I don't know how else to say it but Chicago's real estate market really, really sucks right now. In about a week and a half the Illinois Association of Realtors is going to report October home sales for Chicago and the rest of Illinois. Don't confuse this with their third quarter numbers that they released earlier this week. That only went as far as September. What their new release is going to show is that October sales dropped 41% from last year. That's a 16 year low. I can't wait to see how the IAR spins this.
Now, in all fairness last year's comparisons are really tough because the government interfered in the housing market with their Ckash for Shacks giveaway program that encouraged people to buy homes a couple of months earlier (The only thing they didn't do is require you to bulldoze your old home in an effort to create more jobs.). In fact, we are going to see tough comparisons for the next 6 months so hang onto your seats. But this still doesn't change the fact that we're at a 16 year low for home sales. In addition, 39% of those sales were distressed properties. Again, bargain hunting springs eternal.
Given that purchase contract volume continues to trail last year by about 20% (see chart below) we can expect ongoing sales shortfalls. Remember that sales mean closings and contracts mean intent to close.
Now there is something peculiar in the data that is puzzling me. As I mentioned, contract volume is only down about 20%, while closings are down 41%. Sure, there is a lag between the contracts and the closings but to see a consistent difference of this magnitude is odd. It suggests that a backlog of contracts are developing and either we are going to see a bunch of closings at some point or the contracts are going to fall through.
A quick check of the data indicates that there is some evidence that a backlog is building. Let's take August as an example. This year only 69% of August contracts had closed by the end of October as compared to last year when 78% had closed. That may explain a chunk of the difference.
There is one bright spot, though. Notice that contract activity was higher than 2008 levels in October. That's the best activity in several months so it provides some evidence of improvement.