As I've said before, there is only so much pain that Chicago home sellers can take. At some point they just give up and stay put - or become reluctant landlords. Based upon recent inventory trends it sure looks like that time is here. At the end of October the months of supply of 2 - 3 bedroom condos in Chicago sat at a record low for this time of year (based upon 6 years of data). Compare October 2011's 11 months of supply to the 2008 peak of 31.8 months and the second lowest level in 2006, which was probably around 15 months. You can see the long term trend in the graph below.
As I reported recently October home sales were really abysmal but months of supply was still low because a) the absolute number of units for sale is extraordinarily low and b) I calculate inventory levels based upon contracts written and contract activity is much stronger than sales.
With inventory levels this low you would think that would provide considerable price support. Unfortunately we are going to have to wait several months for the Case Shiller index to catch up with us to find out.