The Chicago real estate market continued to stall in March with the worst sales decline in 20 months. Home sales fell by 7.6%, just a smidgen worse than the 7.5% decline we saw in January. This was fully anticipated, given the huge decline in contract activity that we saw in February.
However, it's not as bad as the picture I attached to this post suggests. I still think the real estate market is fundamentally strong. And that's not just some inane realtor hype. If you look at the graph below, which shows monthly home sales back to 1997 with all the March values flagged in red, you will see that this March actually had the second highest sales in 11 years. It's just that last March was exceptionally strong and therefore hard to match.
Nevertheless, the light blue moving average line in the graph shows that Chicago home sales have tapered off. But it still appears that low inventories are to blame because homes continue to sell quickly. What's odd though is that, despite tight supply, we are not seeing price increases.
In two weeks the Illinois Association of Realtors will report that March sales fell by 10.1% but my 7.6% number is more accurate.
Chicago Home Contract Activity
Home contract activity in the Chicago market continues to be weak, which ultimately translates to weak closings in the near future. My updated estimate for February is an 18.0% decline but, if not for that outlier, March would have been the biggest decline in 20 months. Also, as you can see in the graph below, it was the lowest level in 3 years and the light blue moving average line has recently started to trend down.
Pending Home Sales
And it's not like we're building a backlog of homes that are going to close in the near future either. The months of supply of pending home sales actually fell slightly in March from last year - down from a 2.23 months of supply last year to a 2.18 months of supply this year. So I wouldn't expect any improvement in the sales numbers any time soon.
Distressed Home Sales
We continue to see improvement in the percentage of Chicago home sales that are distressed. March came in at 8.1%, down from last year's 12.0%. Given the trend I suspect we are now permanently in the single digits on this painful metric, barring any new collapse in the Chicago market.
Chicago Home Inventory
The exceptionally tight inventory of homes for sale is the crux of the Chicago real estate story. Although the inventory of attached single family homes actually increased from a 3.0 month supply last year to a 3.1 month supply this year, detached single family inventory plummeted from a 4.6 month supply to a 3.4 month supply. As you can see in the graph below it has been 6 years since the two measures have been this close together. Even the more affluent neighborhoods that were seeing increases in detached inventory over the last few years have recently seen declines.
Chicago Home Sale Market Times
How long it takes for homes to sell in Chicago is still a bit of a mystery though. You would think that with inventory continuing to drop we would see a corresponding drop in market times. But just the opposite is true. Last March attached single family homes that sold went under contract in 83 days but this year it actually took longer at 87 days. Meanwhile, detached single family homes took ever so slightly less time to go under contract - down from 114 days last year to 113 days this year.
You can also check out our Web site for additional information on the Chicago area real estate market.
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.