As we wrap up the 2nd Summer month, the national media is all a-buzz with the “news” of recovery.  While I am as hopeful as the next consumer about the prospect of recovery, there seems to be good and bad in our local housing market.

Let’s start with the good.  The numbers and statistics mentioned here represent a look at the month of July for the towns of Aurora, Batavia, Elburn, Geneva, Montgomery, North Aurora, Oswego, Plainfield, St Charles, Sugar Grove, and Yorkville.  The number of homes listed for sale continues to be less than the same time period last year.  Good news, as more homes on the market equals downward pressure on prices.  Remember your 1st year Econ class, supply and demand.  Homes for sale is 16.3% down compared to July of last year.  The only town in my survey with an increase in the number of homes for sale was Batavia, and it was only up 5%.

More good stuff here as 4 of these communities have inventory levels that are single digit.  The calculation here is done by taking the number of homes sold in a month, and dividing it into the number of homes for sale.  This results in a number called the “absorption rate” or “months supply of inventory”.  Any number of 10 or more months is considered a buyers market, and a sign of a weak housing market.  Montgomery wins this category with a 7.6 month supply of homes.  Oswego, North Aurora and Plainfield all come in with a number in the 9.7, 9.9, and 9.8 respectively. (I know, a little rounding and we are in the double digits, but work with me here).  Montgomery also wins the award for largest percentage of homes on the market under contract at 15.25%. Compare that percentage to the 4 and 5 percent from the Winter months, and things look rosy!

There is some not so good to keep our optimism in check here though.  The towns along Route 47 continue to struggle.  Elburn has an inventory level of over 16 months, with a percentage under contract of only 6.56 percent.  The under contract average for the area I sampled is 10.6%, and the average months supply of inventory for the area is 11.3 months.  Sugar Grove has the 2nd biggest supply percentage wise at 15.3 months, with Yorkville at 12.5 months inventory.

A look behind Montgomery’s strong numbers also brings a little temperence to our good mood too.  Of the sales closed in July 2009, a full 59% of the homes sold were in pre foreclosure, or already foreclosed on.  The number in Oswego was 44%, and the number for Plainfield was 39%.  While it is good to get these homes off of the market, (decrease the inventory), typically “distressed” sales represent significant discounts in price, and mean more downward pressure on prices and values. That does not sound like a recovery, at least not in the short run.

What I have failed to hear in any of the “worst is over” reports on the real estate industry is the word “season” or “cycle”.  We are wrapping up, with August, what is every year the “spring market” or “buying season” for real estate.  The increase in number of homes sold usually kicks in sometime late February, and starts a normally steep decline in August.  2009 has mirrored this cycle so far.  How fast will the number of sales per month fall?  When will it head north again?  Are we truly at the bottom?  Watch with me…