Will Tightening Chicago Home Inventories Stop Price Declines?

Will Tightening Chicago Home Inventories Stop Price Declines?

We regularly track 2 - 3 bedroom condo inventories in Chicago, measured in terms of months of supply, as an indicator of how tight the real estate market is, which should in theory indicate which way prices will be moving. The idea is that when supply is tight there will be upward pressure on prices - you know, supply vs. demand. We focus on 2 - 3 bedroom condos because they represent the middle of the market in the Chicago.

A few weeks ago we updated the trend analysis (yeah, I'm late getting this out) and what it shows is that the months of supply has been coming down quite a bit since skyrocketing immediately after the government real estate market interference program. The graph below lays it out for you and as you can see November started a decline over the previous year's numbers. February was at about a one year's supply of condos.

As realtors like to say when they are trying to dismiss negative headlines "all real estate is local" and that is certainly true for these inventory numbers. Therefore, we also provide a breakdown of these inventory levels, along with market times, for a few select Chicago neighborhoods.

If you will recall Chicago condo prices have been in a free-fall during this period of relatively high inventory levels, which makes sense. But as prices fall sellers start to pull their properties off the market and the inventory starts to shrink. In fact, at the end of February there were 23% fewer condos on the market than last year at this time. Will this stop the precipitous decline in prices?

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