Predicting The Housing Market Turn

After reading The State of the Nation’s Housing 2009 from the Joint Center for Housing Studies of Harvard University, it became clear to me that much of the rest of the country is already seeing some signs of a housing market turn. More importantly, it made me fully aware of the fact that many learned people are seeing reasons why it should and will be occurring.

But how do you predict the turn of the housing market in Tallahassee? There are so many factors involved that you cannot simply point to any one factor, so I thought I’d summarize why I think I know when the turn will begin.

First of all, the problems that we are seeing in the housing market are bundled with all the other financial problems that are happening at the same time. The financial markets are in a mess, the economy is staggering, and real family wealth has taken a hit all over the country. I know that real estate is local, but sometimes what is happening locally is also happening nearly everywhere else. Knowing this is the key to predicting the turn in the housing market.

Therefore, my definition of the “housing market turn” is the point in time when daily home sales go from declining to rising. Due to the nature of market cycles, we will not be able to “call a market bottom” until well after it has occurred. If you look at the graph above, you can see several times during the current decline where it appeared as if the direction was turning to the upward direction, only to plateau and then continue on its travel downward.

Another Way To Look For The Housing Market Turn

Monitoring the daily home buyer activity graph is a bit tedious to say the least. While we consider it important (as well as update the graph at The Market Bulletin twice per week), we also could just review Year-Over-Year performance to see if we have a chance of a market turn. As you can see from the real estate graph above, we have experienced 35 straight year-over-year declines in the Tallahassee real estate market! Notice that no such streak exists (whether positively or negatively) in past, with the previous record on continual runs in the market to be at 9 months at the most! This tells you how severe this current downward trend really is.

Predicting The Housing Market Turn In Tallahassee

Some of the factors that affect our housing market in Tallahassee are the same as in any other market in America. These include employment rates, mortgage rates and availability, and consumer confidence. But even with the current projected job and budget cuts at the Universities and the State, Tallahassee is projected to having one of the more stable economies in the State of Florida. Additionally, most economic forecasts predict population growth in Tallahassee! So, what is my prediction … I based my prediction on the following:

• The Tallahassee housing market has fallen 63% from the peak (extreme decline)
• Tallahassee population growth is near or greater than 0% (meaning no real decline)
• There is a statistical correlation between population size and home sales activity
• Home affordability is equivalent to levels found in 2004
• First Time Homebuyer Program Is Providing “Free Money” for Buyers through November

So, I believe we will see the turn of the housing market between August and November of this year. I suspect year-over-year performance for June and July to continue on the decline, but after that, I feel somewhat confident that the Tallahassee real estate market will experience a growth in the daily buyer activity. Buyers are seeing value again in our market and educated home sellers have started adjusting to the new values. Most importantly, we have been building a “pent up demand” from people who would have been buying homes had confidence not fallen through the floor. This plus Federal Tax Credits will bring the turn to the market this year.

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Joe Manausa is a real estate blogger, a real estate investor and the Broker and Co-Owner of Joe Manausa Real Estate. He can be reached via e-mail through the Tallahassee Real Estate Website or catch his latest writings on the Tallahassee Florida Real Estate Blog , or by calling (850) 386-2001.