May Chicago Real Estate Market: As Expected, Worst Ever Sales Decline

When I did my last monthly update on the Chicago real estate market I told you it was going to get worse because April closings benefited from contract activity prior to the coronavirus hibernation. With April contract activity down 54.4% from the year before it was inevitable that May closings were going to suck. And they did.
Check out the graph below, which has all the May values flagged in red along with a light blue moving trendline which has taken a dramatic dip in the last couple of months. May closings were down 42.5% from last year, which is a record drop since 1997. In fact, over the last 24 years only 2 years had a lower level of sales – 1997 and 2009.
The Illinois Association of Realtors will come out with their numbers in a couple of weeks. Their version of reality will show a 43.6% year over year decline.

Chicago monthly home sales
Chicago home sales have been declining now for several years but the Coronavirus really tanked the market in May

Chicago Home Contract Activity

Yeah, Chicago home contract activity also sucks but the good news is that it’s sucking a lot less these days than it had been. I’m estimating that May activity was off by 18.7% from last year, compared to a 54.1% decline in April, which is a lot better.
To get an even better view of what’s going on let’s look at the most recent weekly data – week 13 in my series, the week ending May 30. Detached contract activity was only off 6% from last year while attached contract activity was actually up a teeny tiny bit – less than 1%. So the bottom line is that contract activity is almost back to normal. June sales should not be that bad.

Chicago home sale contract activity
Chicago home sale contract activity plummeted to a record low for an April due to Coronavirus concerns.

Pending Home Sales

As you would expect pending home sales are also down quite a bit as shown in the graph below but it’s also recovered a bit from a really bad April. May had a decline of 1043 units from last year and it needs to be “replenished” over the next month or two so some of the new contracts written will go towards that.

Chicago pending home sales
The backlog of homes likely to close in the next 1 – 2 months has fallen to record lows for this time of year in parallel with the decline in contract activity

Distressed Home Sales

The long term decline in the percentage of home sales that are distressed has to come to an end as we run out of room to go down further. May came in at 5.3% vs. 5.5% last year, which is a pretty small decline, but it may be that this is also Covid related. Many people who have a choice about listing their home held back over the last few months but if you had a distressed sale to take care of…well…you moved forward. So it’s not surprising that this number might be a bit elevated.

Chicago Distressed Home Sales
Since the housing crisis the percentage of home sales that are distressed has steadily declined.

Chicago Home Inventory

As a reminder, I’m deviating from using the pre-packaged inventory graphs because there is too much averaging incorporated (see last month’s real estate market update for a longer explanation) and using my own metric of months of supply. The result is very revealing. Detached inventory is at a record low of only a 2.6 month supply compared to 3.5 months last May – definitely a seller’s market. Yeah, I know…hard to believe.
Even attached inventory dropped significantly to only a 3.6 month supply from 6.2 months in April. But that compares to 3.7 months last May – not significantly lower on that basis.
Let’s see if we can get a more up to date picture of the inventory by looking at the most recent weekly data. Detached inventory was at 10.6 weeks supply vs. 12.4 weeks last year so that’s consistent with my monthly numbers. And attached inventory came in at 14.3 weeks vs. 16.7 which is a significant drop so the June number could show a big decline from last June.
But here’s the big surprise for me. It looks like these low inventory levels are going to persist for a while and I’m not entirely sure why. This most recent weekly data shows that sellers are still holding back – still not ready to let strangers walk through their homes? New detached listings for the week ending May 30 were still down 29% from last year and new attached listings were down 22%. Go figure. But it’s good for sellers and bad for buyers.

Chicago home inventory
After a big Coronavirus induced spike in April the inventory of homes for sale dropped back down in May. Detached inventory hit a record low.

Chicago Home Sale Market Times

Where the rubber meets the road though is how long does it take to sell a home in Chicago and that’s a bit disappointing. Detached homes that sold in May took 86 days to go under contract compared to 79 days last year. Attached homes took 80 days vs. 70 days last year but, as you can see in the graph, this metric has been on a rise anyway. We probably shouldn’t get too worried about these numbers though because a lot of these homes went under contract when inventory levels were much higher than they are now.

How long it takes to sell a home in Chicago
The Chicago real estate market impact of the Covid-19 pandemic has recently started to manifest in longer market times for both detached and attached homes

If you would like more information on the Chicago real estate market you can visit our Web site for additional data.
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Gary Lucido is the President of Lucid Realty, the Chicago area’s full service real estate brokerage that offers home buyer rebates and discount commissions. If you want to keep up to date on the Chicago real estate market or get an insider’s view of the seamy underbelly of the real estate industry you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.

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