December 14, 2010 - This is the time of year where every real estate site is posting its 2011 real estate market forecast, so I thought I would do the same. My thoughts on next year's housing market will not come as a surprise to our long-time readers, as we are constantly measuring and reporting the current state of the Tallahassee real estate market.
We have projected and reported falling home values in Tallahassee for the past three years. We will continue to do so now. While it is no fun to be the bearer of bad news, I think it is important to have a great understanding of the Tallahassee housing market if you are buying or selling anytime soon. With knowledge comes power, right?
Year Over Year Home Sales Report
One quick way to see "how things are going" is to study year-over-year results for home sales. Did we sell more in November of this year compared to November of last year? This is great trend information that let's us know the current state of the housing market.
Perhaps the most troubling message that this real estate graph delivers is that we are on in the midst of a serious recovery. The blue arrow points to 39 consecutive months of declines (a statistical abnormality to say the least) which was only disturbed by the fact that the Federal Government got involved for a brief period of time. After throwing a few trillion dollars at the problem, they've gone away and the trend has returned.
The year-over-year home sales graph clearly shows that the current trend is for fewer home sales compared to last year. While this can change at any time, I have some more information that will point to a likely continuation of falling home sales levels.
Unit Sales Trends Handy For 2011 Real Estate Market Forecast
Current home sales trends, when viewed including a healthy portion of our past history, allows one to project into the near future. Examine the following graph and consider what it is saying about the 2011 real estate market.
The graph above demonstrates the following three trends:
- On average, 260 homes sold each month for the past year, and this trend is falling
- On average, 390 homes sold each month for the past 5 years, and this trend is falling
- On average, 480 homes sold each month for the past 10 years, and this trend is falling
We must project a continuation of this falling trend until something significant changes in the market. The best way to look for a change is by following politics and by following the current supply and demand in the Tallahassee housing market. Needless to say, the political landscape is far too involved to be covered in a summary 2011 real estate market forecast such as this blog post, but supply and demand are simple enough to measure.
Supply And Demand Make 2011 Real Estate Market Forecast Clear
When we observe the current supply and demand report for Tallahassee real estate, we quickly see a glut of supply that is vast enough to ensure that pricing pressures will not ease in 2011.
By clicking on the real estate chart above, you can see a detailed housing supply and demand report by area and price range. Currently, the Tallahassee real estate market has 12.4 months of supply (more than double what is required for a balanced market), which assures us that supply will outpace demand again in 2011 and home values will continue to fall.
One Positive Sign For Tallahassee Housing
There is one trend that appears to be moving in a positive trend, and it is one that we monitor on a regular basis. The Pending Home Sales Report shows that the rapid decline in new contracts has stalled, and we might be stabilizing in this critical, forward looking report.
When we look at the graph above, we see that the number of new contracts (pending home sales) has been on the rise since the middle of November. Considering it had previously been falling since the end of April, this is definitely one very good trend and a positive sign for the Tallahassee housing market.
2011 Real Estate Market Forecast
High supply and historically low demand indicates that we will see falling home values again in 2011. The total number of homes sold should be very near the numbers that we posted in 2010, though I suspect 2011 might actually be a bit lower. This forecast would make 2011 the worst year on record (my records go back to 1991) for somebody who has to sell a home in Tallahassee.
Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.