The Chicago real estate market is still on a see saw, alternating between strong sales months and weak sales months. After another weak month in February March blew it out of the water, hitting the highest level in 11 years. But read this entire post before you get too excited.
Yes, March sales were up 17.9% over last year, which is in fact the strongest year over year increase in 3 1/2 years as you should be able to clearly see in the graph below. Check out the pattern of the red dots which are all the March data points. Then again look at that light blue line which is the 12 month moving average that smooths out all the noise, of which there is plenty. That moving average is only up 3.4% as of March - nowhere near that 17.9% so don't get too excited.
I'll give you more reasons to not get too exited in a bit but in the meantime please note that when the Illinois Association of Realtors reports on March sales in about 2 weeks they will show a mere 15.2% increase for this March due to a flaw in the way they do their comparisons.
One of the other flies in the ointment is that contract activity hasn't been that strong lately. In fact I'm estimating that March contracts were down 1.5% from last year after February was down 6.8% and you can see from the light blue moving average line that contract activity has been rather flat for quite a while.
So with contract activity so low how could you have a blowout month like March? See the next section.
Pending Home Sales
We went into March with a slightly elevated level of pending home sales - homes under contract waiting to close. However, we came out of the month with an unusually low level of pending home sales - a 2.23 month supply vs. a 2.66 month supply at the end of last March. That lower level of pending home sales simply means that closings drew down that pipeline more than normal during the month. That means that the low level of contracts didn't backfill the closings, which will negatively affect future months. In other words we will still be on the see saw in April.
Distressed Home Sales
Yep, we hit another record low month of distressed home sales as a percentage of total sales. March came in at only 12.0% vs. 19.6% last year. That's the lowest level in 9 years and the drop that occurred in the last year doesn't really seem any smaller than some of the previous drops.
Chicago Home Inventory
Home inventory in Chicago just continues to defy reason and hit lower and lower levels. The inventory of single family homes in March hit a new record low of a 4.0 month supply vs. a year ago at 4.5 months and condo inventory stood at a 2.7 month supply vs. 3.3 months a year ago.
However, the inventory picture is not quite so bright for upper echelon single family homes on the north side of the city where inventories are much higher and still rising.
Chicago Home Sale Market Times
This is where things get really weird. Normally when inventories are this low and still declining the market times also are very short and declining. However, as you can see in the graph below the market time for single family homes has started to rise, which makes no sense. The average market time for single family homes that closed in March was 113 days, up substantially from 100 days last year. So maybe market times are a leading indicator of inventory levels and inventories are about to start rising again?
However, the story for condo and townhome market times was consistent with the low inventory story. Condos and townhomes closing in March took only 83 days to go under contract (they are generally cheaper than single family homes and cheaper homes sell faster) compared to 91 days last year.
Gary Lucido is the President of Lucid Realty, the Chicago area's full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider's view of the seamy underbelly of the real estate industry, or you just think he's the next Kurt Vonnegut you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.