We’ve been chattering about the low inventory for the last two months. Crain’s confirms that in some Chicago neighborhoods and suburbs, it is below 3 months.
As of the end of 2012, the neighborhood with the lowest inventory level was the South Loop at just 2.3 months of supply.
The number of listed homes fell the most in the Near South Side, a community including the South Loop. A division of New York developer Related Cos. recently relaunched sales of about 500 units in three failed South Loop towers pulled from the market last year, but only a fraction are currently listed for sale.
It’s still slim pickings for many buyers in the neighborhood who can’t compete with investors paying cash, can’t finance a purchase in a building full of renters or don’t have the patience for banks to approve a so-called short sale, a red tape-heavy transaction resulting in a loss for the lender. Nearly 44 percent of all sales on the Near South Side last year were distress-related, according to MRED.
Trying to buy a loft near the Randolph Street restaurants? Good luck. Inventory is at just 2.4 months. Interestingly, several neighborhoods outside of the GreenZone also are at super low inventory levels.
Here’s the worst city neighborhoods according to Crain’s:
- South Loop: 2.3 months
- Near West Side: 2.4 months
- Avondale: 2.8 months
- McKinley Park: 3.1 months
- Washington Park: 3.2 months
- Douglas: 3.5 months
Though the supply drop means buyers have fewer choices and less leverage in negotiations, it’s good news for many sellers, who can sell their homes more quickly than before — and have more power to hold the line on prices.
Indeed, local home prices have stopped falling. The S&P/Case-Shiller index of Chicago-area single-family home prices rose 2.2 percent last year, the first annual gain since 2006. Still, that was the weakest year-over-year gain of the 20 cities tracked by S&P/Case-Shiller.
The local residential market still faces challenges. Foreclosures and distress remain a problem in many neighborhoods and suburbs, and many homeowners are still “underwater,” owing more on their mortgage than their home is worth.
How much will prices have to rise before we start to see a lot more inventory?
Or will we be stuck in this low inventory market for years?
Inventory reduction: number of local homes for sale falls [Crains Chicago Business, David Lee Matthews, February 28, 2013]