After 20 consecutive months of double digit growth in home sales the Chicago real estate market is ending the year with rather flat year over year sales. When the Illinois Association of Realtors announces the official numbers in a week and a half they are likely to report a slight decline of about 0.3% - basically flat. In reality there was ever so slight growth of about 2.5% - just enough to allow us to claim 29 consecutive months of year over years home sales growth. This was totally expected as contract activity has been slowing down and contracts lead closings by about a month or two.
Given the extremely low levels of home inventories (more on that below) I have to believe that home sales could be a lot stronger. The demand is there, with numerous buyers on the sidelines waiting for the right property to come along. It's just that the supply is not there.
The November sales numbers were pretty much in the middle of the pack over the last 17 years or somewhere between the Novembers of 2001 and 2002 - a long time ago.
The IAR press release will also mention that median home prices were up 11.1%. What this primarily means is that the mix of homes sold is skewing higher but watch the journalists discuss rising prices as if it's the same thing.
Chicago Home Contract Activity
Well, this is the metric that tells us where the market is going and it's looking rather flat, which is how we already know that at least December closings will again be basically flat. I'm estimating that after accounting for contract terminations November contracts will actually be 1.6% below last year.
Pending Home Sales
Chicago homes that remain under contract at the end of November (essentially pending home sales) declined once again from the previous month to 4292, which means that more homes either closed or had their contracts terminated than went under contract. This is normal at this time of the year. However, when viewed relative to the current sales rate the months of supply of pending homes actually went up a tad to a 2.4 month supply.
Distressed Home Sales
As is normal at this time of the year, the percentage of home sales that were distressed rose to 32.8%, which remains lower than it has been over the last 4 years. But that's still a really high number. 1/3 of all sales are either a short sale or a foreclosure? Although 2009 was lower I maintain that that doesn't really count because it was an artificial market distorted by that silly homebuyer tax credit fiasco.
Chicago Home Inventory
So this is what I believe is keeping the lid on further growth in Chicago home sales. Home inventory levels continue to hit new lows, with only a 4 month supply of single family homes and a 3 month supply of condos and townhomes at the end of November. I can assure you that buyers are pretty frustrated and you can see the upward pressure on home prices. It's like they used to say at Circuit City: "You can't sell the product in the warehouse" (actually that was before the Internet).
It remains to be seen if the spring selling season is going to see some supply hit the market. One would think so as sellers re-evaluate their plans with visions of fast sales and higher prices dancing in their heads.
Chicago Home Sale Market Times
So when there is not enough inventory for demand homes sell quickly and that's exactly what's been happening. Even though market times have ticked up a bit recently they are still historically low and remain below 100 days, which allows realtors to continue to take credit for having magic dust. Single family homes that sold did so in 92 days while condos that sold did so in 75 days. You can see that at different points in time single family homes and condos have sold at very different rates. Right now is a better time to be selling a condo than a single family home, though at 92 days it's a pretty good time to sell single family homes as well.
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