If you regularly read this blog you know that the Chicago real estate market has been a bit weak this year – as measured by home sales activity. In the previous 12 months the average decline from a year ago has been 7%. That’s why it’s actually good news when the decline for September came in at only 0.5%.
Nevertheless, the graph below shows September as having the lowest number of closings in the last 7 years. As evidenced by the light blue moving average line the trend has been down for a couple of years now.
Please note that in about 2 weeks we’ll be hearing from the Illinois Association of Realtors and they will be telling us that the sales decline for September was actually 4.2% but don’t believe them. They tend to overstate the decline by comparing current preliminary numbers to final numbers from a year ago.
Chicago Home Contract Activity
It should be no surprise that contract activity has also been trending down since a contract often results in a closing. The graph below shows much of the same pattern that we just saw above with September down 3.9% from last year. That’s the lowest level in 8 years and it’s an indication that October is likely to be another slightly down month.
Pending Home Sales
Chicago’s pending home sales is another indicator of what is likely to close over the next month or two. It tells us how much is in the pipeline and, as the graph below shows us, it’s been on a steady decline for the last 8 years. In fact, September was the first time in 17 months that it actually went up from the previous year. It was a small increase. Only 37 units.
When pending home sales decrease it’s an indicator that closings have been supplemented by a draw down of the pipeline. The pipeline can’t go down forever so that source of closings has its limits. If we have finally reached the point where pending home sales are no longer contributing to closings we could see lower closings than we have been seeing – all else being equal.
Distressed Home Sales
As has been the case for 9 years the percentage of Chicago home sales that are distressed continues to decline. Only 6.0% of September’s sales were distressed compared to 7.1% last year. As you can see in the graph below the magnitude of the drops are necessarily decreasing. While I suspect we will not reach the double digit percentages again any time soon I also don’t see much more downside.
Chicago Home Inventory
If you look at the graph below you’ll see that for the past several years there has been a larger inventory of detached homes for sale in Chicago (as measured in months of supply) than attached homes (condos/ townhomes). A few months ago that relationship flipped and there is now a 4.7 month supply of attached homes on the market compared to a 4.0 month supply of detached homes. While the supply of attached homes is up from 4.4 months last September the supply of detached homes is down from 4.7 months. Granted, we are hitting the seasonal high in home inventory but the inventory of attached homes is starting to get to a level where buyers are believed to have more power than sellers.
Chicago Home Sale Market Times
As you would expect the time it takes to sell a home in Chicago tends to move in parallel with the inventory of homes for sale. Therefore, as the inventory of attached homes for sale has risen so has the market time. In September, the attached homes that closed took 78 days to go under contract vs. 65 days a year ago. But, despite the significant decline in inventory of detached homes, their market time only dropped from 80 days to 79 days.
Our Web site also contains additional Chicago housing market statistics that you may find interesting and some of that information is updated on a daily basis.
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.