On a national and local level, pending home sales are up as inventory is coming back down to a normal 5 to 6 months supply. The Near North side of Chicago is currently has low inventory with 3 to 4 months supply. Rent prices are climbing 5-10% over last year, and home buying is becoming attractive again. There is momentum in the real estate market as interest rates remain low, employment stability returns and consumer confidence improves. Economists are encouraging consumers to consider getting into the real estate market.
While buyers and investors are entering the real estate market, there will be more distressed inventory coming to market too. Since Illinois requires foreclosures to go through the judicial process, it will take longer to clear out the distressed sales. As of April, the state of Illinois had just over a 2 year supply of distressed homes. Across Chicago’s Near North Side distressed inventory currently available makes up between 5-15% of all homes on the market in Lincoln Park, Lakeview, Bucktown and Wicker Park for single family homes, condos and townhomes. Of the pending and closed sales since December of 2011, distressed property has made up 10-20% of the sales for the same neighborhoods and home styles. The exception to that is condos and townhomes under $500,000 where 60% of those properties were distressed sales.
Since 2009 foreclosures have sold at a discount of 28-29%, short sales have gone from discount of 18% to a 23% discount. The time it takes to get through the short sale and foreclosure process has been somewhat simplified, but there is still much inventory for Illinois to get through. It’s likely that the longer it takes for an area to absorb short sales, the deeper the discount for short sales will become.