000, the number of housing units increased 3,205 annually, or a rate of 2.2 percent. Since 2000, the inventory has increased by 4,230 units annually. As of the Current date, an estimated occupied housing units are in the HMA. Of an estimated 8,900 vacant units, 6,225 are available for sale or rent, with the remaining 2,675 units being kept off the market for various reasons. In 1990, housing tenure was 55 percent owner and 45 percent renter. It is estimated that as of the Current date, ownership has increased to nearly 59 percent. Table 4 presents trends in housing inventory, tenure of occupancy, and housing vacancy from 1990 to the Current date. Multifamily building permit activity between 1990 and 1999 averaged 1,550 units annually. The level of activity increased to an average of 2,150 units a year between 2000 and the Current date. The increase in construction was the result of low interest rates and a strong real estate lending market. Since 2000, nearly 60 percent of the multifamily permits were issued in the City of Madison. The cities of Fitchburg, Middleton, Sun Prairie, and Verona account for the bulk of the remaining multifamily permits. Since 1990, approximately 15 percent of the multifamily units built in the City of Madison have been condominiums, many of which are located in the downtown area. Table 5 presents 5


[User] Analysis of the Madison, Wisconsin Housing Market as of October 1, 2003 trends in building permit activity from 1990 through the Current date for single-family and multifamily housing in the HMA and both submarkets. Housing Vacancy The healthy local economy and low mortgage interest rates have resulted in a strong sales market for single-family homes. The sales vacancy rate for the HMA in 1990 was 0.8 percent; this rate increased slightly to 1.0 in 2000, which is also the estimated current sales vacancy rate. The rental vacancy rate, which was 4.2 percent at the time of the 2000 Census, has risen to an estimated rate of 6.3 percent in the HMA and 7 percent in the City of Madison. Sales Market Conditions Conditions in the Madison HMA sales market continue to be very strong for both new and existing homes. According to the Realtors® Association of South Central Wisconsin, between 1997 and 2002, on average, 4,750 homes were sold annually in the HMA. During 2002, a record 5,226 homes were sold. In the first 9 months of 2003, sales reached 4,316, on pace to set a new record. The median sales price has increased from in 1997 to in 2002, an annual increase of 5.7 percent. According to the Madison Area Builders Association, the average cost for a typical single-family home built in the HMA during 2002 was approximately . Very few homes larger than 3,500 square feet are being built. The condominium market is strong with new projects being built in Madison and surrounding suburbs such as Fitchburg. Prices start at with some units selling for more than . As housing prices in the City of Madison continue to increase, many first-time homebuyers who work in the City of Madison are purchasing homes in the Remainder of the HMA or in adjacent counties. The 2000 Census indicates that 37,000 people commuted into the HMA from other counties such as Rock County. According to data from the South Central Multiple Listing Service, the median sales price in the HMA in 2002 was compared with in Columbia County and less than in Rock County. Rental Market Conditions The rental market has historically had a very low vacancy rate. A recent surge in the construction of new rental projects, along with a number of former renters taking advantage of low mortgage interest rates to purchase homes, has caused the vacancy rate in several locations to rise. Despite certain rental projects and areas experiencing double- digit vacancy rates, the overall rental market is balanced. At the time of the 1990 Census, the rental vacancy rate in the HMA was 3.7 percent, and conditions throughout much of the market were very tight. As of the 2000 Census, the vacancy rate had increased to 4.2 percent, and the market remained tight. The University of Wisconsin has not increased its on-campus housing stock since 1986, while enrollment has increased at a modest but 6 Beginning in 2000, multifamily building activity increased in the HMA. Between 1990 and 1999, multifamily construction, as measured by building permits, averaged 1,550 units, half of which were in the City of Madison. Since 2000, multifamily building activity has increased to 2,150 units annually, while the city’s rental inventory has increased by 1,275 units each year. Because of the increase, the vacancy rate has risen above its historical low average. Madison Gas & Electric conducts a quarterly survey that estimates the number of vacant rental units. The survey covers only larger apartment buildings and thus does not include the entire rental inventory. The surveys indicate the vacancy rate increasing steadily since 2000. During the first quarter of 2000, the rate was 3.4 percent; this increased to 5.8 percent during the third quarter of 2003.

[Assistant] The completion of several large rental developments in the City of Madison and the Remainder of the HMA is the primary cause of the recent increase in the rental vacancy rate. A contributing factor is the low home mortgage interest rates that have caused former renting households to purchase a home. In the downtown area, many older rental properties that typically are rented by students are experiencing vacancies for the first time in years. In the suburban areas, newer higher end projects are experiencing difficulty maintaining full occupancy. The strong, diverse economy should continue to create jobs and result in continued demand for rental units. Units currently under construction and those in the later stages of planning should result in a rental market that will continue to be balanced over the forecast period. Forecast Housing Demand Based on anticipated household growth and current market conditions, it is projected that there will be a demand for an estimated 8,100 new housing units during the 2-year forecast period ending October 1, 2005. Sales housing will account for 5,700 units of the total demand. The continued growth in employment along with historically low mortgage interest rates should result in a continued tenure shift from rental to homeownership and keep demand for new sales housing strong. For rental housing, demand during the forecast period will be 2,400 units. Annual demand is projected for 480 one-bedroom units with monthly gross rents starting at two-bedroom units with gross rents beginning at $700, and 120 three-bedroom units with rents starting at $850. Table 6 presents detailed data on rental demand for the forecast period by bedroom size and rent.


[User] The factual framework for this analysis follows the guidelines developed by HUD’s Economic and Market Analysis Division. The analysis and findings are as thorough and current as possible based on information available on the “as-of” date from both local and national sources. As such, any findings or conclusions may be modified by subsequent developments. HUD wishes to express its appreciation to those industry sources and state and local government officials who provided data and information on local economic and housing market conditions.

[Assistant] This analysis takes into consideration changes in the economic, demographic, and housing inventory characteristics of the market area during three periods: from 1990 to 2000, from 2000 to the October 1, 2004 as-of date of the analysis (Current date), and from the Current date to an October 1, 2007 Forecast date. The analysis presents counts and estimates of employment, population, households, and housing inventory, as of the 1990 Census, 2000 Census, Current date, and Forecast date. For purposes of this analysis, the forecast period is 36 months.


[User] Analysis of the Milwaukee-Waukesha, Wisconsin Housing Market as of October 1, 2004 Housing Market Area The Milwaukee-Waukesha Housing Market Area (HMA) is defined as the Milwaukee- Waukesha Metropolitan Statistical Area that includes Milwaukee, Waukesha, Ozaukee, and Washington Counties. For purposes of this analysis, the HMA has been divided into two submarkets: the City of Milwaukee and the remainder of the metropolitan area, referred to in this report as the Remainder of the HMA. Since 1990, the population of the HMA increased at an annual rate of approximately 0.5 percent, reaching as of the Current date. During this same period, the City of Milwaukee lost population at a rate of 0.4 percent annually, reaching as of the Current date. The City of Milwaukee has lost population because the rate of out- migration has exceeded the net natural change (resident births minus resident deaths). The rate of out-migration from the City of Milwaukee has slowed from 9,100 people annually between 1990 and 2000 to 6,600 people annually since 2000. The loss of jobs in the HMA has reduced the rate of household formation. Since 1990, households in the HMA increased at an annual rate of slightly less than 1 percent, reaching as of the Current date. Between 1990 and 2000, the City of Milwaukee lost more than 800 households annually; since 2000, that rate of loss has dropped to fewer than 100 a year. Despite a weakening job market, historically low mortgage interest rates have resulted in a very strong market for both existing and new homes in the HMA. The percentage of owner-occupied units increased from 59.4 percent in 1990 to 61.8 percent as of the Current date.

[Assistant] Through October 1, 2007, the demand for new sales housing is estimated at approximately 4,000 homes annually. With mortgage interest rates at historically low levels, the tenure shift toward homeownership should continue, which will keep the demand for new sales housing strong through the forecast period. Annual demand for rental units will be 1,500 units during the forecast period.


[User] Analysis of the Milwaukee-Waukesha, Wisconsin Housing Market as of October 1, 2004 Corporation. Between 1990 and 2003, the number of manufacturing jobs in the HMA declined by more than 25,000. In addition, many manufacturing jobs moved within the HMA from the City of Milwaukee to suburban locations, especially Waukesha County. Although still dependent on high-paying manufacturing jobs, the HMA has become more diversified with nearly 80 percent of the jobs located in the service-providing sectors. The retail trade, professional and business services, educational and health services, and government sectors all account for nearly 50 percent of the nonfarm jobs in the HMA. Between 1990 and 2003, nearly 90 percent of the net job growth occurred in professional and business services and in educational and health services. Major service sector employers include Marshall & Ilsley Corporation, U.S. Bank, Kohl’s Department Stores, and Northwestern Mutual Life Insurance Company. The HMA mirrored the national economy with strong job growth between 1990 and 2000, followed by 3 years of job losses. During the past 12 months, the HMA experienced modest growth in employment. From 1990 to 2000, total resident employment increased at a rate of slightly more than 1.0 percent annually. Since 2000, resident employment has declined at an annual rate of 0.4 percent. Between 1992 and 1996, resident employment increased on average by 16,100 a year, but declined by 1,000 annually from 1997 to 2003. During the latest 12-month period, average resident employment in the HMA increased by 2,800 compared with the previous 12-month period. Between 1993 and 2000, the unemployment rate in the HMA fluctuated very little, moving between 3.1 and 4.6 percent. In 2001, because of the recession, unemployment climbed to 4.7 percent and reached 6.0 percent the following year. During the past 12 months, unemployment averaged 5.5 percent. Population Between 1990 and 2000, the population in the Milwaukee-Waukesha HMA increased at an annual rate of 0.5 percent, reaching in 2000. Since that time, because of the slowdown in the economy, population has grown at a slightly lower annual rate of 0.4 percent, reaching an estimated as of the Current date. The City of Milwaukee, 4 Analysis of the Milwaukee-Waukesha, Wisconsin Housing Market as of October 1, 2004 which has experienced significant job losses, especially in manufacturing, continues to lose population. Between 1990 and 2000, the City of Milwaukee lost 5 percent of its population, declining to in 2000. Over the same period, the population for the Remainder of the HMA grew by 10.2 percent, reaching in 2000. As of the Current date, it is estimated that the City of Milwaukee has a population of an annual loss of 0.1 percent since 2000. The Remainder of the HMA continues to add population at an annual rate of 0.7 percent and currently stands at . During the 1990s, an annual net natural increase of approximately 9,400 occurred in the HMA, which helped to offset annual out-migration of slightly more than 2,500 people. Between 2000 and the Current date, net migration increased to 2,800 people annually and net natural increase declined to 8,300 people. Since 2000, the City of Milwaukee has shown an annual net natural increase of 5,800, less than the 6,650 people lost to out- migration. Two universities—the University of Wisconsin-Milwaukee and Marquette University— are located in the City of Milwaukee. Neither university has had a major impact on population growth. The University of Wisconsin, which is located northeast of downtown Milwaukee near the shores of Lake Michigan, has experienced modest enrollment growth in recent years; enrollment currently stands at approximately 26,000 students. About 2,700 students are housed on campus, with the remainder living in nearby private housing or commuting by car. Marquette University had an enrollment of 10,800 students in the spring of 2004 compared with 10,200 in the spring of 2000. The campus houses about 3,100 students and another 1,400 live in apartment buildings owned by the university in the surrounding neighborhood. Freshmen and sophomores are required to live on campus while upper-classmen can live off campus, with a small percentage of students commuting. Table 3 presents population change trends from 1990 to the Forecast date for the HMA and the two submarkets. Households The number of households in the HMA has increased faster than the rate of population growth because of a decrease in average household size. Current household size in the HMA is estimated at 2.44 persons, compared with 2.60 persons in 1990, which follows the national trend toward smaller families. Between 1990 and 2000, the number of households in the HMA increased at an annual rate of 0.9 percent. Since 2000, the rate of household growth has declined to approximately 0.8 percent and is projected to maintain that rate during the forecast period. Households in the HMA have increased from in 1990 to an estimated as of the Current date. The City of Milwaukee, which lost an average of more than 800 households between 1990 and 2000, has lost fewer than 100 households annually since 2000 and is projected to gain 1,650 households during the forecast period. Table 3 presents trends in households from 1990 through the Forecast date for the HMA and the two submarkets. Analysis of the Milwaukee-Waukesha, Wisconsin Housing Market as of October 1, 2004 Housing Inventory The housing inventory has followed a pattern similar to that of employment, population, and households. Between 1990 and 2000, the number of housing units in the HMA increased by 5,600 annually, or a rate of 1.0 percent a year. Since 2000, the inventory has increased annually by 5,100 units, or an annual rate of 0.8 percent. As of the Current date, an estimated housing units are in the HMA. Of an estimated 31,000 vacant units, 18,650 are available for sale or rent, with the remaining 12,500 kept off the market for various reasons. In 1990, housing tenure was 59.4 percent owner and 40.6 percent renter. It is estimated that, as of the Current date, ownership has increased to more than 62 percent. This shift toward homeownership is due in large part to historically low interest rates and a healthy economy during the 1990s. Table 4 presents trends in housing inventory, tenure of occupancy, and housing vacancy from 1990 to the Current date. From 1990 through 1999, single-family permits averaged 3,911 a year in the HMA, although permits varied considerably by year, ranging from a low of 3,351 in 1997 to a high of 4,583 in 1992. Between 2000 and 2003, single-family permits averaged 3,635 a year, peaking at 3,939 in 2003. Between 1990 and 2000, on average, only 92 permits a year were issued in the City of Milwaukee. Since that time, the City of Milwaukee has issued an average of 168 permits annually. The increase in activity can be attributed in large measure to construction occurring near the city’s downtown on land that became available when deteriorated structures were demolished. Between 1990 and 2000, multifamily building permit activity averaged 3,000 units annually in the HMA. The average number of permits decreased to 2,350 units from 2000 through 2003. Most multifamily activity occurred in the Remainder of the HMA, with the City of Milwaukee accounting for 11.8 percent since 1990. Much of the activity in the City of Milwaukee was due to the construction of condominiums, many of which are located northeast of downtown near the University of Wisconsin-Milwaukee campus. Table 5 presents trends in building activity from 1990 through the Current date for single-family and multifamily housing in the HMA and both submarkets. Housing Vacancy The vacancy rate for owner-occupied units in the HMA declined from 1.3 percent in 2000 to an estimated 1.0 percent as of the Current date. The City of Milwaukee currently has an owner vacancy rate of 1.5 percent, which is down from 2.0 percent in 2000. Because of a weaker economy and the shift toward homeownership, the rental vacancy rate in the HMA has increased from 5.7 percent in 2000 to an estimated 6.0 percent as of the Current date. The City of Milwaukee has demonstrated a similar trend, with the rental vacancy rate increasing from 6.2 percent in 2000 to a current rate of 6.5 percent. Sales Market Conditions Despite a sluggish economy, low mortgage interest rates resulted in record existing home sales during 2003, with the first 9 months of 2004 on pace to set another record. According to the Metro Multiple Listing Service, 19,358 existing homes were sold in the 6 Analysis of the Milwaukee-Waukesha, Wisconsin Housing Market as of October 1, 2004 HMA during 2003, compared with the previous high of 18,479 in 2002. Existing home sales have set a record in every year since 1999 and the market remains strong as of the Current date. Prices in 2003 were 7 to 9 percent higher than a year earlier, with the average price ranging from in Milwaukee County to in Ozaukee County. In Ozaukee County, which has many high-end homes, prices were down 1.6 percent from 2002, but are up nearly 30 percent over the past 6 years. The City of Milwaukee and some of the older suburbs, with modestly priced housing stocks, are experiencing strong sales for homes priced in the mid s. In other areas of the HMA, few existing homes sell for less than . The demand for homes priced at more than has been soft, with sales times increasing upward to 6 months and prices edging down in some areas. According to MTD Marketing Services, the average price for a newly constructed home in the HMA in 2003 was up 5.2 percent from 2002. Rising material costs have pushed the average new home price during the first 9 months of 2004 to . The primary market for new single-family homes is between and . New homes are typically at least 2,000 square feet, with many homes being more than 3,000 square feet. In 2003, the HMA had its best year for single-family construction since 1999. Washington County had a 28-percent increase in permits compared with 2002 due in part to the search for lower land costs and home prices, although people would face longer commutes. Activity continues to be strong in the downtown Milwaukee condominium market. In 2001 there were 128 condominium units built in the downtown area. Since that time, more than 2,300 units have either been built or proposed. Empty nesters, who are selling their large suburban homes to escape maintenance and yard work and want to enjoy the Lake Michigan shoreline and other downtown amenities, are buying condominiums. Young professionals who work downtown and have previously been renting are also purchasing such units. According to Mandel Group, single, young professionals are purchasing units in the to range, while affluent empty nesters, who tend to be business owners, managers, and professionals, are purchasing more expensive units. Some members of the latter group live in warmer climates during the winter months. Rental Market Conditions The rental market has suffered since the 1990s due largely to low mortgage interest rates that have resulted in a tenure shift from renter to homeownership. The market is also still absorbing a large number of new units that entered the market in the late 1990s. Since 2000, the rental vacancy rate for the HMA has steadily increased from 5.7 percent to an estimated 6.0 percent as of the Current date. Although the overall rental market is soft, several areas such as the east side of Milwaukee and the northern suburbs along Lake Michigan have balanced to tight markets. According to REIS, Inc., the average rent in Milwaukee and Waukesha Counties increased from $729 in 2000 to $768 in 2003, or an annual increase of 1.8 percent. Concessions are common, with 1 or more months of free rent being offered in apartments 7

[Assistant] Forecast Housing Demand Based on anticipated household growth and current market conditions, estimates indicate a demand for an estimated 16,650 new housing units during the 3-year forecast period ending October 1, 2007. Sales housing will account for 12,050 units of the total demand. With mortgage interest rates rising slightly, but low by historical standards, the tenure shift from renter to homeowner should continue, which will keep demand for new sales housing strong through the forecast period. Rental housing demand during the forecast period will be 4,600 units. Annual demand is projected for 620 one-bedroom units with monthly gross rents starting at two-bedroom units with gross rents beginning at $700, and 155 three-bedroom units with rents starting at $850. Table 6 presents detailed data on rental demand for the forecast period by bedroom size and rent.


[User] Sales Market Currently, the sales market in the HMA is balanced. The strong market for existing sales housing reflects affordable home prices and low mortgage interest rates. During the past year, the number of homes sold and the median sales price have increased. Improvement in the economy and a modest increase in net in-migration is expected to result in a steady demand for sales housing during the 3-year forecast period, as illustrated in Table 1.

[Assistant] Rental Market The rental market in the HMA is relatively balanced overall. Rent concessions have declined during the past 12 months as the rental market has become more com- petitive because of condominium conversions, which have reduced the supply of rental units. Rents have increased modestly by 1 to 2 percent a year during the 12- month period ending June 2006. The rental market is expected to continue to tighten during the 3-year forecast period as continued condominium conversions reduce the rental inventory. Market Details Economic Conditions................2 Population and Households......4 Housing Market Trends.............5 Data Profile...............................9 Notes: Total demand represents estimated production necessary to achieve a balanced market at the end of the forecast period. Units under construction as of July 1, 2006. Source: Estimates by analyst Table 1. Housing Demand in the Milwaukee-Waukesha HMA, 3-Year Forecast, July 1, 2006 to July 1, 2009 Milwaukee-Waukesha HMA Sales Units Rental Units Total Demand Under Construction


[User] Since 2000, the local economy has slowed and total nonfarm employment has declined. Approximately 32,500 jobs were lost between 2000 and the current date. During this period, employment in the manufacturing sector accounted for 30,620, or 94 percent, of the jobs lost as a result of plant closings and relocations. Approximately 80 percent of the jobs lost were in Milwaukee County, which had a concentration of industrial equipment and electrical equipment and components manufacturers. Since 2000, new healthcare providers and specialty clinics have expanded throughout the HMA, especially in the fast-growing suburban areas of Washington and Waukesha Counties. The top two employers in the area are Aurora Health Care and Wheaton Franciscan Healthcare, with 15,000 and 9,000 employees, respectively, as shown in Based on 12-month averages through June 2006. Source: U.S. Trends in Labor Force, Resident Employment, and Unemployment Rate in the Milwaukee-Waukesha HMA, 1990 to 2005 Labor Force & Resident Employment Unemployment Rate Labor Force Resident Employment Unemployment Rate Job losses in transportation and utilities and trade accounted for most of the decline in the service-providing sectors. In the same period, employment in the education and health services sector continued to increase, by 1.4 percent. Net out-migration of working-age residents and increased retirement of older workers have contributed to the decline in the labor force since 2000. Because of these net out- migration and retirement factors, the unemployment rate in the HMA declined from 5.5 percent in 2004 to 5.0 percent in 2005.

[Assistant] Based on anticipated employment growth in southeastern Wisconsin, particularly in the service-providing sectors, total nonfarm employment in the HMA is expected to increase modestly by 600 jobs annually, or less than 1 percent, throughout the 3-year forecast period. According to the Wisconsin Department $500 million annually, according to the University’s Office of Resource Analysis. Employment in the trade sector is projected to increase by approximately 800 retail jobs when the newly remodeled Bayshore Town Center opens in suburban Milwaukee in November 2006. The financial activities sector also is expected to expand when Northwestern Mutual Life Insurance Company completes an $85 million office expansion in the fall of 2008, increasing its workforce from 1,000 to 2,000 in suburban Milwaukee. Total resident employment also is projected to grow during the forecast period. Resident employment growth during the forecast period is expected to increase at a rate of less than 1 percent a year, slightly less than the growth levels of the 1990s. As of the forecast date, total resident employment in the HMA is expected to total .


[User] Between 1990 and 2000, population in the HMA had a net increase of 6,859 annually. During this period, the population in Ozaukee, Washington, and Waukesha Counties increased by 8,770 a year. Milwaukee County lost 1,911 residents a year; all the population loss was in the city of Milwaukee. Household growth trends during the 1990s reflect the pattern of population growth in the HMA, with the number of households increasing by approximately 5,000 annually. The strengthening local economy led to a modest net in-migration for Note: Based on 12-month averages through June 2005 and June 2006. Table 3. 12-Month Average Employment in the Milwaukee- Waukesha HMA, by Sector Employment Sector 12 Months Ending June Months Ending June 2006 Percent Change Total Nonfarm Employment – 0.4 Goods Producing Construction Manufacturing – 0.3 Service Providing – 0.6 Trade – 2.1 Transportation & Utilities – 7.3 Information – 3.3 Financial Activities Professional & Business Services – 0.7 Education & Health Services Leisure & Hospitality Other Services – 1.0 Government – 0.9 of Workforce Development, the education and health services sector is projected to continue to add jobs and account for most new nonfarm jobs. Children’s Hospital of Wisconsin in suburban Wauwatosa From 2000 to the current date, as the local economy slowed, population growth in the HMA slowed to 2,375 a year, or less than 1 percent. In Milwaukee County, the population continued to decline as the area lost 5,000 jobs and workers relocated to areas outside the county. Although some of these residents relocated to the neighboring counties of Ozaukee, Washington, and Waukesha, population still increased at a slower rate than in the 1990s. The slowdown in household growth was due to the loss of jobs that resulted in increased net out-migration in the HMA. The forecast annual population growth rate for the HMA is estimated to remain at 0.2 percent, or 2,675. The number of households is forecast to increase by 4,675, or 0.8 percent, annually. Housing Market Trends Sales Market Low mortgage interest rates, affordable sales housing, and modest increases in median household incomes boosted existing home sales in the HMA between 2003 and 2005. During this period, approximately 20,400 homes were sold annually, up 17 percent from the 17,400 homes sold during the previous 3-year period. A record 21,650 homes were sold in 2005. During the 2003- through-2005 period, the median sales price for existing homes increased by 6 percent annually to . Components of Population Change in the Milwaukee-Waukesha HMA, 1990 to Forecast Current to Forecast Net Natural Change Net Migration Average Annual Change Sources: 1990 and 2000—U.S. Census; current and forecast—estimates by analyst – 2,000 – 4,000 – 6,000 – 8,000 Population and Households Continued Home sales totaled 20,400, unchanged from the previous 12-month period ending June 2005. The median sales price increased by 5 percent during the past 12 months to . The sales market is strong for homes selling below the median sales price. More than 3,000 new single-family homes were permitted during the 12-month period ending June 2006, down 17 percent from the previous 12-month period. Condominium units are becoming more popular in both the city of Milwaukee and suburban areas. Since 2000, approximately 4,500 condominiums units, with an average price of have been sold in the HMA, representing 17 percent of total residential sales. Suburban Milwaukee accounted for approximately 52 percent of condominium sales and the city of Milwaukee for the remaining 48 percent.

[Assistant] Neighborhoods in the city of Milwaukee are undergoing significant condominium development. Much of this activity is concentrated in downtown Milwaukee, the Third and Fifth Ward neighborhoods located south of downtown, and Brewer’s Hill located north of downtown. Reflecting increased demand from empty nesters and single professionals, Brewer’s Hill and downtown neighborhoods east of the Milwaukee River are the most active for condominium development, accounting for 1,600 of the 2,100 units entering the market since 2000. The Third and Fifth Wards, where vacant commercial buildings are being converted to residential units, have 400 condominium units, and the Westown area has the remaining 100 units. Park East, one of the largest redevelopment projects in downtown Milwaukee, will start construction in September 2006. Approximately 1,500 new residential units are planned for this $250 million planned, mixed-use project during the 3-year forecast period.


[User] As of the current date, an estimated owner-occupied units are in the HMA, up 1.1 percent annually since 2000. The sales vacancy rate is currently 1.2 percent. Table DP-1 (at the end of the report) provides sales vacancy rates in the HMA in and the current date.

[Assistant] Estimated Demand for New Market- Rate Sales Housing in the Milwaukee- Waukesha HMA, July 1, 2006 to July 1, 2009 Price Range ($) Units of Percentage From To Demand of Total Source: Estimates by analyst and higher 35 0.3 Housing Market Trends Sales Market Continued current market conditions, estimates indicate a demand for approximately 12,300 new units of sales housing during the forecast period. U.S. Census Bureau, Building Permits Survey The anticipated strengthening of the local economy and modest increase in net in-migration are expected to maintain the demand for homes during the forecast period. Condominiums are expected to continue representing 17 percent of total sales over the 3-year forecast period. Based on anticipated household growth combined with Rental Market The rental market in the Milwaukee- Waukesha HMA is balanced. The current 7-percent rental vacancy rate is down by approximately 8 percent from a year ago. The bal- anced conditions are attributable to the strengthening local economy and conversions of rental housing to condominiums that, together, resulted in tighter conditions. Since 2000, approximately 1,000 apartments have been converted. As occupancy rates increased, concessions have become less prevalent than they were a year ago. Property managers in west suburban Milwaukee and Waukesha Counties reported that rental vacancy rates declined significantly in Class A properties to about 8 percent in 2006, down from approximately 11 percent or higher in 2005.


[User] Multifamily Building Permits Issued in the Milwaukee-Waukesha HMA, 1990 to 2006 Notes: Includes all multifamily units in structures with two or more units. Includes data through June 2006. Source: U.S. Census Bureau, Building Permits Survey Reflecting tighter market conditions, rents increased 1 to 2 percent during the 12-month period ending June 2006 compared with flat rents in the previous 12-month period. The average rents for one-bedroom, two- bedroom, and three-bedroom units in newly completed Class A devel- opments are approximately and $1,350, respectively. Rental Vacancy Rates in the Milwaukee-Waukesha HMA, 1990 to Current Current Sources: 1990 and 2000—U.S. Census; current—estimates by analyst During the current 12-month period ending June 2006, approximately 1,825 rental units were permitted, about the same as during the previ- ous 12-month period. Currently, more than 1,000 rental units are under construction and 200 rental units are in the planning phase. The rental units currently under construction are targeted mainly to empty nesters and young profes- sionals seeking to live closer to jobs, retail services, and entertainment sources. Tax credit financing plays an impor- tant role in rental housing production for low-income households in the HMA. An estimated 17,500 com- pleted rental units for low-income residents in the HMA were financed with low-income housing tax credits; about 9,700 of these units are for se- niors. The vacancy rate for tax-credit units is less than 5 percent.

[Assistant] Based on anticipated household growth and current market condi- tions, estimates indicate a demand for 5,000 new rental-housing units during the 3-year forecast period. Table 5 provides an estimate of the noncu- mulative distribution of demand for new market-rate rental housing in the HMA by rent levels and the number of bedrooms per unit.


[User] For purposes of this analysis, the HMA is divided into three submarkets: (1) the Cook County submarket, which includes the principal city of Chicago; (2) the Northern submarket, which includes DeKalb, DuPage, Kane, Lake, and McHenry Counties in Illinois and Kenosha County in Wisconsin; and (3) the South- ern submarket, which includes Grundy, Kendall, and Will Counties in Illinois and Jasper, Lake, Newton, and Porter Counties in Indiana.

[Assistant] Nonfarm payrolls are projected to increase an average of 1.2 percent annually during the 3-year forecast period. Table DP-1 at the end of this report provides employment data for the HMA.


[User] Sales Market The sales housing market in the HMA is soft, with an estimated vacancy rate of 2.1 percent. The sales of both new and existing homes trail their re- cent peaks; existing home sales have improved during the past 12 months and new home sales continued to decline. During the forecast period, demand is expected for 46,400 new homes (Table 1). The 4,400 homes currently under construction and a portion of the other vacant units in the HMA that might come back on the market will satisfy some of the forecast demand.

[Assistant] Rental Market The rental housing market in the HMA is slightly soft, with an esti- mated overall rental vacancy rate of 6.8 percent, down from 9.3 percent in 2010. During the forecast period, demand is expected for 20,600 new rental units (Table 1). The 4,600 units currently under construction and a portion of the other vacant units in the HMA that might come back on the market will satisfy a portion of that demand.


[User] Excludes local school districts. Population growth averaged 36,300 people, or 0.4 percent, annually between 2000 and 2010. Population growth since 2000 in the HMA has been entirely the result of net natural increase (NNI), or resident births minus resident deaths. Net migration has been negative since 2000; however, net out-migration slowed significantly during the past 5 years. The nation- wide recession and housing downturn combined to reduce the number of residents who chose to move out of the HMA. Population and Household Growth in the Chicago HMA,* 2000 to Forecast * Chicago-Naperville-Joliet HMA. Sources: 2000 and 2010—2000 Census and 2010 Census; current and forecast— estimates by analyst Population Households 2000 to to current Current to forecast Average annual change Components of Population Change in the Chicago HMA,* 2000 to Forecast * Chicago-Naperville-Joliet HMA. Sources: 2000 and 2010—2000 Census and 2010 Census; current and forecast— estimates by analyst Net natural change Net migration 2000 to to current Current to forecast Average annual change – 20,000 – 40,000 from 2001 through 2007 before de clining to an average of 24,800 people annually since 2008. The Cook County submarket, with an estimated population of 5.24 million as of the current date, accounts for approximately 55 percent of the total population in the HMA. Since 2010, Cook County has recorded the most population growth of all submarkets, increasing by an average of 20,150 people, or 0.4 percent, annually, com- pared with a decline of 18,200 people, or 0.3 percent, annually from 2000 to 2010. Population growth in Cook County began in 2008 and coincided with a large drop in net out-migration from the submarket. From 2001 through 2007, net out-migration from Cook County averaged 76,500 people annu- ally, before declining to 30,700 people in 2008. Since 2009, net out-migration has averaged 17,350 people annually. Based on Internal Revenue Service migration statistics, the number of individuals who migrated to Cook County has remained relatively un- changed since 2001, and the smaller net out-migration is attributable to a reduction in the number of individuals migrating from Cook County to the Northern and Southern submarkets of the HMA, as well as elsewhere in Illinois. Since 2010, the population of the Northern submarket has increased by an average of 10,800, or 0.4 percent, annually, to 2.74 million, compared with growth averaging 26,450, or 1.0 percent, annually from 2000 to 2010. The population of the Southern submarket has grown by an average of 6,225, or 0.4 percent, annually since 2010, to 1.57 million, compared with growth averaging 28,000, or 2.0 percent, annually between 2000 and 2010. The Northern and Southern submarkets have recorded respective average net out-migration of 7,150 and 3,175 people annually since 2010. Net out-migration has occurred each year since 2007 in the Northern sub- market while out-migration began in 2009 in the Southern submarket. Both submarkets were affected by increasing gas prices and soft home sales markets, which reduced the number of residents who chose to move from Cook County to these surrounding areas.

[Assistant] As the economy continues to recover, net out-migration from the HMA is expected to remain near recent levels and the population of the HMA is ex- pected to grow at a similar rate during the forecast period when compared with growth since 2010. The popula tion in the HMA is expected to increase by 40,350, or 0.4 percent, annually during the 3-year forecast period. During this time, NNI is expected to continue to account for all population growth, offsetting net out-migration of approximately 23,000 people an- nually from the HMA. Population Population and Households Continued


[User] The Northern and Southern submarkets are expected to increase in population by an aver- age of 11,650 and 6,675, respectively, or 0.4 percent each, annually.

[Assistant] Household growth in the HMA, which has averaged 18,900 households, or 0.5 percent, annually since 2010, is ex- pected to remain relatively unchanged at 18,350 households, or 0.5 percent, annually during the forecast period, a rate of growth slightly above that of the population. The homeowner- ship rate in the HMA increased from 65.2 to 66.0 percent from 2000 to 2010 but decreased to 64.9 percent as of the current date, with declines recorded in each of the three submarkets during this time. Soft home sales markets, tight lending standards, and a local economy that has not fully recovered from the 2008-through-2010 downturn made homeownership less attractive than renting for many households during this time. The Cook County submarket has the lowest homeowner- ship rate in the HMA, at 57.2 percent, but the Northern and Southern sub- markets have homeownership rates of 74.1 and 76.5 percent, respectively. Number of Households by Tenure in the Southern Submarket, 2000 to Current Current Renter Owner The vacancy rate remains elevated despite increasing home sales. Approximately 43,950 new and exist- ing homes were sold during the 12 months ending September 2012, up 12 percent compared with the number sold during the previous 12 months (Hanley Wood, LLC). The rate of home sales declined each year from 2005 through 2010, from new and existing home sales in 2005 to 39,900 such sales in 2010, before in- creasing in 2011 and 2012. The number of new home sales has declined signifi- cantly in the Cook County submarket, from 19,550 in 2005 to 3,450 in 2010. During the 12 months ending Septem- ber 2012, approximately 1,350 new homes sold in the submarket, a decline of 28 percent from the 1,900 new homes sold during the previous 12-month period. At the same time, the average sales price for new homes increased nearly 10 percent, to partly reflecting a shift toward construction of homes in higher cost areas in Cook County. Newer developments tend to be smaller, in-fill projects, because financing has become more difficult to secure for large-scale developments and speculative building has become less common. As the number of new home sales declined, the proportion of those home sales that were con- dominium units increased, from 58 percent of new home sales in 2005 to 80 percent in 2008 and 2009, reflect- ing increased new home construction in the city of Chicago and decreased construction in outlying Cook County suburban locations, which are more likely to consist of single-family homes. This trend may be reversing, because 70 percent of new homes built during the 12 months ending September 2012 were condominium units, compared with 73 percent during the 12 months ending September 2011. The average sales price for a new condominium unit in Cook County was during the 12 months ending Septem- ber 2012 compared with for a new single-family home. Sales of existing homes in the Cook County submarket have declined since 2005, initially following a trend similar to new home sales, but existing home sales reached a bottom in 2008 and have gradually increased since. Exist- ing home sales totaled 84,950 in 2005 and declined each year until 2008, when 34,700 existing home sales were recorded (Hanley Wood, LLC). Sales of existing homes remained stable, averaging 37,500 homes sold annually from 2009 through 2011. During the 12 months ending September 2012, existing home sales totaled 42,600, up 14 percent from the previous 12 months. The average sales price for existing homes in the Cook County submarket declined from a peak of in 2007 to in 2010. The average sales price has continued to decline and, for the 12 months ending September 2012, the average sales price of an existing home was or 6 percent less than the average sales price during the 12 months ending September 2011. The continuing decline in existing home sales prices is partially a result of the large number of Real Estate Owned (REO) properties sold. The During the 12 months ending September 2012, approximately 34 percent of existing home sales, or 14,600 homes, were REO; during the same time, the aver- age sales price for an REO home was or less than one-half the average sales price for all existing resale homes. As of September percent of home loans in the submarket were 90 or more days delin- quent, in foreclosure, or transitioned into REO, up slightly from the 12.0- percent rate recorded in September 2011 (LPS Applied Analytics). It takes an average of 697 days to complete a foreclosure action in Illinois, among the longest periods in the nation (RealtyTrac® Inc.). Single-family home construction, as measured by the number of single- family homes permitted, averaged approximately 5,225 homes annually in the Cook County submarket from 2000 through 2007. In 2008, as the economy and housing market began to weaken, 1,475 single-family homes were permitted, and construction de- clined further, to an average of 720 homes permitted annually, from 2009 through 2011. New condominium construction in the Cook County sub- market averaged 4,975 units annually from 2000 through 2003, before in- creasing to an average of 7,750 units annually from 2004 through 2007, as low interest rates and a strong local economy boosted condominium de- velopment in the city and investor purchases increased. From 2008 through 2011, new condominium units per- mitted averaged 1,175 annually, as developers shifted new multifamily construction efforts from condomini- ums to rental properties, in response to strengthening rental market conditions. Sales prices for new homes vary de- pending on location and amenities, with higher prices for new condomin- ium homes in downtown Chicago. Lakeshore East, in downtown Chicago, between the Chicago Loop and Lake Michigan, includes retail, restaurants, apartments, and condominiums in a 28-acre, master-planned community. When complete in 2016, the develop- ment is expected to include 4,950 residences, 1,500 hotel rooms, and up to square feet of retail, along with a planned elementary school. The centerpiece in Lakeshore East is the 87-story Aqua Tower, which includes 262 condominiums, 9 townhomes, 474 rental units, and a 334-room Radisson Hotel. The condominiums range in price from for a studio unit to $3 million for multistory townhomes. Single-family homes in desirable neigh- borhoods in Chicago also command a premium. Single-Family Building Permits Issued in the Cook County Submarket, 2000 to 2012 Notes: Includes townhomes. Includes data through September 2012. Sources: U.S. Census Bureau, Building Permits Survey; estimates by analyst During the 3-year forecast period, demand in the Cook County submar- ket is expected for 17,400 new homes (Table 1). The 2,750 homes currently under construction and a portion of the 87,000 other vacant units that might come back on the market will satisfy some of the forecast demand. Table 4 illustrates the estimated de- mand for new sales housing in the submarket by price range. Demand is expected for approximately 5,000 homes in the first year and is expected to increase to 6,500 homes by the third year of the forecast period.


[User] Housing Market Trends Sales Market—Cook County Submarket Continued Price Range ($) Units of Percent From To Demand of Total and higher Note: The 2,750 homes currently under construction and a portion of the estimated 87,000 other vacant units in the submarket will likely satisfy some of the forecast demand. Source: Estimates by analyst Table 4. Estimated Demand for New Market-Rate Sales Housing in the Cook County Submarket, October 1, 2012, to October 1, 2015 Rental Market—Cook County Submarket with the average monthly rent a year before (MPF Research). Apartment rents in the submarket averaged $1,150 for an efficiency apartment, $1,100 for a one-bedroom unit, $1,225 for a two-bedroom unit, and $1,525 for a three-bedroom unit. Concessions, typically 1 month of free rent or no security deposit, with a 12-month lease were offered at approximately 7 percent of apartment properties during the third quarter of 2012, down from nearly 20 percent a year ago. In the Loop area, concessions are offered in only 1 percent of the apartments surveyed in the third quarter of 2012, down from 24 percent of apartments a year ago (MPF Research). Rental housing market conditions in the Cook County submarket have tightened since 2010 because of the improved economy, continued soft sales market conditions, and slowing out-migration. Apartment market conditions are typically tighter than the overall rental market conditions in the submarket. Rental Vacancy Rates in the Cook County Submarket, 2000 to Current Multifamily construction activity, as measured by the number of multifamily units permitted, totaled 4,275 units permitted in the Cook County submarket during the 12 months ending September 2012, down slightly from the 4,400 units permitted during the same period a year earlier. By com- parison, from 2000 through 2007, multifamily construction averaged 9,625 units annually, before declining to an annual average of 2,525 units from 2008 through 2010. After 2007, the composition of multifamily con struction shifted from predominately owner-occupied units to predominantly rental units. From 2000 through 2007, it is estimated that more than two-thirds of the multifamily units permitted were for owner occupancy; this ratio more than reversed from 2008 through 2010, when only 28 percent of all multi- family units permitted were intended for owner occupancy. The reversal of tenure in multifamily units permitted was primarily caused by soft home sales market conditions and tighter lending standards, as well as the weak local economy, which made homebuy- ing less attractive. Currently, approxi mately 6,000 multifamily units are under construction, of which 60 percent are estimated to be for rental occupancy. The Aqua Tower, within the Lake- shore East development (described previously in the sales market section), includes 474 rental units and reached stabilized occupancy in the summer of 2010, approximately 1 year after leas- ing began. Rents for studio apartments in the Aqua Tower start at $1,750, one- bedroom units begin at $2,340, and two-bedroom units begin at $3,487. Also in downtown Chicago, just west of the Loop, a 496-unit apartment property named “K2” is scheduled to begin leasing in March 2013. The K2 includes studio, one-bedroom, two- bedroom, and three-bedroom units, with rents ranging from $1,650 through $6,500 monthly; it is the fifth and final building in the K Station development, which includes a total of 2,145 condo- miniums and apartments. Suburban rental properties outside Chicago but in the Cook County submarket include Central Station, an 80-unit property in Evanston, just north of Chicago. Central Station is scheduled to begin leasing in July 2013 and will include studio, one-bedroom, two- bedroom, and three-bedroom units.

[Assistant] Demand is expected for 14,900 new market-rate rental units in the Cook County submarket during the forecast period. The 3,600 units currently under construction and a portion of the 87,000 other vacant units that might come back on the market will satisfy some of this demand (Table 1). Table 5 shows the estimated demand for new market-rate rental housing in the submarket by rent level and number of bedrooms.


[User] Multifamily Building Permits Issued in the Cook County Submarket, 2000 to 2012 Notes: Excludes townhomes. Includes data through September 2012. Sources: U.S. Census Bureau, Building Permits Survey; estimates by analyst From 2009 through 2011, existing home sales prices averaged . Much of the decline in existing home sales prices since 2007 can be attributed to an increase in the number of REO sales. In 2005 and 2006, before the housing downturn, REO sales ac- counted for 2 percent of all existing home sales in the submarket; by the end of 2007, the share had increased to 6 percent. From 2008 through 2010, REO sales accounted for approximately 25 percent of all existing home sales. REO sales accounted for 31 percent of existing home sales during the 12 months ending September 2012, down from 34 percent during the previous 12 months. The average sales price of an REO home in the submarket during the 12 months ending Septem ber 2012 was or 53 percent below the average sales price of a non-REO existing home. As of September 2012, 8.7 percent of home loans in the Northern submarket were 90 or more days delinquent, were in foreclosure, or had transitioned into REO, up from 8.5 percent in September 2011 and 3.3 percent in September 2008 (LPS Applied Analytics). The sales housing market in the North- ern submarket remains soft, with a current estimated vacancy rate of 1.8 percent, down from 2.2 percent in 2010 (Table DP-3 at the end of this report). Despite gains during the most recent 12 months, existing home sales, which include both single-family homes and condominiums, have remained at relatively low levels during the past 5 years, a result of strict lending require- ments and a sluggish local economy. The number of existing homes sold increased 22 percent, to 28,400 homes, during the 12 months ending Septem- ber 2012 (Hanley Wood, LLC). This increase followed a 3-percent decline in the number of existing homes sold during the previous 12 months. From 2005 through 2007, by comparison, an average of 46,500 existing homes sold annually in the submarket before the number of existing home sales dropped to an average of 23,800 an- nually from 2008 through 2011. The average sales price of an existing home declined 7 percent, to during the 12 months ending Septem ber 2012, after declining 3 percent dur- ing the previous 12 months. Existing home sales prices peaked at Notes: Numbers may not add to totals because of rounding.

[Assistant] The 3,600 units currently under construction will satisfy some of the estimated demand. Source: Estimates by analyst Zero Bedrooms One Bedroom Two Bedrooms Three or More Bedrooms Monthly Gross Rent ($) Units of Demand Monthly Gross Rent ($) Units of Demand Monthly Gross Rent ($) Units of Demand Monthly Gross Rent ($) Units of Demand Estimates by analyst Table 6. Apartment market conditions are typically tighter than the overall rental market conditions in the submarket. During the third quar- ter of 2012 apartment vacancy rates within the Northern submarket ranged from a low of 3.1 percent in Central DuPage County to a high of 5.3 per- cent in the far west Chicago suburbs, which also recorded the largest in- crease in vacancy rates among areas surveyed during the past year of 1.0 percentage point (MPF Research). The largest vacancy rate declines during the past year occurred in the Arlington Heights/Palatine/Mount Prospect and Schaumburg areas, which recorded decreases of 0.9 percentage points each, to 3.4 and 5.0 percent, respec- tively. Average monthly rents in the North- ern submarket range from $930 in the far west Chicago suburbs to $1,100 in the Naperville area. The average monthly rent rose in the third quarter of 2012 when compared with the third quarter of 2011 in all areas within the Northern submarket except for central DuPage County, where the average rent declined less than 1 percent. Rent growth during this time ranged from a 1-percent increase in southeast DuPage County to a 6-percent increase in the Schaumburg area. Builders responded to improved rental market conditions in many parts of the submarket during the past year by increasing multifamily housing pro- duction. During the 12 months ending September 2012, the number of multi- family units permitted increased by approximately 35 units, or 3 percent, to 1,250 units, compared with the number permitted during the previous 12-month period (preliminary data). Rental Vacancy Rates in the Northern Submarket, 2000 to Current homes is expected to remain below the level of production recorded from 2000 through 2007. The 1,025 homes currently under construction, as well as some of the estimated 26,500 other vacant units that will likely reenter the market, will satisfy part of the forecast demand. Prices for new units currently start at . Table 6 presents detailed information on the estimated demand for new market- rate sales housing, by price range, in the Northern submarket during the forecast period. Several multifamily projects are cur- rently under way in the submarket. Arboretum Landmark Apartments, in the city of Lisle, in DuPage County, Illinois, began construction in the spring of 2012 and will include 310 units when completed in the fall of 2013. Wheaton 121, a 306-unit apartment complex in the city of Wheaton, in DuPage County, Illinois, is expected to be complete in the summer of 2013. During the next 3 years, demand is expected for 3,200 market-rate rental units in the Northern submarket (Table 1). Demand for new units is not expected to emerge until the second year of the forecast period, after the 660 units currently under construction are complete. Rents for new units typically start at about $700 for efficiencies, $900 for one-bedroom units, $1,200 for two-bedroom units, and $1,500 for three-bedroom units. Table 7 provides the estimated demand for new market-rate rental housing by number of bedrooms and rent level during the forecast period.


[User] Multifamily Building Permits Issued in the Northern Submarket, 2000 to 2012 Notes: Excludes townhomes. Includes data through September 2012. Sources: U.S. Census Bureau, Building Permits Survey; estimates by analyst The sales housing market in the Southern submarket is soft, with a current estimated vacancy rate of 1.8 percent, down from 2.1 percent in 2010 (Table DP-4 at the end of this report). Despite gains during the most recent 12 months, existing home sales (which include both single-family homes and condominiums) have re- mained at relatively low levels during the past 5 years, a result of strict lend- ing requirements and a sluggish local economy. The number of existing homes sold increased 16 percent, to Sales Market—Southern Submarket Notes: Numbers may not add to totals because of rounding. The 660 units currently under construction will satisfy some of the estimated demand. Source: Estimates by analyst Zero Bedrooms One Bedroom Two Bedrooms Three or More Bedrooms Monthly Gross Rent ($) Units of Demand Monthly Gross Rent ($) Units of Demand Monthly Gross Rent ($) Units of Demand Monthly Gross Rent ($) Units of Demand Table 7. Estimated Demand for New Market-Rate Rental Housing in the Northern Submarket, October 1, 2012, to October to to to to to to to to or more to to to or more or more or more 95 Total 160 Total 960 Total 1,600 Total 480 This increase in existing homes sold followed a decline of 10 percent in the number sold during the previous 12 months. From 2005 through 2007, an average of 28,600 existing homes was sold each year in the submarket, before sales dropped to an annual average of 16,550 homes from 2008 through 2011. The average sales price of an existing home declined 3 percent, to during the 12 months ending Septem ber 2012. This sales price decline followed a 3-percent decline during the previous 12 months. Existing home prices peaked at approximately in 2007, before declining 18 percent to their current levels; from 2009 through 2011 existing home prices averaged . Much of the decline in existing home prices during this time can be attributed to an increase in the number of REO sales. In 2005 and 2006, before the housing downturn, REO sales ac- counted for 6 percent of all existing home sales in the submarket; by the end of 2007, the share had increased to 11 percent. From 2008 through 2010, REO sales accounted for 26 percent of all existing home sales. REO sales accounted for 29 percent of existing home sales during the 12 months end- ing September 2012, down slightly from 31 percent during the previous 12 months. The average sales price of an REO home in the submarket dur- ing the 12 months ending September 2012 was approximately or 34 percent below the average sales price of a non-REO existing home. As of September percent of home loans in the Southern submar- ket were 90 or more days delinquent, were in foreclosure, or transitioned into REO, up from 9.8 percent in Septem- ber 2011 and 5.3 percent in September 2008 (LPS Applied Analytics). During the 12 months ending Septem- ber 2012, the number of new homes sold in the Southern submarket in- creased 17 percent, to 1,350 homes. New home sales began to increase during 2012, after posting declines each year from 2005 through 2011. Declines in new home sales averaged 36 percent annually in 2008 and 2009 before slowing to an average of 17 percent annually in 2010 and 2011. Net in-migration to the Southern submarket recorded a steady decline since 2005, particularly from Cook County, which resulted in decreased demand for new homes. Softness in the sales market led to a decline in the average sales price of new homes of 2 percent, to during the 12 months ending September 2012, following an increase of less than 1 percent during the previous 12 months. The average new home sales price is currently 11 percent below the peak of recorded in 2007 and 2 percent below the average sales price of for the period of 2008 through 2011. Condominiums are not a significant part of the new home sales market in the Southern submarket, accounting for only 30 units, or 2 percent, of new home sales, during the 12 months ending September 2012. From 2006 through 2010, condominiums accounted for an average of 4 percent of all new home sales in the submarket. Despite the recent increase in new home sales, single-family home builders remain somewhat cautious. Single- family homebuilding activity, as meas- ured by the number of single-family homes permitted, increased during Despite reduced levels of building activity, a number of developments are currently under way or nearing completion in the submarket. Butter nut Ridge, in the city of Manhattan in Will County, Illinois, includes 18 lots, with preconstruction pricing for new homes starting at approximately . Churchill Club, in the city of Oswego, in Kendall County, Illinois, is a single-family development with 1,100 home sites and is mostly built out. Sales prices for the remaining available floor plans range from about to .

[Assistant] During the next 3 years, demand is ex- pected for 9,975 new homes (Table 1). Because of the current supply of va- cant units and slower household growth, demand for new homes is expected to remain below the levels recorded in the early 2000s to mid- 2000s. The 630 homes currently under construction, as well as some of the estimated 20,500 other vacant units that will likely reenter the sales hous- ing market, will satisfy part of the forecast demand. Sales prices for new units currently start at approximately . Table 8 presents detailed information on the estimated demand for new market-rate sales housing, by price range, in the Southern submar- ket during the forecast period.


[User] Summary Economy Economic conditions in the Madison HMA continued to improve, maintain- ing a trend that began during 2010. During the 12 months ending May 2015, nonfarm payrolls increased by 7,500 jobs, or 2.0 percent, to . The unemployment rate declined to 3.7 percent from 4.6 percent during the past 12 months. During the next 3 years, economic conditions should remain strong and nonfarm payrolls in the HMA are expected to increase 1.6 percent annually. Table DP-1 at the end of this report provides addi tional economic and population data on the HMA. Sales Market The sales housing market in the HMA is currently slightly tight, with a 1.2-percent vacancy rate, down from 2.0 percent in April 2010. Home sales (including single-family homes, townhomes, and condominiums) in the HMA totaled 10,200 during the 12 months ending May 2015, down 550, or more than 5 percent, from the previous 12 months (Metrostudy, A Hanley Wood Company). Demand is forecast for 6,275 new homes during the next 3 years (Table 1). The 360 homes currently under construction and a portion of the estimated 6,700 other vacant housing units that will likely reenter the sales market will satisfy some of the demand during the forecast period.

[Assistant] Rental Market The rental housing market in the HMA is currently balanced, with an estimated vacancy rate of 6.0 percent, which is an improvement from the 6.7-percent rate in April 2010. Students at the Univer- sity of Wisconsin-Madison (UW-M) are estimated to account for more than 13 percent of all renter households in the HMA. During the forecast period, demand is estimated for 5,550 new market-rate rental units ( Estimates by analyst Market Details Economic Conditions................ 2 Population and Households...... 6 Housing Market Trends............. 7 Data Profile............................. 12