Finally, even after having snow in April – I really
believe that we are going to be seeing a pretty spring. It has been a long hard winter, and I
can finally feel the real estate market starting to wake up!
So, how is the market?
There are a couple of numbers that I like to study, when
determining how the market is performing. First, I consider the absolute number
of units sold on a month-on-month and year-on-year basis. Are we selling more
or less properties than last month? And are we selling more homes than last
year this time?
Below are a series of charts that can help illustrate
this. These charts list the absolute number of units sold. Indicated are April
of 2013, March of 2014, and April of 2014. In this way, one can tell both the month-to-month trend and
also see what has been the most recent historic level for a particular month.
In general, while closed sales in April were down from
both April of 2013 and March of 2014, I can’t say that I am particularly surprised.
Properties usually close 30-90 days after the contract is written, so sometimes
these numbers tend to reflect more historic activity. Clearly this winter we have seen a bit of decline in the
number of sales. If the trend continues in May, June and
July, I will be a little more concerned.
Considering the number of units in isolation doesn’t
provide the complete picture. Also needed is knowing how many new listings came
on the market. Are the inventory levels dropping to a more balanced market? The
following chart shows the number of properties that went under contract during April
versus the number of units that were new to the market this last month.
As might be expected, more units came on the market then went under contract. This is usually what happens in the spring. The good news is, that there isn't a significant increase between new and sold as there had been during the housing crisis. Sales are just about keeping pace with new inventory coming on.
The numbers that most Realtors like to follow are the
inventory levels. Inventory is measured in months. What
"month's inventory" means is this: if sales were keeping pace with
new properties coming on the market, how many months would it take to sell the
outstanding inventory? It's a better way of interpreting the unit
count, because it reflects how quickly certain price points are moving or
stagnating.
A healthy balanced market is around 6-10 months of
inventory. An unbalanced seller’s market is about 0-8 months of
inventory. And a buyers’ market is considered anything over 8 months of
inventory.
Across the board things are in pretty good shape. In Kenilworth, Lake Forest and Lake Bluff inventory levels are a little high, but nothing dramatic. We see some shortages and sellers' markets in Wilmette and Evanston.
Keep in mind, these charts only present the numbers in
aggregate. Various price points have higher or lower levels of inventory.
High end inventory remains pretty high. It's still a great time to buy one of those dream houses on the north shore!
In summary, the market is back to normal -- yeah! It's been a long time coming.
There were moments during April when it felt like it did in 2005 at the peak of the market. With the exception of high-end home, it's exciting to know that we have cleared out much of the overhang of inventory.
With the great weather on our way, one can hope that May will be the best month yet!