How are Chicagoland's Condos & Townhouses Selling?

Many home buyers today are looking to take advantage of great prices on condominiums and townhouses. When it comes to buying a condo, location is paramount, and different areas in Chicagoland are in very different stages of this downturn in the real estate cycle. Looking at a market's absorption rate tells you how "backlogged" the market presently is- How many properties are for sale, divided by how many have sold in recent months, and if that rate stays constant, how many months will it take to sell them all? This is a great indicator of future price direction, year-over-year improvement or decline, and the relative health of one area versus another.

Those of you wondering what makes a buyers market versus a sellers market? Absorption rates of well over 6 months should tell you that it is a buyers market. It is a buyers market in much of Chicagoland, but not all areas are created equal.

I've picked one community from North, Northwest, West, Near West, South West, and South Suburbs, as well as a popular Chicagoland neighborhood just outside of the loop. You will notice that the market has improved from the winter's heavy saturation, but pay close attention to where 2008 March statistics are in contrast to March of 2007. Just click on the graphs to see each one in greater detail. I sampled Evanston, Schaumburg, St. Charles, Oak Park, Naperville, Orland Park, and Lincoln Park.

Evanston

Schaumburg

St. Charles

Oak Park

Naperville

Orland Park

Lincoln Park

What should we make of all of this? It tells me that there is a looming reduction in list prices and selling prices coming out of the near west suburbs, and the southwestern suburbs.

Theory: Based on the perspective that the "epicenter" of values resides in Chicagoland's city limits, one assumes that prices become lower the further away one travels from Chicago. If one area has a higher inventory to be worked off, then prices will drop, causing the next-furthest area to experience a stagnation in sales. Then as that area accumulates inventory, sellers recognize the need to reduce prices. As they act, inventory drops, and the process continues. As an area further out drops in price and experiences a wave of inventory absorption, the desirability of the closer area then diminishes, as a longer distance from the "epicenter" becomes acceptable to homebuyers. This eventually causes the process to start over again - inventory builds at the epicenter, prices drop, and as buyers eventually reach their limit to how far they will live from the epicenter, they decide that as prices in the epicenter reach a lower level, justification for the still more expensive, but closer, purchase arises once more.

Absorption is just below the 6 month mark in Lincoln Park, and around the Northern and Western collars of Chicagoland it is hovering at or around 6 months. It remains at higher levels in the near west and southwest suburbs. Based on this ideology, it would seem that near-west suburbs may experience a period of depreciation, with the farther western and southwestern suburbs then experiencing a greater increase in inventory.

Is Chicagoland moving towards Milwaukee? Is Joliet and Kendall County growth justifying a Peotone Airport & subsequent Southwest suburban buildup? These trends strike down any notion regarding "The Loop" as the epicenter for real estate values, and the movement of values based on proximity to downtown Chicago. Any idiot knows that values vary drastically across the north and south sides of Chicagoland. If that is the case, then are these areas independent of one another in their progression through the real estate cycle?