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 U.S. annual house price appreciation dipped below 5% annually
for the first time since 2015, growing at a 4.9% annual rate, but the Illinois
data was particularly bad.
Illinois house price appreciation was the lowest in the country, with home
values growing 1.9% from the third quarter of 2018 through the third quarter of
2019, according to recently released data from the Federal Housing Finance
Agency.
Illinois’ worst-in-the-nation performance was particularly bad
as five out of six neighboring states experienced home price appreciation at or
above the national rate. Slow appreciation rates raise the total cost of
homeownership – the net cost of mortgage payments, property and income taxes,
and maintenance after accounting for appreciation.
 The state’s poor performance from Q3 2018 through Q3 2019 comes as no surprise
because appreciation rates have been lagging the rest of the nation since the
Great Recession. The state’s high tax environment continues to make the returns
to housing investment among the worst in the nation and increases the overall
cost of homeownership.
The state’s largest housing market, the Chicago metropolitan area, also fared
poorly relative to other U.S. metro areas for house price appreciation in the
past year. During the past four quarters, the Chicago-Naperville-Evanston
metropolitan area saw house price appreciation of 1.6%. The area’s performance
ranked 95th out of the nation’s 100 most-populous metro areas.
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While Chicago’s housing market performance was
among the worst in the nation, neighboring Gary, Indiana,
experienced some of the strongest appreciation in home values of all
metro areas. In fact, Lake County, Indiana, where Gary is located,
is one of the top destinations for Illinoisans leaving Cook County.
From tax year 2017 to tax year 2018, Cook County lost nearly 4,300
residents on net to Lake County, Indiana. A lower cost of living,
lower taxes and greater returns on housing investment that lead to
lower costs of homeownership may be part of the reason Illinoisans
are more likely to move to neighboring states.
Home prices are tied in part to the demand by prospective
homeowners. As Illinois and the Chicagoland area continue to lose
population, housing demand can be expected to fall, and house price
appreciation will likely continue to lag the rest of the nation.
So long as Illinois continues to pursue massive income and property
tax hikes instead of necessary structural spending reforms,
Illinoisans will likely continue to find better opportunities
elsewhere. Then the housing market will continue to struggle.
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