In every real estate market, there are basically two types of buyers: Non-discretionary real estate buyers are buying because they have to move. Reasons for this could include new occupation, forced relocation, or any other outside agent that requires a move. On the other hand, discretionary buyers move because they want to move. Reasons for this include a change in income, change in family status or size, or just a change, period. Discretionary buyers are typically the largest group in a stable economy (such as we have in the Tallahassee Real Estate Market).
So why the talk of discretionary versus non-discretionary home buyers? Because many of the discretionary buyers are sitting on the sidelines due to several factors, so we are not seeing the reduction in inventory at this time. The following graph was compiled using residential sales activity reported in the MLS, and it shows that buying activity is trending at its lowest level since 2003. The green line in the graph below represents the twelve-month trend of closed residential sales throughout the Tallahassee MLS (Leon, Wakulla, Jefferson, Gadsden, Jefferson, Franklin and other counties).
The red line above is the measure of residential properties for sale in the Tallahassee MLS. As you can see, the supply has been fairly stable since May of last year, actually dropping at times! Unfortunately, the purple line represents "months of supply" which has reached an all-time high of 14.7 months! It is obvious that no "bottom of the market" has been found yet, but with all the positive opportunities for buyers out there, I suspect we should see the sales trend (green line) start to flatten out and then turn soon. With interest rates being so low, most Buyers are better off buying and financing with low interest rates then they are waiting for the bottom and risk paying more interest on their loans (click here for a blog covering interest rates versus housing values in Tallahassee).
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Joe Manausa is 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.
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.