There are a few statistical measures that realtors use to monitor the condition of real estate markets. Two of these measures are months supply of home inventory (how many months it would take to sell off the current inventory at the current sales rate) and market time (how many days homes have been on the market). Seems simple enough, right? Not so fast. Believe it or not there is plenty of room in defining these measures to make them look either better or worse.

Let’s start with months supply of home inventory. Realtors have access to a statistical tool that conveniently spits out months supply of inventory for just about any slice of the Chicago real estate market you might want. However, for purposes of this “official” calculation the tool starts with the number of homes on the market at any time during the month and then reduces that number by the number that went under contract during the month and the number of listings that expired. I guess the rationale for doing it this way is that this represents how many homes remain to be sold. The only problem with this approach is that expired listings were part of the overhang that needed to be absorbed during the month. The fact that sellers gave up on them doesn’t make that housing supply go away. Therefore, I think it’s appropriate to include them in the calculation. The graph below compares the two approaches for measuring months supply of condo (2 – 3 bedrooms) inventory in Chicago. As you can see, the more comprehensive measure is always larger than the official numbers – especially in the fall.

BTW, you will notice that the June home inventory level for Chicago is actually lower than last  year for the first time in over a year.

Then there’s the market time. The real estate industry’s official measure of market time is based upon the number of days that a home was on the market before going under contract. Therefore, it only measures the market time for homes that actually sold! So, it excludes all the homes sitting on the market unsold. Well, that seems sort of biased, doesn’t it – not that the real estate industry would ever want to paint a pretty picture of the real estate market? So I believe that it is more accurate to calculate the average market time of all homes – sold and unsold. This more accurately reflects the pain of home sellers. The graph below compares the market times in Chicago using the different methods. As you can see, it’s a fairly dramatic difference and the more comprehensive method also reflects the seasonality that you would expect to see in a measure like this.

Effective July 1, 2009 we have restated all of our statistics (current and historic) using these new methodologies. As always, you can find Chicago neighborhood specific real estate market data here:

• Edgewater
• Hyde Park
• Lakeview
• Lincoln Park
• Lincoln Square
• Logan Square
• Loop
• Near North Side
• Near South Side
• Near West Side
• North Center
• Rogers Park
• South Shore
• Uptown
• West Town

This week several statististics on the state of the Chicago real estate market came out and all of them paint the same picture: the real estate market is still weak.

First there was the Case Shiller index which indicated that home prices in the Chicago area fell once again in March. They are down 18.6% year over year and down 27.4% from the peak in September 2006.

Then the Illinois Association of Realtors came out with the sales statistics for April. For the third year in a row sales are down more than 20% from the previous year:

I also pulled down the quarterly sales statistics for the city of Chicago from the Chicago Association of Realtors and it shows the lowest level of sales since the 1995 – 1996 time period:

You can always get the latest version of these and other housing market statistics on our Chicago real estate market trends page.

Just updated the employment picture for the greater Chicago area and it’s not pretty. Essentially all the growth of the last decade has been wiped out and the unemployment rate is the highest it has been over that decade. Of course, the housing stock was built (and continues to be built) for employment levels we never achieved. It’s no wonder that housing prices have been on the decline and that we’re starting to see some rational sellers capitulate on this point.

There are now over 350,000 fewer jobs in the Chicago area then at the peak in 2007. We are approaching decade lows and are already lower than we were 10 years ago.

Just completed our bi-monthly (Strange word. Could mean twice a month or every two months. We use the latter definition.) assessment of the 2 – 3 bedroom condo market in Chicago and some of our key neighborhoods and the data masks what’s really going on. As the graph below shows the fall and winter were brutal with inventory levels reaching about a 2 year supply. Although inventory has now dropped to a bit less than 1 year’s supply (still a lot) this masks the fact that the sales level is half of what it was a year ago. The reason that inventory levels aren’t higher is that there are fewer condos on the market right now than last year and, more significantly, tons of condo listings are expiring or being canceled. Sellers are still holding out for better days.

The other notable trend is the number of days that it takes these condos to sell. 4 out of the last 7 months have seen this number above 100 days. People who have to sell stick it out and take the price cuts to move on with their lives.

You can always find our latest statistics on the Chicago market here and we also keep inventory and days on the market data at the neighborhood level:

• Edgewater
• Hyde Park
• Lakeview
• Lincoln Park
• Lincoln Square
• Logan Square
• Loop
• Near North Side
• Near South Side
• Near West Side
• North Center
• Rogers Park
• South Shore
• Uptown
• West Town

As you know, I don’t sugar coat the real estate news so here it is. The housing market in Chicago is still on the decline. We’ve had a couple of different statistics released in the last 2 days that show that both home prices and sales volumes are continuing to decline.

• The Case Shiller index for December came out yesterday
  • Home prices are back to December 2003 levels
  • Prices are down 14.3% in the last year
  • Prices are down 18.6% from the peak
• The Illinois Association of Realtors released their sales statistics for January and it shows that home sales are down 24.4% from 2008, which was down from 2007, which was down from 2006.

You can always find these and other statistics along with charts on our Chicago Real Estate Statistics page.