It looks like the Chicago real estate market is off to a really strong start in 2021 with January setting a 14 year record high for closings. Closings last month were 17.1% higher than last January as the market continues to make up for lost home sales early in the pandemic. In fact, for the trailing 12 month period sales were actually slightly higher than for 2019. In other words, the recovery is complete and from here on out any continued growth in sales will push us above 2019 levels. Comparing ourselves to 2020 will be pointless for obvious reasons, though the year started off with a nice increase over 2019 - until April.
Note that the Illinois association of realtors will report a 14.1% rise for January because of the weird way they calculate their comps.
You can see a lot of these patterns in the graph of monthly sales below. The green line is the rolling 12 month average and it just poked up above December 2019 levels.
What I don't show in the graph below (it would be too busy) is that the bulk of the gain in sales actually came from condos, which had been lagging until January. If you split it out you would see that condo sales were actually up 21.4% while single family home sales were up only 6.0%. It could be that the single family home inventory shortage is holding back sales of those homes. And, obviously, condos are not as much out of favor as the recent popular narrative suggests - except maybe in the Loop.
Chicago Home Contract Activity
A significant increase in contracts for home purchases is confirming the rise in closings. We've had 8 consecutive months of large increases. January contracts were up 15.8% over last year so that should continue to feed the growth in closings for the next month or two.
As you can see in the graph below January contract activity was the highest in the 13 years since I've been tracking the data and the moving average is also now running higher than it was in late 2019 and early 2020.
Pending Home Sales
The number of homes waiting to close is also on the rise. Pending home sales at the end of January hit a 4 year high and the moving average is higher than late 2019/ early 2020 also. Pending home sales rose by 462 units from last year. To put that in perspective last February had around 1500 closings so that increase could significantly impact February closings. So not only are the new contracts resulting in significantly more current closings but they are also filling the pipeline with future closings.
Distressed Home Sales
The percentage of home sales that are distressed continues to decline in light of the foreclosure moratorium in place. January normally has a pretty high percentage. Last year it was 9.1% but this year we hit another record low of only 3.2%. I don't know that it can go much lower than where we are so we are not going to be seeing the kinds of seasonality in the numbers that we have historically seen.
Chicago Home Inventory
I'm still running my own inventory numbers to better capture the dynamics of the current housing market. I'm calculating months of supply based on current month contract activity. On this basis detached home inventory is still at ridiculously low historical records. We were down to a 1.8 month supply in January. Attached inventory is clearly higher but not to the point suggested by reports of condos being out of favor right now. Although there are many more condos on the market now, as I pointed out above, there are a lot more contracts being written also. We had a 3.8 month supply of attached inventory at the end of January compared to 3.9 months last year. So inventory (months of supply) is actually lower.
Chicago Home Sale Market Times
Market times are similarly encouraging. Detached homes that sold in January did so in only 75 days, down from last year's 93 days - as you might expect when inventory levels are so low. However, attached homes also sold very quickly. January closings sold in only 92 days compared to 109 days last year.
There's also an interesting observation in the graph below. For at least 6 years condos consistently sold faster than detached homes - until around 2019. Then they ran very close to the same market times until the last few months when detached homes started selling faster. So some sort of shift started to occur even before the pandemic hit.
If you visit our Web site you will find that we have additional Chicago real estate market data available there.
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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.