Within the last week or two the local MLS has made available new information on showing activity that should provide additional insight into the health of the Chicago real estate market. I'm thinking that this might help us get a better handle on just how hot the market is. There are two separate metrics that have been added and I will attempt to explain each of them, telling you what I THINK they represent. I emphasize THINK because when speaking with the MLS folks I just didn't get a really warm, fuzzy feeling that they were 100% sure how these things were being calculated. (It goes with the real estate business. You shouldn't believe everything you are told.)
Both of these metrics are based on data captured by the ShowingTime system, which many, but not all, realtors use to schedule their showings. There's your first caveat: this doesn't include all listings but it should be a large enough sample.
The first metric is simply the number of showings per listing. The only thing is that nothing is simple in real estate. For instance, in order for a listing to be included in this measurement it must have had a showing in its first 28 days on the market. And the listing had to be active at some point during the month. So apparently (that means I THINK) if a listing is cancelled on the 2nd day of the month it could be included in the data. Also, a listing could be included if it was activated at the end of the month - provided it had a showing.
So...when a listing is cancelled and reactivated during a given month (happens a LOT) it could be counted twice - as two separate listings, each with their own showing count. In later months only the new listing would be counted and any showings associated with the original listing are not counted.
And then there is the fundamental flaw in a measurement like this in that newer listings are going to have few showings while older listings will have a lot of showings. That means that early in the year when lots of new listings come on the market the showing count is going to be artificially depressed and then it will be artificially raised later in the year as fewer new listings hit the market.
Confused yet? Obviously, this metric is not perfect. Nevertheless, here is the graph of the data for the Chicago real estate market (but it is also available for any market in the area), broken out by attached and detached homes. The two most obvious observations from this data are 1) There is pronounced seasonality, with the showing count spiking from January to April-ish and 2) there has been an upward trend in the number of showings for a listing over the last few years.
The other metric is the number of showings requested until a contract is accepted for those listings that went under contract during the month. This metric basically follows all the same rules and has the same caveats as the first metric. The graph is shown below - again for just the Chicago real estate market.
Interestingly, this metric also shows seasonality but only for attached homes and with a slightly earlier peak than the showings per listing metric. The peak months are December - March.
I do find the existence of any seasonality in this metric odd because why would you need more showings to sell a home depending on the time of year? I could understand it taking longer to sell and taking longer to get the needed number of showings but why would you need more SHOWINGS to sell the home? And why are there more showings to get a contract during the busier time of the year? Shouldn't it be fewer showings?
Well, there are two possible explanations. First, perhaps buyers and sellers get more picky as they move into the prime selling season and therefore conduct more showings. The other possibility is that homes might be priced low during the busier period, resulting in many more showings in a short period of time before a contract is accepted. In that case you might be getting more multiple offers but you still have a lot of showings before you accept a contract. So this could be a perplexing metric.
The other interesting observation from this data really shouldn't be a surprise: Detached homes need more showings to sell than attached homes. Attached homes need 10 - 15 showings and detached homes need 15 - 20 showings in order to sell, which is actually higher than I expected. But, yes, buyers and sellers of detached homes are definitely pickier.
Note that it would be good for sellers to keep these numbers in mind because it sets a reasonable expectation of what it's going to take to sell their home. If their condo has been on the market for a month and only had 3 showings they are definitely overpriced. Or another very real possibility is that their realtor is a clown. And they could also draw the same conclusion if they've had 20 showings without an offer.
I don't think that these metrics are going to change all that much from one month to another (other than the seasonal effect) so I probably won't be including these in my monthly update on the Chicago real estate market. However, I will be keeping an eye on them and if I notice anything peculiar I will certainly point it out.
#ChicagoRealEstate #ChicagoHomeSales #HomeSelling
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.