Well, the speculation among realtors continues that the Chicago real estate market is slowing down - especially after September's 15% decline in home sales from last year. So I was particularly interested in the October results and on Monday I even looked at October listing cancellations to see if there was any hard data to suggest that the real estate market was going soft. But all indications remain the same: it's a fairly normal market. Let's look at the numbers.
Monthly home sales rose by a mere 0.4% over last year though it might look like a bit of a decline in the graph below because the sales data for October is not yet finalized - and won't be for several more weeks. But that's how the Illinois Association of Realtors calculates their comparisons and that's why they will report a 2.6% decline in 2 weeks. But, of course, I know better than to do that and that's why I can tell you that on an apples to apples basis we actually had slightly higher sales.
But notice that - especially after the bad September numbers - the light blue moving average line in the graph is decidedly trending down. Also, this October actually had lower home sales than 3 out of the last 5 years.
Chicago Home Contract Activity
Home purchase contract activity remains weak in Chicago. I'm estimating that last month was 9.7% lower than last year. That would mean 10 straight months of decline and the lowest October in 7 years. It also continues to support the notion that the overall trend in sales is down despite wide fluctuations from month to month in the annual comparisons. And we can probably look forward to more declines in sales in the coming months.
Pending Home Sales
Pending home sales is the buffer between contracts and closings and it can either tend to smooth out or exaggerate the differences between the two. In October pending home sales once again declined - from a 1.89 month supply last year to a 1.63 month supply this year. That explains how October sales were able to come in flat to last year despite declining contract activity - by drawing down the backlog of pending home sales. This suggests that we will probably be seeing another huge drop in sales over the next month or two as we either rebuild that backlog or are unable to draw it down any further.
Distressed Home Sales
It sure looks like the percentage of home sales that are distressed is reaching its lower limit. We did hit another record low in the percentage but the drop from last year was probably one of the smallest drops I've seen since I've been collecting the data. Last year 8.8% of sales were distressed in October compared to 8.6% this year. So that's only a 0.2% drop and you can really see how small that is in the graph below. Basically, we're running out of room at the bottom of the graph to go much lower.
Chicago Home Inventory
So this is why I don't think the Chicago real estate market is all that weak right now. If it were we would see high inventory levels. However, that's not the case at all. Attached home inventory is indeed rising - to a 4.1 month supply of homes from a 3.6 month supply last year. And that sure is a significant increase but 4.1 months of homes on the market is still a little tight. Meanwhile the inventory of detached homes actually declined from 4.9 months of homes to 4.0 months of homes.
Chicago Home Sale Market Times
And the other indicator of a weak housing market would be long market times but those aren't bad either. Attached homes took a little longer to sell this October than last year - 76 days, up from 68 days - consistent with the higher inventory levels but that's still not that long by historic standards. But detached homes are taking about the same length of time to sell as they did last year - 82 days. Again, that's not bad for detached homes.
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Gary Lucido is the President of Lucid Realty, the Chicago area's full service real estate brokerage that offers home buyer rebates and discount commissions. 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.