As I mentioned the other day there is one bright spot in the data for the Chicago real estate market despite low overall sales. Inventory levels, as measured in months of supply, are actually falling and this should support home prices with buyers forced to bid on a restricted supply. Check out the graph below and you will see that June's inventory of 2 - 3 bedroom condos was the lowest it has been in 5 years - even lower than 2007 which was the beginning of the bursting of the bubble.
Normally you would not expect months of supply to decrease in a slow sales environment but, as I've mentioned before, sellers have had it with low prices and a dearth of buyers. They've just decided to hunker down and stay put with their family of 4 in a 2 bedroom condo or rent out their old homes to fraternity boys and hope for the best. Therefore, the absolute number of homes on the market has really plummeted - more so than contract activity. The result is a lower months of supply of homes on the market. Compare the market dynamics for June in the last 3 years (2010 was an anomaly with the tax credit) in the graph below.
The data behind the graph shows that inventory levels have fallen by more than 28% while contract activity has fallen by only 16%.
Of course, whether or not any of this is good news depends upon whether you are a buyer or a seller, right?