Why Home Prices Must Fall
The Tallahassee area logged 163 single-family existing-home sales in October, down 5 percent over a year ago which is not as good as many other areas in Florida that seem to show gains in every market measured. Of course, those measurements are from REALTOR® MLS reports, which typically do not show much more than 1/2 t o 2/3rds of the entire market activity.
The median price for those local sales gained 1.2 percent to $174,000 from $172,000 in October 2008. Fort Walton Beach was the only other market in October to see prices rise, up 1 percent from a year ago.
Graph Of Home Prices In Tallahassee, Florida
The real estate graph above shows that the average price continues to drop, while the median price has actually been recovering. Unfortunately, the graph does not depict appreciation or depreciation, as it shows what home buyers are paying without regard to what they are buying.
Tallahassee Housing Market Sees Slight Increase In Home Sales
This is wonderful to report, as we have been producing reports showing the number of homes selling in Tallahassee declining for over 3 years running! Based upon the growth in pending home sales, it appears like the market is starting to turn around.
Much of this could be due to the First Time Homebuyer Tax Credit which was scheduled to terminate at the end of November, but with the extension, buyers have until June 30, 2010, to close on their purchase, and the rules no longer limit the credit to first-time buyers. Hopefully this will continue the rise in pending home sales.
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Glut Of Homes Still Creates Pricing Pressure
While the good news is that home sales are picking up, the bad news is that homes will continue to depreciate in Tallahassee. This must continue until the glut of homes on the market is reduced to a balanced level (roughly 6 months of supply). The following graph shows that the current number of homes on the market represents more than 1 year of supply. (vertical blue bars in the graph). While I have seen reports of "vanishing supply" and statements that our market is "low on inventory," this is obviously just not the case.
Shadow Inventory Emerging To Increase Home Supply Levels
In 2010, we will see the shadow inventory emerge onto the scene in the Tallahassee housing market. In a previous blog post, I wrote about how we attempt to measure the shadow inventory in Tallahassee. I was able to deduce that 2,000 to 3,000 homes were in one segment of the shadow inventory (non-prime mortgages), and it is the unresolved portion of these that will emerge to add more homes to the supply-side in Tallahassee.
Many reports on the real estate market exist on the internet. Unfortunately, most are just a re-hash of fluffed-up reporting by the National Association of REALTORS® (remember their campain in 2007 .... "Now is the time to buy!") and from people who really do not attempt to analyze the information that is available to the public.
I will continue to report the numbers as I see them. I would appreciate any feedback, whether positive or negative, and the best place to do this is in the comments section that follow each Tallahassee Real Estate Blog post. If you want to keep your identity hidden, you can always register your comment with a fictitious name. But please do comment!
One thing I'm not sure every thinks about is the stealth (my phrase) Inventory. I was showing homes to a customer 4 in a row in a sub division all built 2005-6. Everyone is upside down with their mortagage and they do not even realize it. the short sale that close a couple of weeks ago was 57 per square foot. You can't buy a lot and build a house for that. Until that whole neighborhood turns over it is going to have downward pressure. We are talking about hundred of homes within a small radius. I think the 1% bump was an aberration and mostly do the the 8000 first time home buyers program.
The NAR is not helping with the smiley faces the keep putting on and giving out sound bits that are true but are not the correct story.
Great points Jim and I agree about NAR (and FNMA) putting out sound bites on how great things are. There are some great buying opportunities now, but there are also some terrible traps, the key is to know which is which. It sounds like you do over in the Destin, FL real estate market. Thanks for commenting.
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