June marked the 2 year point in the turnaround in the Chicago housing market. It marked 24 consecutive months of year over year increases in home sales – most of which have been double digit percentage increases. This June was 16.6% above last year’s 22% improvement over the year before that.
As I always like to point out the Illinois Association of Realtors will announce the official numbers in 2 more weeks but their number will come in closer to a 12.3% gain. If you want to understand why there’s a difference you can look back at some of my older monthly updates but suffice it to say that my numbers are more accurate.
In addition the IAR will report on median home prices showing a huge jump over the previous 2 years – $255,000 vs. $217,000 in 2012 and $205,000 in 2011. That is indeed a huge jump, which is probably largely attributable to a decreasing mix of distressed sales (see below) and an increasing mix of new construction at higher prices. As I always point out the median price stats are usually heavily influenced by mix changes, not real price changes. However, with increases of this magnitude I think we’re starting to see the influence of some real price changes.
June Chicago Home Sales
The June numbers easily beat the June level of 2002, which was already at bubble levels but once the dust settles and all closed sales are reported I think we will also see that this June also beat the government distorted sales levels hit in 2010, which were really high. As you can see in the long term home sales trend line below the Chicago housing market is clearly on a strong path to recovery.
Chicago Home Contract Activity
Home contract activity, which leads sales (closings) by about 1 – 2 months is sending all the signals of continued double digit percentage growth in sales. I’m projecting June contracts to be up 18% over last year, which is a decidedly smaller growth number than the last 5 months, but nonetheless a strong positive indicator. (The reason that my number is a “projection” is that a significant percentage of these contracts will never result in a closed sale because the deals will fall apart.)
The other factor that determines future sales is the pending backlog of contracts. At the end of June there were 6757 contracts pending, which is enough to feed almost 2.6 months of closings at current closing rates.
Distressed Home Sales
Chicago Home Inventory
When you look back at home inventory in Chicago over the last 5 years you see just how far we’ve come in terms of recovering from the bursting of the housing bubble. The inventory of homes for sale on a months of supply basis continues to drift lower. At one time condo inventory peaked at 18.3 months but now it is a mere 3.1 months. Single family home inventory is also down considerably at 4.2 months.
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