It looks like June was another fairly weak month for the Chicago real estate market. In about 2 weeks the Illinois Association of Realtors will report a decline in home sales of around 13.4%. My own, more consistent measure puts the sales decline at 10.4%. And June would also mark the 11th month out of the last 13 that came in lower than the previous year.
If you look at the graph below you can see this June in a longer historic perspective. You have to go back 6 years to find a lower June - and June 2013 was not that much lower than this June. And you can also see how the light blue moving average line keeps drifting lower.
Frankly, I'm no longer sure what to make of this market. See why I'm perplexed below.
Chicago Home Contract Activity
First of all, if you look at contract activity it's no surprise that June home sales were down as much as they were. I've been posting for several months now how contract activity has been weak. A lot of that has been reflected in declining pending home sales (see next section) and some of it has been reflected in declining home sales.
With May contract activity down 12.3% it's no surprise that June home sales fell like they did. However, June contract activity was down a bit less. My current estimate is a decline of 5.4% so I don't think July sales will be off that much from last year.
See the graph below for historic contract activity and note how the lighter blue line - the moving average - keeps trending down just like the moving average of sales in the graph above.
Pending Home Sales
As I just mentioned a lot of the lower contract activity has been drawing down pending home sales. You can see that long term trend in the graph below. This last June was no exception - except that the year over year decline was not as big as in other recent months. The decline was only 234 units vs. a 375 unit decline in May.
At some point this backlog of homes waiting to close stops declining - or maybe it even goes back up. It can only go so low. And when that happens all the lower contract activity directly flows through into lower home sales.
Distressed Home Sales
Distressed home sales continue to be a smaller and smaller segment of the market. We hit another record low of only 4.1% of total sales vs. 6.2% a year ago. I suspect we won't be back in the double digits any time soon again.
Chicago Home Inventory
Home inventory is where things get weird. Detached inventory is significantly down from last year - 3.8 months of supply vs. 4.3 months - so it makes sense that the sales of detached homes is down. However, the attached home inventory is now solidly up from last year - a 4.6 month supply vs. 4.0 month supply last year - and up even more from 2017. Although attached inventory is not quite yet in buyer's market range yet that's a pretty health supply. Yet sales are down relative to the previous 5 years. How can that be? Before I attempt to answer that let's go to the next section.
Chicago Home Sale Market Times
How fast are homes selling? Well, before I tell you let me remind you that these statistics only look at homes that actually sold. That means that if a lot of homes are just sitting on the market they will never get counted in the data.
Attached homes that sold did so in 64 days, up from 55 days last year. Those longer market times are consistent with the higher inventory levels. And detached homes that sold did so in 70 days, down from 75 days last year. And those shorter market times are also consistent with the tighter inventory levels of detached homes.
So, while sales of detached homes are down because of tighter inventory it seems to me that sales of attached homes can only be down because buyers, in general, don't want the inventory that is available - i.e. it is probably overpriced. Unfortunately, for all sorts of reasons, there is no data that can easily test this theory. I can tell you anecdotally that we've had no problems selling condos very quickly in this market. That's why I'm scratching my head about this.
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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 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.