I've been issuing weekly updates on the impact of the coronavirus nightmare on the Chicago real estate market prior to today but I'm now due for my monthly update so I'll just weave the two together. March is the first month where we can start to see how these unusual circumstances are affecting the market. Of course, the stay at home order was not issued until March 20 so the impact is not reflected for the entire month. However, even before the order was announced people started to retrench into the security of their own homes.
Check out my monthly sales graph below with all the March data points flagged in red and a 12 month moving average in light blue. Looking at just sales you might not see an impact because anything that closed during March was well on its way to closing before things started to get scary. March closings actually rose 2.8% over last year but that was still weaker than 4 of the past 5 years. When the Illinois Association of Realtors reports their numbers in a couple of weeks they will incorrectly state that closings were only 1.0% higher than last year.
Chicago Home Contract Activity
The real impact of the coronavirus situation is seen in the earlier stage of transactions - contracts written - and they fell off a cliff in March, even though the impact was limited to the last half of the month. You can immediately see how bad it is in the graph below, which shows my estimate of a 28.3% decline from last year. First, this is the lowest level of contract activity in 9 years. Second, it's the biggest percentage drop since April 2011. This does not bode well for sales in the next couple of months.
If we look at just the week ending March 28 we see a 43% decline in detached contracts written and a 50% decline for attached homes. So that gives you some idea of what April might look like.
Pending Home Sales
Now, with the much lower level of contracts written and with a lot of stories of deals falling apart I really expected to see a huge decline in pending home sales. However, as you can see in the graph below, the decline does not look that much greater than what we've seen in recent years. Pending homes sales were only down 339 units from last year. But if you look at the graph closely you will see that we had actually been running flat compared to last year (based on the moving average) until March came along.
Distressed Home Sales
Of course, distressed home sales as a percentage of all home sales continued to decline, hitting 4.7%, down from 8.4% last year. What's odd though is that the decline seems to be greater than other recent declines. Not sure why that would happen. I might have expected that to happen down the road a bit as the lenders hold off on completing foreclosures in the middle of a pandemic.
Chicago Home Inventory
The inventory of homes for sale continued to decline in March, hitting a 3.7 month supply of attached homes for sale, compared to 4.0 months last year. However, the bottom dropped out of detached homes for sale which plummeted from a 3.9 month supply last year to only a 3.0 month supply this year.
Listing activity is definitely dying down - partly because potential sellers don't want strangers delivering viruses to them and partly because they believe the market is soft. For the week ending March 28 the number of new attached listings declined by 55% while the number of new detached listings declined by 48%.
There's actually a lot more nuance to this story than I want to cover here right now so I might follow up with another post later this week. To give you a preview you can't just look at the number of units for sale and you have to be careful how you calculate months of supply.
Chicago Home Sale Market Times
There was not a clear pattern in how long it took to sell a home that closed in March. Attached homes that sold took slightly longer than last year - 104 days vs. 96 days last year - continuing the trend that is evident in the graph below. But detached homes actually sold faster: 106 days vs. 111 last year. So it was a mixed bag.
You can find even more data on the Chicago real estate market on our Web site.
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.