A spring and early summer surge in home buying in the Chicago area came to an abrupt halt in July, as local home sales slid 7.3 percent from a year ago.
It was the first monthly decline in year-over-year existing home sales since November, and much sharper than the 1.9 percent drop reported then, according to Illinois Realtors.
The real estate trade group said 11,716 homes sold in July, compared with 12,645 in July 2015. Yet prices rose modestly. The median sales price was up 5.8 percent to $238,000. That compares with $225,000 a year ago.
In Chicago, July's decline in sales activity was even more pronounced. Sales fell 11.9 percent year-over-year, to 2,714 homes sold. The median price rose just 1.9 percent, to $290,000. Condominium sales fell 14.8 percent, while the median condo price rose 3.9 percent to $321,950.
The downturn in home sales is expected to continue for a few months. Geoffrey Hewings, director of the Regional Economic Applications Laboratory at the University of Illinois at Urbana-Champaign, is forecasting a decrease of 7.3 percent to 9.9 percent in sales through October.
The forecast for the three months including August "suggests negative growth both on a yearly basis and a monthly basis," Hewings said in a report for the association. He predicts a moderate increase in sales prices.
Mike Drews, president of Illinois Realtors, said a lack of inventory in the market is pushing sales lower and prices higher. Compared with a year ago, the number of Chicago-area homes listed for sale in July was 41,429, down 16.4 percent.
Low inventory is having a similar effect across the U.S., the National Association of Realtors said Wednesday. Sales of existing homes fell 3.2 percent last month to a seasonally adjusted annual rate of 5.39 million. The decline marks a reversal from rising demand that pushed sales in June to their highest level since February 2007. Year-over-year home sales were down 1.6 percent. The median home price nationally was $244,100, up 5.3 percent from July 2015.
With a lack of inventory, home sellers are able to list their homes at higher prices and still attract buyers. But Lynn Madison, president of the suburban Mainstreet Organization of Realtors, also noted that rising prices in Chicago's suburbs have caused some potential buyers to become reluctant about making a purchase.
In the Chicago area, homes on average were on the market for only 44 days, according to Illinois Realtors. A year ago, homes were going under contract within 50 days. In the city of Chicago, homes went under contract in an average of 38 days.
It's a seller's market, but even with inventory limited, not all locations or homes benefit equally, said Karen Irace, an Orland Park real estate agent with Re/Max.
Among homes priced over $700,000, there is a 9.2-month supply of homes, which is higher than a year ago. The $500,000-to-$700,000 range has a 5.7-month supply, down from six months in July 2016.
A housing market switches to a buyer's market when there is enough inventory to accommodate about six months of sales.
For the upper-priced homes, Hewings said there are simply fewer people to buy at those prices. There is only a 3.1-month supply of the $200,000-to-$300,000 homes that appeal to families as they move up from previous homes. There remains little interest in home buying among first-timers, and especially millennials, Hewings said.
Hewings noted that at the current rate of price appreciation, it still will be 3.4 years before prices in the Chicago area are fully recovered from the housing crash.
Communities that had sharp increases in the number of homes placed under contract in July were Arlington Heights, up 25.7 percent; Aurora, up 16.8 percent; Buffalo Grove, up 14.9 percent; Palatine, up 13.6 percent; and Schaumburg, up 34.3 percent, according to Mainstreet.
In Western Springs, the median sales price of a single-family detached house rose 10.4 percent to $615,000, and while the number of homes sold in Elmhurst dropped 7.1 percent to only 65, the median price jumped 44.6 percent to $600,000.
Large increases in the number of homes sold were reported in Burr Ridge, Clarendon Hills, Lisle and Villa Park.
In Cook County, sales dropped 10.3 percent, with the median price up 5.3 percent, to $249,000. Condo sales dropped 12.1 percent, and single-family homes 8.7 percent. But the median condo price jumped just 2.1 percent to $240,000 while the median price of a single-family home was $253,000, an increase of 6.8 percent.
Declines in sales volume in Lake and DuPage counties were more modest — just 1.9 percent and 4.4 percent. But in Will County, home sales fell 7.9 percent.
Associated Press contributed.