Housing Consumption Must Continue March 13, 2010

Housing consumption must continue for the time being, forcing home builders to the sidelines until the over-supply is corrected. Historically, you could always tell when Tallahassee was due to see a change in direction from local home builders. We watch as cycles develop in the new construction industry, and these cycles allow us to forecast future movements.

For example, looking at the graph of single family detached home permits and sales above, we can see the cycles very clearly. In order to understand the cycles, there are two important things to understand about the graph:

The “Average Ratio Line” represents the 20 year average of the ratio between new home sales and new home permits. I have always believed that the difference between the two accounted for the growth rate that we see in the market. The “100% Gridline” shows the level when sales and  permits are the same, thus if the measured ratio is “above the line,” then we are consuming glut, when it is below, we are adding to the supply of homes for sale in Tallahassee.

The current trend of “consumption” has run as long as any similar trend in the past, which might lead banks and home builders to believe it is time to start building again. But I would be concerned that the shadow inventory of distressed properties is going to make this a poor decision if they do.

More Tallahassee Real Estate Resouces

Do you want to know more about the Tallahassee real estate market? It is not as hard as you might think keeping up with the movements in the housing market, you just have to know where to look. The following are some of the best resources that you can find on Tallahassee real estate:

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