Last week I posted on Chicago's May real estate market update and noted that there was a peculiar phenomenon in the data. While listing activity is up and sales are down inventory is also down. In principal the change in inventory = new listings - sales - cancellations/ expirations so my conclusion was that expirations must be up in order for all these facts to be true. I've just completed some analysis and it looks like that is the case, though it doesn't explain the whole story.
First of all, believe me when I tell you that there has recently been more listing activity than last year. For instance, April and May were up 10.8% and 11.4% respectively.
Meanwhile, cancellations and expirations have indeed been up as well. My conclusion is that more homeowners have heard that Chicago home prices are up and homes are selling quicker so they want to test the waters and see if they can finally get out of that home they have been stuck with for the last 8 years. However, I suspect that many of them are finding out that it's not quite as rosy as they thought it was and then they pull the plug or the listing just expires.
However, this increase in expirations and cancellations does not explain the whole mystery of how we can have lower inventory while simultaneously having more listing activity. The numbers still don't add up totally. And I think to really get to the bottom of it I would have to dig a lot deeper. If I did that (and I really don't have the time right now) I think I would find out that it really comes down to the way months of inventory is calculated. You see there are at least 10 different ways of doing it and when I rely upon canned programs to quickly produce the graphs I'm never completely sure what I'm getting. They could be looking at contracts or closings on a single month or 12 month basis or total listings active during the month or listings active at the end of the month. See what I mean? It's like everything else in real estate - things are not always what they seem to be.
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