Home Values - Is This As Low As We Go?
There always seems to be somebody pushing the "now is the time to buy" (buy a home) agenda, so we like to analyze market conditions on a regular basis in order to refute or confirm that claim.
This "Black Friday Blog Post" will show you two real estate graphs that contain more than 20 years of collected data on house sales in Tallahassee, and then you can be the judge of whether or not now is the best time to purchase a real estate investment.
Recently, long-time reader "Steve" commented on our recent post showing Northeast Tallahassee home values, saying:
When I look at the average price per square foot graph, I see that that data “points” are splitting the moving average lines. Lately, there are as many points above the line as below, and that has pulled the average line to almost level. Yes, it is a weighted average, and the last three low points have more weight than the last three high points, but it’s slowing down. Are you sure this isn’t as low as we go? My pitch would be: “buy now, before the average price per square foot goes back up”. :) - Steve
Though Steve was commenting on a graph from the Northeast Tallahassee real estate market, the following graph of average house values shows all four quadrants of the Leon County housing market.
Average Home Values In Tallahassee
This first real estate graph is an eye opener.
Home values have fallen back to levels last seen in 2003 and more importantly, they are well below the long term "normal" appreciation line.
The yellow line on the graph shows the 20 year average rate of appreciation, and market values had shot well above that line starting back in 2002.
But now that we are in the sixth straight year of declining home values, we have fallen below that long-term average. Could this be the typical market 0ver-correction that occurs before a cycle change?
Average Monthly Home Sales In Tallahassee
While home values are still on the decline due to an oversupply of homes for sale in Tallahassee, unit sales appear to have turned the corner and are finally heading higher.
The red trend line shows the one year trend of monthly home sales, and they appear to be rising.
The yellow trend lines shows the falling 8 year trend.
Hopefully, we'll see the short term trend push through the longer trend within the next two years, though three years appears to be more likely based upon the number of people in the market who just won't qualify to buy for a while due to recent short sales and foreclosures of their past held homes.
Is It Time To Buy A Home In Tallahassee?
It's hard to argue that we appear to be at a market bottom.
I believe that home values will continue to slowly fall and pricing pressure is going to remain as we push through the high number of foreclosure sales in Tallahassee over the next few years.
Unit sales do appear to be on the rise and the rate at which the market can consumer the inventory of distressed properties is going to be a big factor in just how much longer this is going to take.
Ultimately, you have to ask yourself when you believe interest rates are going to rise and how significant that is to your purchase decision. For most homebuyers, financing is the only option, thus interest rates at historical low levels are a compelling reason to buy now.
Cash buyers on the other hand have the luxury of waiting for the right opportunity, as there are several thousand short sales and foreclosures waiting to clear in the next few years.
So for most people, we have definitely moved into the "buy" zone, as home affordability is very low and is likely to rise with the coming rise in mortgage interest rates.