Predicting The Housing Market Turn

Posted by Joe Manausa on Wednesday, June 24th, 2009 at 11:43am.

After reading The State of the Nation's Housing 2009 from the Joint Center for Housing Studies of Harvard University, it became clear to me that much of the rest of the country is already seeing some signs of a housing market turn. More importantly, it made me fully aware of the fact that many learned people are seeing reasons why it should and will be occurring.
But how do you predict the turn of the housing market in Tallahassee? There are so many factors involved that you cannot simply point to any one factor, so I thought I'd summarize why I think I know when the turn will begin.
First of all, the problems that we are seeing in the housing market are bundled with all the other financial problems that are happening at the same time. The financial markets are in a mess, the economy is staggering, and real family wealth has taken a hit all over the country. I know that real estate is local, but sometimes what is happening locally is also happening nearly everywhere else. Knowing this is the key to predicting the turn in the housing market.

Defining The Turn In The Housing Market

Perhaps the first thing I need to do is to define what I mean by "the turn in the housing market." In Tallahassee, we are currently seeing fewer and fewer homes sold on a daily basis (take the past 365 days, count the number of homes sold, divide by 365). By looking at  a real estate graph of daily home sales, we can say that the housing market is clearly getting worse each day.

Therefore, my definition of the "housing market turn" is the point in time when daily home sales go from declining to rising. Due to the nature of market cycles, we will not be able to "call a market bottom" until well after it has occurred. If you look at the graph above, you can see several times during the current decline where it appeared as if the direction was turning to the upward direction, only to plateau and then continue on its travel downward.

Another Way To Look For The Housing Market Turn

Monitoring the daily home buyer activity graph is a bit tedious to say the least. While we consider it important (as well as update the graph at The Market Bulletin twice per week), we also could just review Year-Over-Year performance to see if we have a chance of a market turn. Housing Market Turn Graphic As you can see from the real estate graph above, we have experienced 35 straight year-over-year declines in the Tallahassee real estate market! Notice that no such streak exists (whether positively or negatively) in past, with the previous record on continual runs in the market to be at 9 months at the most! This tells you how severe this current downward trend really is.

Predicting The Housing Market Turn In Tallahassee

Some of the factors that affect our housing market in Tallahassee are the same as in any other market in America. These include employment rates, mortgage rates and availability, and consumer confidence. But even with the current projected job and budget cuts at the Universities and the State, Tallahassee is projected to having one of the more stable economies in the State of Florida. Additionally, most economic forecasts predict population growth in Tallahassee! So, what is my prediction ... I based my prediction on the following: So, I believe we will see the turn of the housing market between August and November of this year. I suspect year-over-year performance for June and July to continue on the decline, but after that, I feel somewhat confident that the Tallahassee real estate market will experience a growth in the daily buyer activity. Buyers are seeing value again in our market and educated home sellers have started adjusting to the new values. Most importantly, we have been building a "pent up demand" from people who would have been buying homes had confidence not fallen through the floor. This plus Federal Tax Credits will bring the turn to the market this year.

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Joe Manausa is a real estate blogger, a real estate investor and the Broker and Co-Owner of Joe Manausa Real Estate. He can be reached via e-mail through the Tallahassee Real Estate Website or catch his latest writings on the Tallahassee Florida Real Estate Blog , or by calling (850) 386-2001.
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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.

2 Responses to "Predicting The Housing Market Turn"

Doug wrote: Joe,
Not sure if I'm buying your call on the bottom. Unemployment not only has to stabilize, but also needs signs that employment is starting to rise, that is not happening nationally as well as locally. We also need a more diversified job market here. When Tallahassee had a chance to attract an new industry..(Biomass Gas & Electric)..it gave a cold shoulder to it. Other companies take note of a local communities business climate and this did not show us in a good light for attracting more outside industries. I know attracting industry is a long term problem and would not effect any short term bump in sales, but attracting industry and business could help balance an unequal tilt towards government jobs in this area. The sales increase you mention , now includes short sales and foreclosures. This phenomena has never been a factor in previous history of sales. With state and local tax revenue decreasing, the future effects on government unemployment has not showed the full effect yet. The 8% home buyer credit will expire in November.....causing a false bump up in sales before its end, but surely a fall off in sales activity after November. In past recessions and downturns the recovery was fueled by the consumer using their house ATM (home equity) to stimulate the economy. That source is gone now. The availability of credit to the consumers and small businesses is not there. Look at the local businesses that have closed or on the brink of closure.....how many are barely hanging on? There are so many variables that could prolong this mess, like higher interest rates, more unemployment, higher gas prices, a ballooning deficit fueling future inflation, higher taxes, more foreclosures. I just do not see the fundamental change that is needed to call a bottom yet. I hope I am wrong and you are right. Thank god you are not the typical industry mouth piece that seems to call a bottom every month. It will be an interesting next 6 months.

Posted on Thursday, June 25th, 2009 at 12:55pm.

Joe Manausa wrote: Thanks for the detailed comment Doug. I agree with all of your points. Here is something to consider ...

The "turn of the market" is not the "return of the market." It is just the lowest point in unit sales. After the turn, prices will continue to drop until market equilibrium is reached (6 months of supply, plus or minus).

Anyway, time will tell. This is my first call since November when I said it could happen this year (but no earlier than March).

Posted on Thursday, June 25th, 2009 at 2:01pm.

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