Residential lot sales in Tallahassee have mirrored the rest of the residential real estate market. Unit sales are down off their highs and prices have fallen. Since January of 1991, Tallahassee has averaged over 180 residential lot sales per month, but the current trend is down near 50 per month.
The good and bad news about residential lots in Tallahassee is that they really only have 1 purpose. People buy lots to build a home upon. If there is a demand for housing in Tallahassee, then so too shall their be a demand for lots. Currently, the opposite is true.
Demand for housing in Tallahassee is at least at a 20 year low, so lot sales have fallen off. But what will happen to lot sales when the market stabilizes?
Tallahassee Lot Sales Appear To Have Bottomed
The number of residential lots being sold each month appears to have bottomed, but time will tell. The declining trend ended in December of 2008, and we now have to see how long the floor will last.
The average price trend has fallen from nearly $120K per residential lot to just over $70K per lot, and I suspect there is a good bit more reduction that will occur, as foreclosures and short sales settle in the market. The real estate graph below show the monthly sales trend and average lot prices in Tallahassee for nearly 20 years.
Long Term Outlook Strong For Residential Lots
I think our economy has a whole lot of problems right now and things are going to be tough for a while. But ultimately, I still believe that Florida is going to be a destination State, and Tallahassee will continue to grow. Most economists that study the Tallahassee economy have predicted a 1% growth rate over the next ten years.
Regardless of the rate of growth, if Tallahassee is growing, we will be consuming more residential lots. The ones that have better access to the amenities in Tallahassee (location, location, location) will sell at a higher price than those that are in less serviceable areas.
Finally there is the cost issue. The cost to produce a residential lot is very high. With impact fees rising and labor costs rising, I just don't see how we will produce residential lots (in the future) for less than $50K per lot. Sure, we will see some liquidation of lots already produced, but when they are consumed, I think Tallahassee lot and land prices will be just like everywhere else in the country. Expensive.
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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.