As expected the Chicago real estate market began to make up for a lot of lost time in July. Not only did sales (closings) come back to more normal levels but the stage is set for even stronger growth in August.
The graph below shows Chicago monthly home sales going back to 1997 with all the July values flagged in red and a light blue moving average line. Last month was up 2.7% from last year, though in two weeks the Illinois Association of Realtors will tell you it was only up 0.6% due to some flawed math. But we're still operating at the lower end of the range over the last 8 years. Given how strong contract activity was in June I was actually surprised that July closings weren't stronger also - but more on that later.
The moving average line (look closely) shows just how dramatically sales have been impacted by the Covid 19 retrenchment. Although the market is coming back I don't think we will be able to fully make up for the losses this year.
Chicago Home Contract Activity
July home contract activity was actually the big news because it was up 30.6% from last year, which is the biggest year over year increase in almost 8 years. Both condos and single family homes put in a strong showing but single family homes contributed more to this increase than condos. Given this activity, August - and maybe even September - closings should be much higher than last year.
Pending Home Sales
July's huge increase in contract activity on top of June's 14.4% increase haven't yet flown through to closings. Consequently, July pending home sales have reached higher levels than 5 of the last 6 years. That's an 828 unit increase over last year which is totally out of character with the long term downward trend we have been on. Eventually these pending deals will feed future closings which is why I expect big increases in August and even September closings.
Distressed Home Sales
The percentage of Chicago home sales that are distressed somehow managed to eek out another decline to 3.3% from 4.7% a year ago. This was another record low despite the fact that we are approaching a limit to how low this percentage can go.
Chicago Home Inventory
If you will recall I switched to my own measure of home inventory in order to more accurately reflect the dynamic Chicago real estate market conditions. My months of supply calculation is based upon each month's contract activity instead of the annualized closings used in the standard MLS tools. As the real estate market normalizes I may be switching back to the standard tools for next month's update.
Using my calculation I came up with a record low in detached inventory of only a 1.7 month supply. Attached inventory was lower than last year with a 3.6 month supply but we've seen lower than that in the past. These levels followed the huge spike that occurred in April when contract activity ground to a halt.
Chicago Home Sale Market Times
The length of time that it took to sell a home in Chicago during July was largely unchanged from a year ago. Detached homes went under contract in an average of 70 days which is up from 68 days last July. Attached homes also took longer than last year, rising to 68 days from 64.
We can look to the median statistics for additional insight on how fast homes are selling. It's interesting to note that the median market time for detached homes was actually down slightly to 27 days from 28 days last year but the median market time for attached homes was down a lot more. That fell from 31 days to 23 days.
So detached homes are taking about the same amount of time to sell as last year but half of attached homes are selling faster than last year. Since the average market time for attached homes is actually up from last year that means that the other half are essentially taking longer to go under contract. So stories of a hot Chicago real estate market are greatly exaggerated. If it were true all these properties would be going under contract a lot faster.
Hop on over to our Web site where you can find additional Chicago real estate market information.
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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.