When the Illinois Association of Realtors reports on December home sales in about 2 weeks they are going to be talking about how great it was that home sales were up around 12.0%. And in reality growth was actually up 14.7% when you compare the December snapshots taken at the same point in time during January. On the surface this will look impressive as it will be the 30th consecutive month with year over year increases in home sales and it will be a substantially higher increase than November's 2.5% growth over the previous year.
Viewed in the longer term historical context this December was higher than all but 5 of the last 17 Decembers and it's the highest December of the last 7 years. It also falls somewhere between the levels of December 2001 and 2002.
As a side note median home prices were up 14.1% over last December, which reflects a richer mix of homes being sold now in addition to higher home prices in general.
Chicago Home Contract Activity
The problem is that when you dig a little deeper into the rest of the data for the month the picture doesn't look quite as pretty. Contract activity has really leveled off since August and December is likely to end up the worst showing since April 2011, with contract activity down an estimated 5.2% from last December.
Pending Home Sales
So if there were actually fewer contracts written this December then how is it that we had so many more homes closing? Apparently a lot of the closings came from home sales that were already pending coming into December that probably needed to get closed before year end. The backlog of these homes got drawn down to it's lowest level since I started to track this data back in May 2012 - only 3711 units. However, I really like to look at the pending home sales in terms of months of supply and December ended at only 1.8 months - also a record low as shown in the graph below.
I don't know how much lower pending home sales can go but I think we're at the point where if contract activity doesn't pick up we're going to see sales declining year over year.
Distressed Home Sales
The percentage of sales that were distressed hit a record low for this time of year, coming in at 32.5%. That shadow inventory that everyone was worried about is certainly fading into the shadows. And I would like nothing more than to see those short sale and foreclosure mills go out of business - not a very professional bunch.
Chicago Home Inventory
Just when you think home inventories can't get any lower they in fact do get lower. We ended 2013 with only a 2.7 months supply of condos and townhomes and only a 3.7 months supply of single family homes. That is so incredibly low for this time of the year. It is definitely a seller's market and I continue to believe that it is this inventory shortage that is preventing home sales from soaring. I know there are buyers sitting on the sidelines.
Chicago Home Sale Market Times
In this environment of incredibly low inventories and strong demand it's no wonder that homes are selling quickly. Single family homes are selling in 94 days and condos/ townhomes are selling in 87 days. Although we are still at incredibly low levels for the past 6 years we are seeing a slight uptick here in the last few months - especially in condos and townhomes. However, I'm not too concerned as this uptick is normal for this time of year.
Once again I feel compelled to warn you about realtors claiming super powers in selling homes quickly. It's not them. It's the market.
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