Despite the fact that home prices in Chicago seem to be heading lower in the short run there are some strong positive indicators for prices in the longer term. We just updated our home inventory numbers for Chicago for 2 - 3 bedroom condos - the sweet spot of the market - and it shows record low inventory levels in February. As you can see in the graph below, at just under 6 months of inventory February is not just low for this time of the year but it's low for any time of the year over the last 5 1/2 years.
As I've said before, sellers are so frustrated with home prices in Chicago that they are refusing to sell, keeping the best inventory off of the market. This can only support prices. This same phenomenon is being observed at the national level. As the Calculated Risk blog notes: "The bottom line is the decline in listed inventory is a big deal, and will lead to less downward pressure on prices".
So, why does the Case Shiller home price index for Chicago keep going down? First, keep in mind that the Case Shiller price index is reported with quite a lag - the last number released was for December. But even that number really represents a moving average that looks back 3 months. Then on top of that the index looks at closings, which went under contract 1 - 2 months prior. So when the index comes out for the month of April or May we will really get the first indication of what contract activity in February really looked like.
You can find this and other housing data on our Chicago real estate market statistics page.