I received a comment from reader "GF" yesterday who was encouraged about some signs of recovery in new home sales. I thought his comment was very revealing in regards to the "big picture" on housing supply and demand, and that we could all learn from his question. GF wrote:
It is encouraging to see some building activity in places like Southwood, but that's the result of the Homebuyer Tax Credit. Now what? The question is, how bad will it get before it starts getting better?
In order to answer this question, the very first thing I did was look at the most recent report on supply and demand in the Tallahassee housing market. Specifically, I focused on the Southeast side of town, where Southwood is located to see if there was any sign that we "needed" more homes built.
You see, with over 12 months of supply, we have a glut of homes on the market in Tallahassee. Additionally, our shadow inventory has been calculated at a size that is even larger than our current inventory, so my gut instinct is to say that we didn't really "need" those homes.
Looking at the Southeast Tallahassee homes supply and demand table above, point "A" shows a very low supply of new construction homes available, while point "B" shows a high level of supply of existing homes for sale in Southwood. What I think this is telling us is that buyers are liking low new construction prices that are more attractive than resale (existing) prices.
Current homeowners are being priced out of the market by new home sales. By my rough count, there were 30 new home sales in Southwood from March through June, which is roughly 1/2 of the arms length home sales in Southwood.
While it would be easy to point fingers at the home builder and say that it is hurting the market, the fact is that by holding on to inflated values, Southwood homeowners have created a niche in the market where the current builder can supply new homes cheaper than than they will sell theirs. This is adding to the supply and ultimately will make for an even tougher landing for Southwood homeowners.
All of Tallahassee will continue to languish in this corrective market until population growth consumes the existing supply of homes as well as those in the shadow inventory. Any new homes added to the market will only delay the full recovery, and will also create more competition among current homeowners who have been struggling with declining prices for more than 3 years.
Recent New Home Sales In Southwood
|Southwood Address||Sales Price||Sale Date|
|2420 RAIN LILY WAY||$217,000||3/30/2010|
|4280 FOUR OAKS BLVD||$210,000||3/30/2010|
|4292 FOUR OAKS BLVD||$209,600||4/9/2010|
|2408 RAIN LILY WAY||$230,800||4/20/2010|
|4300 FOUR OAKS BLVD||$154,900||5/11/2010|
|3100 MIST FLOWER RD||$344,800||5/17/2010|
|4284 FOUR OAKS BLVD||$151,600||5/19/2010|
|2404 RAIN LILY WAY||$206,000||5/20/2010|
|4312 FOUR OAKS BLVD||$150,000||5/20/2010|
|4296 FOUR OAKS BLVD||$190,000||5/21/2010|
|GROVE PARK DR||$495,000||5/24/2010|
|2440 RAIN LILY WAY||$194,200||5/27/2010|
|4268 FOUR OAKS BLVD||$145,000||5/27/2010|
|4316 FOUR OAKS BLVD||$190,000||5/27/2010|
|2436 RAIN LILY WAY||$204,400||6/3/2010|
|2432 RAIN LILY WAY||$194,000||6/9/2010|
|4288 FOUR OAKS BLVD||$150,000||6/10/2010|
|3068 INDIAN GRASS LN||$265,400||6/15/2010|
|3950 SHUMARD OAK BLVD||$196,800||6/15/2010|
|3728 RIVERTON TRL||$222,700||6/16/2010|
|3942 SHUMARD OAK BLVD||$154,100||6/17/2010|
|3946 SHUMARD OAK BLVD||$147,500||6/17/2010|
|3079 BENT GRASS LN||$258,000||6/18/2010|
|3938 SHUMARD OAK BLVD||$191,600||6/18/2010|
|3150 CONE FLOWER DR||$336,900||6/22/2010|
|3922 SHUMARD OAK BLVD||$190,400||6/23/2010|
|3930 SHUMARD OAK BLVD||$145,000||6/25/2010|
|3926 SHUMARD OAK BLVD||$150,000||6/28/2010|
|3716 RIVERTON TRL||$207,200||6/29/2010|
|3934 SHUMARD OAK BLVD||$191,300||6/29/2010|
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.