In two weeks when the Illinois Association of Realtors releases their July numbers it will definitely look like the Chicago real estate market is on the decline. They will report sales down by about 8.4% from last year, which is in fact a pretty significant number. And, due to the systematic bias in their reporting, the real number will be closer to a decline of 6.4%. But it turns out that when you dig into all the numbers there are some apparent dark clouds on the horizon for Chicago real estate.
Let’s start with just the sales data in the graph below, with all the July numbers flagged in red and a moving average trace in light blue. Although last month was clearly down from the previous year it’s still at the second highest level in 7 years. This July also fell very close to the July 2002 level.
Chicago Home Contract Activity
The disappointing part of the Chicago real estate market story is that contract activity is looking like it was down quite a bit last month vs. last year. I’m estimating a decline of about 16.9%, which would be the biggest decline in more than 3 years. Remember that since contracts turn into closings with some delay this is basically predicting that August sales are going to be down quite a bit from last year.
The graph below shows 6 years of Chicago home contract activity with all the July numbers flagged in red and there’s that light blue moving average again.
Pending Home Sales
Pending home sales for the Chicago real estate market is the other part of my gloom and doom scenario. In the graph below notice how the months supply of pending home sales is hitting new lows at a 1.8 month supply – and that’s pretty low for this time of year. Basically the only way July was able to close as many sales as it did was by tapping into this backlog of pending home supplies. But given the low contract activity this reservoir was not refilled. So this just confirms that Chicago home sales going forward are not going to be very strong.
Distressed Home Sales
Part of the story is clearly the fact that distressed home sales are way down from last year. We keep hitting new lows on both an absolute and percentage basis. The graph below tracks the percentages and July came in at 17.7%. As I’ve pointed out before the decline in distressed sales pretty much accounts for the entire decline in total sales.
Chicago Home Inventory
If you want to call it a bright spot the extremely low levels of home inventory in Chicago are a great sign of the strength of the real estate market. At only a 4.2 month supply of condos and townhomes and a 4.8 month supply of single family homes supply is definitely tight and could be largely explaining why sales are down. There just isn’t enough good product to buy. But notice that recently condo and townhome inventory has been picking up.
Chicago Home Sale Market Times
The other indicator of strength in the Chicago real estate market is the average market times, which are at near record lows. Condos and townhomes that sell are selling in only 62 days while single family homes are selling in only 85 days. With inventories so low buyers are moving quickly on whatever looks good.
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