Good news! Chicago home sales declined by 3.5% in April from the previous year. Why is that good news? Because that's the smallest decline in 6 months for the Chicago real estate market. But it is the 6th month in a row that sales were down.
The graph below shows Chicago's historic monthly home sales figures with all the April data points flagged in red and a light blue moving average line. As you can see this April was the lowest in 4 years (March was the lowest in 6 years by comparison) and the moving average has been trending down now for a while. But I still don't think this signals a problem. Read on.
In a couple of weeks the Illinois Association of Realtors will come out with the official numbers and they will claim that sales fell by 5.4% because of a difference in how they compare this year to last year.
Chicago Home Contract Activity
Contract activity in April was off around 7.2% from last year, which is on par with most of the recent months. That alone is an indication that closings will continue to be off in the next couple of months or so. However, my revised estimate for March contracts is a 16.9% decline and, given that April closings didn't fall anywhere near that much I think it's a safe bet that May closings will show a much sharper drop as the much lower volume of contracts works its way through the system.
I have historic contract activity graphed below and the pattern is very similar to the sales graph, with declining activity for a while now.
Pending Home Sales
The other piece of the puzzle is pending home sales - the backlog of contracts waiting to close. As you can see in the graph below this metric has also been trending down for a couple of years now. A very small portion of that is explained by shorter contract to close times. Much of it is a result of fewer contracts being written but some of it is also due to a depletion of the backlog, basically being used to subsidize closings. That can't go on forever and when the well runs dry we will see bigger drops in the sales figures.
April's pending number was 422 units lower than last year relative to closings of 2555 in April and it's the lowest level since I've been tracking this. So that's a fairly large drop.
Distressed Home Sales
After an increase in March, and my assertion that we had reached the bottom, the percentage of home sales that were distressed in April declined once again, making me question where the bottom is. It fell to 6.3% from 8.2%, which is a pretty big decline. I don't think we'll see those double digit percentages again any time soon.
Chicago Home Inventory
The supply of homes for sale remains the big story here - and it has become different for attached and detached homes. Both are still in tight supply but their lines crossed back in February and now there is a significantly larger supply of attached homes (condos and townhomes) than detached homes. At the end of April the supply of attached homes hit a 4.1 month supply, up from 3.5 months last year and the highest level since 2015. Compare that to the supply of detached homes which declined to a 3.6 months supply from 4.0 months last year. Basically they have switched places in the last year and, in fact, pretty much 100% of the decline in sales that we've seen has been in detached homes, which makes perfect sense given the lower inventory. So I don't think we have a demand problem here.
Chicago Home Sale Market Times
And the market time trends support the notion that there is not a demand problem. Although market times are up for both attached and detached homes it's not by much. In April it took attached homes that sold 76 days to sell, up from 73 days last year. Detached homes sold in 99 days, up from 96 days last year. Both of these are in line with recent years.
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 or get an insider's view of the seamy underbelly of the real estate industry 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.