When people in Chicago think about the recent lack of home inventory they immediately are assuming that it's a result of a shortage of sellers. That has been true over the long run - the last 6 years in fact - as a result of sellers being unable to sell because they are so ridiculously underwater on their mortgages or not above water enough to go buy the next home. However, what has largely gone unnoticed lately is that there really isn't a shortage of sellers any more - or at least the trend has reversed this year. See the graph below from the Chicago Association of Realtors and notice how for the first time in 6 years listing activity is actually higher than the previous year. I decided to confirm this myself. In the first 15 days of May this year 9885 residential properties (condos, single family homes, and 2 - 4 flats) were listed for sale. That compares to 9366 last year at this time.
So simple math compels us to understand that if supply is slightly up but inventories are way down then demand must be way up. As Thursday's blog post on how quickly Chicago homes are selling and at what prices shows demand is pretty strong right now. There's actually another Chicago Association of Realtors graph that sort of demonstrates this but I'm hesitant to show it to you. Oh...what the heck...I'll just explain the caveat.
The graph below shows the contracts written in each time period that had not fallen through as of the time this graph was constructed. So for contracts written a year ago that data is pretty well set in stone. However, for contracts written in the last 3 months a fair number of them are going to fall apart within that 3 month time period. In other words, the more recent data is overstated relative to the previous year and the more recent the data is the more overstated it is - by about 20% in my estimation. Nevertheless, the increase in contract activity shown below is so large that I think you can still clearly see that demand is way up over recent years.
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