2 Long Term Housing Trends Paint A Clear Picture For Tallahassee
There are two key housing trends that we monitor to get the "state of the union address" for the Tallahassee real estate market.
Long time readers of our real estate blog know that we track literally hundreds of different trends, but when it comes time to answer the question "how is the market," look no further than the movement in the number of homes that are selling and the median price for which they are selling.
In other words, how many homes are getting sold, and what are sellers getting?
Key Housing Trends Graph
The following real estate graph shows the one-year trend of the median home sales price combined with the one-year trend of monthly home sales (unit sales).
The black line represents the average number of homes selling each month in Leon County, Florida (measured on the left vertical axis), while the red line reflects the one-year trend of the median home sales price (measured on the right vertical axis).
So how's the market?
Well, the median home price in Tallahassee is the same as it was in the Spring of 2005, while the number of homes selling is the same as was recorded all the way back in the Summer of 1992.
Yes, that's right.
1992. Our population was 40+% smaller back then, yet the same number of homes were selling then as are selling today.
So when asked "how is the (real estate) market in Tallahassee," we can answer that we're selling homes at a rate similar with 23 years ago at prices consistent with what was selling 10 years ago.
Where Are The Buyers?
There is one primary factor that I think is having the most significant impact on the reduction in home sales in Tallahassee.
What could it be?
The usual suspects would include mortgage interest rates, home values, home prices, and jobs.
- Mortgage interest rates - When mortgage interest rates rise, the ability to borrow declines, and this means there are fewer prospective buyers who can afford homes. Of course, the opposite is true as well. When mortgage interest rates fall, more people can afford to borrow and to buy a home. Considering that mortgage interest rates are near an all-time low, I think we can safely say that mortgage interest rates are not keeping people from buying homes.
- Home values - Historically, 40-45% of homebuyers in Tallahassee have a home that they need to sell in order to become a buyer. Home values fell strongly since 2006 and have "trapped" many families who would like to make a move in a home with zero or negative equity. This has had an impact on demand. But lately, home values have been rising, and every few percentage points of rising values frees up hundreds or even thousands of people to buy. I think we can attribute the rising figures in the black line in the graph to the fact that values are rising, but home values are not responsible for our market selling as low as we are experiencing right now.
- Home prices - When home prices rise, the buyer pool for those homes declines. It's a simple supply and demand relationship. But when we look at the graph above, we see that prices are where they were 10 years ago, and back then mortgage interest rates were 50% higher. This means home affordability is better today than it has been in a very long time ... meaning current home prices are not the reason that home sales are so slow.
- Jobs (employment) - If the number of jobs is growing in Tallahassee, than we need more people and more homes to house those people. When the number of jobs declines, the opposite is true. The population in Tallahassee appears to be increasing ever-so-slightly ... as if babies being born are out-numbering those of us who are passing. The number of people relocating to Tallahassee appears to be fewer than those relocating from Tallahassee, and I believe this is primarily job related. Since babies do not buy houses, we can likely point to declining employment opportunities as the primary reason that the number of homes selling is so low. With the State of Florida focusing on getting efficient, Tallahassee has to learn how to sustain itself and not just rely on the State and Federal Governments for jobs.
So if you want to see Tallahassee real estate get back to growth and full recovery, we need to focus on creating jobs in Tallahassee.
Help spread the word. Bend the ear of your City and County leaders. The State of Florida is growing jobs and cutting government. That means great news for Florida, but (in the short run), bad news for Tallahassee.
We have to create job opportunities for those who have lost their positions with the State.
We have to create job opportunities for people outside of Tallahassee to draw them here (to replace those who have left/are leaving).
The solution to Tallahassee's housing market conditions is in the creation of jobs.