The Illinois Association of Realtors just released their January real estate market update for various parts of Illinois, including Chicago. As I pointed out a couple of weeks ago their numbers show 32.2% higher home sales in Chicago than a year ago (OK, I actually predicted 31.9%) , which confirms what every realtor will tell you right now: the Chicago real estate market is super hot.
Homebuyers are out in droves and there is a shortage of good inventory. As a result, properties are going under contract very quickly, with multiple offers, and sometimes over asking price. We’ve already started to see evidence of rising prices in the official numbers from Case Shiller.
Since realtors can suffer from happy ears I set out to quantify what is really going on. I’ll spare you the details of all my failed attempts to do this but I eventually settled on measuring the percentage of new listings that were going under contract within the first 2 weeks on the market. I couldn’t measure any sort of price realization because this activity level is a relatively recent phenomenon and there hasn’t been enough time for all these deals to close.
I decided to focus on the Chicago neighborhoods where most of our business is and where I think the market is really hot.
I then looked at all recent new listings for condos, townhomes, and single family homes above $150,000 and what percentage of them went under contract within the first two weeks on the market. I plotted a 7 day moving average of this number below, starting in about the middle of November. As expected the graph shows a shocking rise in this percentage, recently peaking at 41%. So, it’s exactly as realtors have been perceiving it.
Notice how there was a lot of fluctuation during the holiday period when people had a lot of other things on their minds.
Now, as always, there is a big caveat with this data. If I had plotted this at any time in the last 5 years I probably would have seen an upward trend. The reason is that a lot of properties go under contract quickly, only to have the deals fall apart sometime in the next month or so. Once a contract falls apart I lose the ability to track that it was once under contract. I can see that it was once under contract but I can’t dump that data and analyze it. So older data reflects the impact of failed contracts but the newer data does not. Hence, the newer data overstates the percentage of listings that go under contract and stay under contract. Such is life.
Nevertheless, 41% is a huge number by any stretch of the imagination so I think it’s safe to say that the Chicago real estate market is smoking hot right now. But there is a dark side to any silver lining. People who have been waiting for a market recovery to move are going to now find out that while it is easier to sell their homes it’s going to be that much harder to find the next one.
Expect Realtors To Take Credit For Selling Homes Fast
No analysis like this would be complete without warning you of how some (many) realtors will try to take advantage of the situation for personal gain. When talking to realtors about selling your home expect to hear a lot about how quickly they’ve been selling their listings. You can also expect to get a lot of mailings bragging about their recent conquests. Well, keep in mind that it’s the market bringing about these results, not any particular magic dust that a realtor claims to possess. As always, remember that what really matters when picking someone to sell your home is how much they are going to charge you, what they are going to DO for you, and how responsive and smart they are.
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