The Tale of Two Metrics: Exploring the Relationship between Available Homes and Successfully Closed Sales

Buying or selling a home in any market poses a certain level of challenges and dynamics. In 2023 these challenges include low inventory, climbing mortgage interest rates, and affordability. The media spins the real estate market in a variety of different ways that can overwhelm buyers and sellers. Today we are going to look at the data and make sense of what is really going on in the market. Locally we are members of Midwest Real Estate Data here in Chicago and the Chicagoland area and we are able to pull historic home sale data back to January of 2008.

The Number of Homes For Sale

We have received many questions from buyers related to the lack of homes available for sale in the market. We are going to look at how today compares to the past. The MLS allow us to pull data as far back as 2008. Keep in mind in January of 2008 we were experiencing the Great Recession,  but for comparison sake we are going to start there and look at the number of available homes for sale.

What's your guess?

• How many homes do you think were for sale in January of 2008 in Chicago and the Chicago suburbs?
• How many homes do you think were for sale in January 2023 in Chicago and the Chicago suburbs?

The delta between the two is surprising. In January 2008 there were 91,414 homes for sale and in January of 2023 there were only 16,540 homes for sale. There are far less choices for buyers today than there were in 2008. This holds true when we see the number of homes for sale stablize after the Great Recession. If you look between 2014 and 2019. At the low we saw about 36,000 homes for sale and at the high about 60,000 homes for sale. By comparison we have far few homes for sale than we have had historically speaking.

Housing Inventory

We see this trend continue when we look specifically at housing inventory measured in months. The metric of housing inventory in it's simpliest form is the number of months it would take for all of the current homes on the market to sell. Six months of housing inventory is typically considered a balanced market for comparison sake.

In January of 2008  we had 10.6 months of inventory and in January of 2023, we were at 1.6 months. So in January of 2008, it would take over 10 months to sell all of the homes available and here in 2023, it would take less than two months to sell all the homes currently available.

Similar to the above between 2014 and 2019 we saw a balanced market with inventory between 4 and 6 months depending on the time of year. Once COVID hit we saw housing inventory steadily decrease hitting a low of 1.3 months in early 2022. As we stand today we are at 1.6 months of housing inventory.

Closed Sales Compared to the Number of Homes For Sale

Both of the above charts have drastic movement from 2008 until now. We went from over 90,000 homes for sale in January of 2008 to under 17,000 homes for sale in January of 2023. 

What's your guess?

• Do we see a drastic difference in the number of closed home sales in January 2008 compared to January 2023 in Chicago and the surrounding suburbs?
• Do we see the similar movement in the data that we saw with the number of homes for sale and housing inventory in Chicago and the surrounding suburbs?

This might surprise you. In January 2008 we had 4,640 closed sales and January of 2023 there were 5,323 sales. If you remember in 2008 this was with over 90,000 homes available for sale and in 2023 this was with only just under under 17,000 homes available. So even with the delta of homes for sale, the number of sales still remained consistent. We see the number of closed sales typically climb in the first half of the year, peak and then retreat as we get into the later months of the year.

What Does This Mean For Me?

If you are a buyer it means there aren't as many houses available for sale as there were historically. This translates into less choices, more competition, and increasing prices. It is important that you work with an agent that understands the complexities of the market and understands the tactics and strategies necessary to navigate today's market.

If you are seller the low housing inventory coupled with strong buyer demand leads to lower market times and higher sales prices. Even though the market is favorable to sellers it is important that you work with an agent that understands how to use this to your advantage to negotiate the best terms for your sale.

As the market evolves, it is anticipated that the inventory will gradually increase, leading to a more balanced landscape for buyers and sellers. Are you interested in buy or selling a home in today's market? Schedule a free no obligation consultation today.