How Far Under Water Is The Tallahassee Housing Market?

Are you under water in your house? You might be surprised at just how many homes in Tallahassee have larger debt loads than their value. This topic came up in a comment made by a reader last week, so I thought it was worth further exploration.

When we say that a house is under water, all this means is that the owner owes more money on the house than could be gained through a sale. So just how do we estimate the number of underwater homes in Tallahassee?

Last week, a regular contributor "Patrick" commented:

I’ve been watching your recent charts with interest. Based on the price declines, it looks like anyone in Tallahassee that bought or refinanced a home in the past 5 years is underwater.

Nobody has equity to move, either up or down. It’s hard to spot a bottom at this point. Truly a buyer’s market, with only the most unique or desirable properties getting a look. I think your 5-7 year prediction is dead on.

So let's sort this all out.

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How Many Under Water Houses Are In Tallahassee

Underwater Houses In Tallahassee

The real estate graph above shows that every home purchased in the years shaded by the arrow are most likely under water, unless of course they have already since been sold. The 29,509 homes that are upside down on the mortgages represents about 10 years of supply at our current rate of demand, and this does not even include the homes that were refinanced during the same time period.

You might be surprised at the amount of information that went into showing how many homes are underwater in Tallahassee. To create the graph above, I calculated the average purchase price each year (using historical appreciation rates) and then I calculated the equity in each home. Additionally, I used sales data from the Leon County Tax Appraiser's office which records the first and second mortgage amounts at closing.

Underwater House

I then segmented the homes into three groups by average combined loan to value (CLTV), and then used historical records on mortgage interest rates to calculate the current equity in each home. Then, using average closing cost data, I determined the number of homes that were most likely underwater. The following table shows the results.

Current Equity Number Of Homes Purchased Total
Year Value 95% LTV 85% LTV 75% LTV 95% LTV 85% LTV 75% LTV Under Water
1991 $165,000 $99,847 $104,968 $110,090 1,642 517 2,100 0
1992 $165,000 $95,842 $101,385 $106,928 1,755 600 2,175 0
1993 $165,000 $91,299 $97,320 $103,341 1,683 646 2,534 0
1994 $165,000 $83,257 $90,125 $96,992 1,809 751 2,564 0
1995 $165,000 $77,129 $84,641 $92,154 1,790 691 2,655 0
1996 $165,000 $64,120 $73,002 $81,884 1,710 664 2,591 0
1997 $165,000 $65,394 $74,142 $82,890 1,692 645 2,382 0
1998 $165,000 $58,954 $68,380 $77,806 1,674 747 2,699 0
1999 $165,000 $44,134 $55,120 $66,106 1,682 787 2,838 0
2000 $165,000 $39,164 $50,673 $62,182 1,741 812 2,678 0
2001 $165,000 $39,700 $51,152 $62,605 1,856 920 3,017 0
2002 $165,000 $24,948 $37,953 $50,959 2,126 1,089 3,195 0
2003 $165,000 $9,959 $24,543 $39,126 2,417 1,242 3,436 0
2004 $165,000 ($9,278) $7,330 $23,938 2,702 1,464 3,491 2,702
2005 $165,000 ($36,109) ($16,676) $2,756 3,033 1,572 3,771 4,605
2006 $165,000 ($69,947) ($46,952) ($23,958) 2,741 1,453 3,497 7,691
2007 $165,000 ($65,720) ($43,170) ($20,621) 1,997 856 2,682 5,535
2008 $165,000 ($53,698) ($32,414) ($11,130) 1,549 593 1,679 3,821
2009 $165,000 ($37,049) ($17,518) $2,014 1,591 448 1,623 2,039
2010 $165,000 ($22,529) ($4,526) $13,477 2,039 447 1,349 2,486
2011 $165,000 ($7,256) $9,139 $25,535 630 146 373 630
Total Under Water -> 29,509

Could Tallahassee Houses Be $2B Under Water?

To give you an idea of the magnitude of the amount of losses the banks might face, the total of the negative equity in the chart above equals $968,443,180. That is just short of 1 Billion Dollars in Tallahassee alone, and this only is looking at home purchases. It is very likely the number from refinancing could be even larger. Even after we factor the homes that have already been sold (estimated) out of the equation, and adding the homes that were refinanced during this same period of time, I would estimate that the potential for residential loan defaults in Tallahassee could reach $2 Billion!

Could The US Housing Market Be $1.6 Trillion Under Water?

Now here's the scary part. The Tallahassee real estate market is usually a fair microcosm of the US Housing Market. If we un-scientifically apply our numbers above, combined with the fact that we are about .06% of the US housing market, then that we can deduce that the US housing market has the potential for $1.6 Trillion in negative home equity, and just from home purchases alone.

I know that this last step was a giant leap, but the methodology was fair for conversation. Do you think $1.6 Trillion in residential loan defaults over the next few years could cause a collapse of the US banking system? I would love to see an analysis (performed by smart people :)) of the equity situation in the total US housing market. I suspect it would quiet all the people saying the recovery is well under way!

This information only serves as support for my constant reminders that the housing market has many more years to go before we will find balance. If you know you will be selling a home in the next few years, sell it now, sell it fast, and use a progressive internet home selling plan to get the top dollar from your home while you can. The earliest sellers will get the highest dollars.

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Your Local Expert In Tallahassee

Are you ready to go see a home in this oft-overlooked, amazing neighborhood? Do you have further questions on the Tallahassee real estate market? If so, you can leave a comment below, give us a call at (850) 366-8917, or drop us a note and we'll give you the local information needed to ensure a successful, smooth transaction.

As a local born and raised in Tallahassee with a focus on customer service, I promise you'll find great success when working with Joe Manausa Real Estate, just as have our past customers. You can read thousands of their reviews reported on Google, Facebook and Zillow right here: Real Estate Agent Reviews Tallahassee.

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#1 By Tyler Durden at 7/11/2017 3:46 AM


As always, thank you for being bold enough to bring the truth. While most in the Real Estate community in our area prefer to bury their heads in the proverbial sand and talk up the market with no factual data to back it up, you are willing to stand as a voice to sobriety and from a depth-of-knowledge point of view that few understand. So, thank you and keep it up. The sooner market forces are allowed to cleanse this mess, the sooner an actual "recovery" will take place.

#2 By Joe Manausa, MBA at 7/11/2017 3:46 AM

Thank you Tyler, and yes, we need the market forces to clean up the mess (not the Government). Mostly, we need to grow (population, not more homes).

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