It looks like the Chicago real estate market is back on the see saw. After reporting the best June sales numbers in 10 years last month (in fact, also the highest sales in 10 years of any month) I'm now telling you that July was the weakest in 5 years. But as you'll see below the market is actually still pretty strong. How is that possible? Read on.
It looks like July closings were about 3.5% lower than last year but when the Illinois Association of Realtors reports the numbers in 2 1/2 weeks they are going to claim that sales were actually down 5.8% because they compare preliminary numbers this year to final numbers from last year. Not a good idea.
The graph below puts the sales numbers in historic perspective with monthly sales numbers back to January of 1997 and all the July sales numbers flagged in red. Notice also that the light blue moving average line is still trending upwards ever so gradually.
Chicago Home Contract Activity
Although July contract activity was down roughly 1.5% from last year, which means future closings are not likely to take off any time soon, it was a heck of a lot stronger than June, which was down by more than 10% from last year. But that's 4 months in a row of declining contract activity. You can see in the light blue moving average line how activity is trending downward.
Pending Home Sales
With fairly small changes in both contracts written and deals closed I guess it's no surprise that Chicago's pending home sales were pretty much flat to last year - 1.84 month supply in both cases. That is up from June's very low 1.65 month supply as you can see in the graph below.
Distressed Home Sales
As has been the case for many years now we hit a new low in July in the percentage of home sales that are distressed - 6.5% vs. 10.5% last July. June or July is always the low point of the year so we will see some increases over the next few months but they will almost certainly be lower than the previous year. However, we are probably reaching the limits of how low this can go as you can see in the graph below.
Chicago Home Inventory
So this is one of the reasons that I am saying that Chicago's real estate market is strong. Inventory just keeps hitting new lows and July was no exception. In July the inventory of condos and townhomes dropped to only a 3.2 month supply vs. a 3.5 month supply last year. Single family home inventory dropped to a 4.6 month supply vs. a 5.2 month supply last year.
When there is so little available for sale it's no surprise that sales are depressed and homes sell very quickly (see the next section). The demand is there but the supply isn't.
Chicago Home Sale Market Times
And the other reason we know that the Chicago real estate market is strong is that homes are selling pretty fast. Condo and townhome market times hit a new record low for July of only 51 days on average (for homes that actually sold) vs. 58 days last year. Single family homes sold in an average of 75 days vs. 80 days last year.
The extremely low inventory levels have to be responsible for this trend. When a reasonably priced property hits the market it goes quickly. The only mystery here is why prices aren't going up higher/ faster. Chicago is one of the weaker metro areas for home price gains. Go figure.
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.