Chicago Real Estate Market Trends, Data, Statistics
Case-Shiller Home Price Index For Chicago
Home price data for Chicago single family homes and condos is reported monthly and goes back to January, 1987. The graph below is current through January, 2013 and includes a trendline, conservatively established for single family homes during a 12 year period of rather reasonable price increases.
Interestingly, it looked like the index for single family homes bottomed in April of 2009, but then it dipped three more times. Much of this repeated dipping is a seasonal effect but this year the seasonal recovery in prices was exceptionally strong. May and June came along and blew the numbers out of the water – prices were up 4.5% and 4.6% from April and May respectively, which is huge. Even after adjusting for seasonality these were the largest one month increases in 24 years. December came in with a 0.7% decrease over November, but that is actually a 2.2% increase over last year. This was the second month in a row that Chicago home prices rose over the previous year. Single family home prices are now at the level last seen in May/ June 2001, having fallen a total of 33.2% from the peak in September 2006. However, the index is running 27.8% below the trendline, which implies that there is some upward pressure to return prices to the “norm”. But I’ve been saying that for a while.
Condominium prices decreased by 2.6% from November. The condo index is now back to July/ August 2000 levels, having fallen a total of 32.8% from their peak in September 2007. However, condominium prices were also up on a year over year basis – by a whopping 5.2%.
Please note that these numbers are based upon a 3 month trailing average of home sales so they are looking back pretty far.
Illinois Association of Realtors Monthly Sales Data (Chicago PMSA)
The IAR tracks monthly units sold for the Chicago Primary Metropolitan Statistical Area (PMSA), which includes a broad area of Chicago and its suburbs. Units sold can be a leading indicator of the direction of housing prices. The graph below shows single family homes plus condominiums sold from January, 2006 through April, 2013, along with a 12 month moving average (to remove seasonality effects). In addition, we have flagged all April data points for comparison purposes.
The graph shows that home sales in the Chicago area have strongly rebounded over the last 4 years. In fact, April sales reached the highest level in 7 years – much better than for the city of Chicago alone.
Chicago Association of Realtors Quarterly Unit Sales for Chicago
CAR tracks quarterly residential units sold for the city of Chicago. The graph below shows single family homes plus condominiums sold from the first quarter of 1992 through the third quarter of 2012. In order to smooth out the seasonal patterns the graph also displays a rolling 4 quarter moving average of the data.
While the first half of 2010 had a significant impact from the homebuyer tax credit the vacuum left behind caused sales to decline in the second half of the year. The market did not begin to return to normal until some time in 2011 and it has been on a tear during 2012. However, sales have a long way to go to catch up to the bubble peak and in the third quarter of 2012 they were about where they were in the third quarter of 1998. And you know what? Look at that employment graph below and you will see that employment is about where it was 14 years ago.
It’s also interesting to note that Chicago home sales peaked in the last half of 2005 but prices didn’t peak until October, 2006. This reinforces the idea that unit sales are a leading indicator of home prices.
Chicago Condo Inventory And Days On Market
The sales rate impacts the months supply of inventory on the market and how long properties have been on the market. Ultimately, inventory levels impact home prices. In the graphs below we track the months of inventory of condos and single family homes in the city along with the market times for 2 – 3 bedroom condos. Why two separate populations? Long story but let’s just say that our history on 2 – 3 bedroom condos goes way back and we have been calculating these statistics a bit differently than the industry. Our days on market numbers are for all homes listed – not just the ones that sell. We feel that this more accurately reflects what’s on the market.
There is only one problem with these statistics. A fairly significant number of properties that go under contract don’t close – maybe 15%. So, as the data ages and properties come back on the market, the months of supply numbers change retroactively for the last couple of months. This leads to the most recent months of supply numbers being understated.
Home inventories in Chicago had been steadily trending higher until June 2009 when they started to improve from 2008. That improving trend continued until May of 2010 when the months of supply of homes increased over the previous year.
As the tax credit expired contract volume plummeted, with June contract volume 32% below the previous year. However, the number of condos on the market also declined so the months of supply did not increase as much as you would expect. Home inventory levels increased to an 18 – 19 months supply right after the expiration of the tax credit, which was way above the previous summer’s level. Since then contract volume has improved and sellers have been holding off so inventory levels have improved considerably, with April hitting the lowest level on record for this time of year since we began tracking this data – actually it’s the lowest level for any time of the year. That is definitely a good sign for home prices as restricted supply should support higher prices.
Meanwhile, the market times for condos that have not been sold have historically fluctuated between 200 and 250 days depending upon the time of year – higher during the late fall and early winter months – until July. July took a steep dive below 140 days and I knew that couldn’t be real so I dug into it. It turns out that the drop was caused by a few buildings taking their long in the tooth listings off the market. Since these listings had all been on the market in excess of 2000 days it had a significant impact on the average. Hence the folly of relying on averages.
The troubled buildings responsible for this anomaly were all in the South Loop and apparently old enough to be in museums: One Museum Park West, 1600 Museum Park, and Museum Park Place South. About 500 unsold units were purchased in these buildings in this time frame by Related Midwest and are no longer listed on the MLS.
Chicago Area Employment
A great indicator of long term demand for housing in any region is the employment statistics. People can’t afford to buy homes if they’re not working. Therefore, we track the employment numbers reported by the Bureau of Labor Statistics for the broad Chicago metropolitan area, which includes such towns as Naperville and Joliet. We track employment instead of the unemployment rate because the latter is strongly affected by estimates of the labor force – and it’s the employed that buy homes.
These numbers had been showing growth until June 2008 when employment started to drop from the previous year. After plumbing 14 year lows, Chicago area employment finally rebounded during 2010 and has been on a general upward trend since. Since the bottom in January 2010 we’ve seen an increase in employment in the area to the tune of 146,000 jobs. But a whopping 317,000 jobs have been lost in total since the peak in July 2007 and that puts us back to May/ June 1997 levels of employment. Although the unemployment rate for the Chicago area has been trending downward lately this has been largely driven by a substantial increase in the estimated labor force. From a low of 3.7% in October 2006 we are now at 9.9% unemployment, which is the highest unemployment rate in a year and a half.
Unfortunately, the most recent employment numbers have been pretty bleak, with the Chicago area losing 106,000 jobs in just the last 4 months. It does look like this is partly a seasonal effect but it seems huge even for that. What gives?
And when people aren’t working foreclosures happen. The following graph, based upon Realty Trac data, shows the number of properties experiencing “foreclosure activity” by month – which means that the property owners received some kind of official notice pertaining to foreclosure. However, the aggregate statistics overstate the problem somewhat in that they include all follow up notices – i.e. a distressed property will appear in the numbers multiple times as it passes through various stages of foreclosure. For that reason it’s more instructive to look at the individual components of the activity numbers, since a property is only counted once at each stage. While most of 2012 saw higher foreclosure activity than 2011, recent months have trended downward and the number of homes in default seems to have stabilized.
Even more interesting is the percentage of home sales in the Chicago market that are distressed – either bank owned or short sales. The percentages are clearly seasonal, dropping off during the summer when there is plenty of inventory but rising during the winter when the more desperate sellers tend to be out. 32% of April’s sales were distressed, which is actually lower than 3 of the last 4 years and clearly the trend is downward.
I’ve opted to produce my own data for these distressed sales rather than use RealtyTrac’s foreclosure sale numbers. I’ve seen too many peculiarities with the RealtyTrac numbers to trust them and at least I know that these numbers come from a reliable source. I think RealtyTrac is grossly underestimating the number of foreclosure sales in Chicago.
Chicago Community Real Estate Market Statistics
For each of the following Chicago neighborhoods we provide trend data for condo inventory and the number of days on the market for sold condos as an indicator of the health of the neighborhood real estate market. We update this data approximately every two months.
- Hyde Park
- Lincoln Park
- Lincoln Square
- Logan Square
- Near North Side
- Near South Side
- Near West Side
- North Center
- Rogers Park
- South Shore
- West Town
S&P Homebuilders Index
The stock market has an uncanny ability to predict the future – at least it’s better at it than professional forecasters. Therefore if you want to know what the outlook is for the housing market you would be well advised to look at the trend in the S&P Homebuilders index. Here is an up to date graph for an ETF that tracks this index. Note that the index keeps hitting new highs.
Don’t agree with it? You are free to buy it or short it and attempt to make money on your superior knowledge. But be careful. Smarter people than you have tried and failed to beat the market!