Housing Market September 2020: Ginormous Report & Video

This housing market update is ginormous, the kind I only produce a handful of times each year.

Follow along as I walk you through current housing market conditions and conclude with a specific demonstration of how current conditions could be exploited. If you own a home or plan to own one sometime soon, this is what you need to know.

Start by looking at the current listings for sale in Tallahassee. They are sorted from highest to lowest price. Take a look as the asking prices decline, the percentage of homes under contract goes through the roof. There are even more for sale that are marked "pending," though they have been removed from our search as they are about to close with another buyer.

Listings In The Tallahassee Housing Market

Video Housing Market Report

September 2020 Housing Market Report

This housing market report will walk you through the big picture first and then drill down to specific conditions that could be very important to you if you decide to sell and/or buy a home.

We'll start with the housing market performance for the previous month, and then key in on the overall conditions for people buying and selling homes.

Year Over Year Home Sales

The first graph in today's report shows how each month's sales compared with the same month the year prior. We refer to this as the year-over-year home sales report.

Year over year home sales fell nearly 10% in August, registering the fourth month of declines in the past five months.

In years past, if we saw a continuous decline like we’re experiencing now, we were able to clearly show that the demand for homes was dropping.

But that is not the case in 2020. 

Demand remains strong, it's the supply-side slowing the housing market. We need more sellers to enter the market, whether this comes from existing homes or the new homes market, we need more inventory.

Year To Date Home Sales

The next graph shows the number of homes sold during the first eight months of each year. It allows us to compare the real estate market at the end of August with 18 previous years (each through August as well).

Home sales are down 3.9% in 2020 when compared to 2019 (through August), and right now are about at the same level as what was recorded in 2003. When we compare 2020 to the past 18 years, 2020 trails just seven other (non-pandemic) years.

These two graphs show strong demand for homes in Tallahassee, so next, we'll look at two graphs that will help better show the reality of the activity in the housing market.

Housing Market Activity

Take a look at this graph of current market conditions.

It shows the supply of homes relative to the current rate of demand so we call it the relative supply of homes. We measure relative supply in “months of supply,” meaning the number of months it would take to consume the current supply of homes for sale.

Here we see the green line shows the number of homes sold each month (that’s the demand) and the red line shows the number of homes for sale each month (that’s the supply). When we divided the demand into the supply, the result gives us the relative supply of homes shown in blue.

Finally, we take the one-year average of the relative supply to remove seasonality and we can see this plotted in yellow. When the market is balanced, we refer to it as market equilibrium.

Most real estate experts consider equilibrium, or a balanced market, as one with 6.0 months of supply of homes for sale. Look at how glutted the market was from 2006 through 2014, where the relative supply of homes peaked at nearly 14 months of supply. We spent very little time at equilibrium and now for the past 6 years, the overall market has favored home sellers.

I cover this graph in more detail in the video that goes along with this report. There might be a trend-change occurring here, so I spend some time revealing that trend and what we're seeing right now.

Relative Supply Of Homes For Sale

The following table shows the relative supply of homes for sale in Tallahassee. Again, this merely means the supply of homes for sale relative to the current rate of demand.

The relative supply of homes is a number that shows us the months of supply of homes for sale (the supply of homes relative to the current rate of demand). A measure of 6.0 is traditionally considered a balanced market, where neither sellers nor buyers have an advantage in the market.

When the relative supply drops below 6.0, the market moves to a seller's market. The opposite is true when the number grows above 6.0 and the market moves to favor buyers.

In the table above, the red cells show sellers' market conditions, orange cells show buyers' market conditions and green shows where the market is balanced.

Overall, the entire market is undersupplied and all four quadrants in Tallahassee are in a sellers' market. Homes priced above $550K in all quadrants remain in a buyers' market.

Luxury Homes Market

This graph is identical to the home sales activity graph we examined previously, with the exception of this one is limited to homes priced above $600K.

Unlike the lower-priced homes in the bottom 90% of the market, the top of the market remains in control of buyers. There are far more high-end homes for sale then there are high-end buyers.

Nevertheless, the top of the market is having a banner year. If you read and watched our Luxury Homes Report, then you know that 2020 is on pace to be the best year ever for the very top of the Tallahassee housing market.

So don't let these two facts fool you. 1. Buyers do control the market, but 2., less so than they have in the past. Now is the best market we've ever seen for selling a luxury home in Tallahassee.

Where Is Tallahassee Moving?

The next graph shows the percentage of home sales that fall in each of Tallahassee's four quadrants, shown over the years. It allows us to find trends for where people are moving.

NE Tallahassee continues to dominate the home sales in Tallahassee, though it is weakening as home prices rise. What used to be more than 50% of all homes sold were in the NE quadrant is now down to about 48%.

NW Tallahassee holds about 31% of all homes sold, meaning nearly 80% of all home sales are on the north side of town. The 21% on the south side of town breaks down to about 16% in SE Tallahassee and 5% in SW Tallahassee.

Tallahassee Housing Supply And Demand

The next graph shows the supply and demand for homes in the Tallahassee housing market, arranged by price range.

Tallahassee is in a VERY STRONG sellers' market for homes priced below $400K and a strong sellers' market under $550K. We don't see buyer's market conditions until we get above that $550K mark.

NE Tallahassee Housing Supply And Demand

The next graph shows the supply and demand for homes in Northeast Tallahassee, arranged by price range.

NE Tallahassee is in a VERY STRONG sellers' market for homes priced below $550K and a buyers' market above $550K. I can tell you that we're even seeing multiple offers on $600K homes in Northeast Tallahassee.

NW Tallahassee Housing Supply And Demand

The next graph shows the supply and demand for homes in Northwest Tallahassee, arranged by price range.

NW Tallahassee is in a VERY STRONG sellers' market for homes priced below $250K and a sellers' market under $350K. We don't see buyer's market conditions in Northwest Tallahassee until we get near the $400K mark.

SE Tallahassee Housing Supply And Demand

The next graph shows the supply and demand for homes in Southeast Tallahassee, arranged by price range.

SE Tallahassee is in a VERY STRONG sellers' market for homes priced below $400K. We don't see buyer's market conditions in Southeast Tallahassee until we get near the $450K mark.

SW Tallahassee Housing Supply And Demand

The next graph shows the supply and demand for homes in Southwest Tallahassee, arranged by price range.

SW Tallahassee is in a VERY STRONG sellers' market for homes priced below $150K. We don't see buyer's market conditions in Southwest Tallahassee until we get near the $250K mark. Of all the quadrants in our market, SW Tallahassee is the furthest behind in the housing market recovery that began in 2012.

How Competitive Is Your Price Range?

The next graph shows how competitive each price range is in the Tallahassee housing market.

If you are thinking about buying a home or about selling your home, this graph will show you what you should expect in the market. It shows the percentage of homes already under contract in each price range.

The green lines measure the number of listed homes that are already under contract with buyers, while the red lines measure the homes without contracts. Nearly 50% of all listed homes are already under contract, so whether buying or selling, you should know that it is highly competitive out there and you need to be prepared in order to get the best deal possible.

You would think that with these strong seller's market conditions, we would see a high number of homes sell at full price or above market value. That is not the case, however. Too many sellers are leaving money on the table. You can learn how to avoid this by reading my article and watching my video on using a sound pre-marketing campaign).

Percentage Of The Inventory Selling Each Month

So far, I believe I've made it clear that the supply of homes for sale is far too low and the competition for available listings is fierce among buyers. Our next two graphs report how this imbalance impacts the home buying experience.

This graph shows the percentage of homes sold each month. During normal market conditions, about 17% of the homes sell each month. But look to the right side of the graph, we're often doubling that amount in recent months.

Each month, a red dot is posted to show the percentage of the inventory that sold each month. If there were no seasonality in real estate, we would expect to see about 1/6th of the homes sell each month (16.7%).

As seasonality is real, we actually expect to see roughly 4 months above 17%, 4 months near 17%, and four months below 17% during the different times of the year. This graph makes it clear, these are not normal times.

When the market was coming out of its collapse, we went more than 8 years without a single month falling within the "normal" range. There were just too many homes on the market and it was common for fewer than 1/10th of them to sell each month.

Now, low inventory levels have the opposite results. About 1 in 3 homes listed for sale sold in each of the past five months. That means when buyers go looking at homes, there is not much out there that is not already under contract with other buyers.

Homes Already Under Contract With Buyers

This next graph shows that more homes for sale in Tallahassee are under contract with buyers than ever before. That means slim pickings for buyers and favorable market conditions for sellers. Nothing is more frustrating as a buyer than finding the perfect home, only to find out somebody else beat you to it.

Nearly one-half of all listed homes for sale are already under contract. The green line in the graph above shows that 48% of the current listings are already under contract, and the one-year trend of the under-contract percentage is at an all-time high of more than 41%.

Hopefully, we'll see more sellers enter the market these next few months, and perhaps see a dip in this ratio. But don't be surprised to see it continue higher if too few sellers arrive.

Housing Supply And Demand Reality

The following two tables make it very easy to do a supply and demand analysis for your specific price range and area of town that you live (or want to live).

Both tables segment the market by quadrant and by price range. The one on the left shows the average number of homes that sell each month, while the one on the right shows the current number of homes for sale.

Let's start at the bottom right of each table. There are 1,284 homes for sale right now in the Tallahassee housing market, and 337 are selling each month. When we divide sales into the active listings, we can see that more than a quarter are selling each month (which is about 57% higher than normal).

These tables are strong evidence for buyers that they need to be ready to go when they are serious about buying a home. While you do not necessarily need to be in a hurry to buy a home, you do need to move with urgency when you find a home you would like to buy.

The market will have brought you to that home because of its relative value, so you can be certain the market will be bringing many other buyers to compete with you. These sellers' market conditions require buyers to make prompt decisions and move aggressively when the right home is found.

Real Estate Seasonality

As stated earlier, there are seasonal changes that influence the housing market. This next graph identifies the percentage of listed homes that sold each month for the five-year period of 2013-2017.

Think of this as what "should" happen during normal times.

As you can see, we have now started what would traditionally be the slower six months of the year, from September through February.

Based upon the buyer activity in the market right now, I'm going to plan on 2020 being completely different. There is both pent-up demand from buyers who have yet been able to secure a home in this uber-competitive market, as well as pent-up supply from sellers who were waiting for the pandemic to pass.

Many of these hesitant sellers have seen their friends and family members move safely to a new home and take advantage of the historically low mortgage interest rates. I expect to see new inventory come in during the final quarter of 2020 at a higher rate than we would normally see.

Mortgage Interest Rates Motivating Buyers

The final graph and tables in today's housing market report represent the stimulus that is bringing buyers to the market despite the pandemic occurring all around the world.

The mortgage graph shows nearly 50 years of monthly mortgage interest rates. We've seen them as high as 18.45% and as low as 2.94% (the current rate). Over the past fifty years, the average rate has come down to 7.93%, a full 5% higher than today's rate!

We saw a new record-low mortgage interest rate recorded in August, and I want to show you exactly what it means to homebuyers today. It's probably more significant than you might imagine (After all, what's a few percentage points anyway?).

How Low Mortgage Rates Impact Home Affordability

The tables shown here allow us to do two separate studies of the impact of low mortgage interest rates. First, we show the monthly savings a buyer is getting today versus rates we've seen in the recent past, while the second shows how buying power will fall when mortgage interest rates begin to return to normal.

The table on the left was built to show a $300,000 loan and the impact of changing mortgage interest rates on that borrower's monthly payment.

If rates were to move up one full percent (to a still-very-low rate of 3.94%), that buyer's payment would go up 13%. When rates return to the fifty-year average, that buyer's payment would be nearly 70% higher each month! This is not a small deal to most people that I know.

Perhaps a more appropriate way to better understand changing interest rates though can be found in the table on the right. My experience selling homes in Tallahassee for the past 30 years has taught me that most buyers purchase as much home as they can get based upon what they can borrow.

So instead of seeing monthly mortgage payments rise, we'll see the borrower's loan amount drop (to keep the payment the same). So a buyer who can borrow $300K today will only be able to borrow $265K when interest rates rise 1%. If the buyer waits until rates return to the fifty-year average, then the buyer will be able to borrow less than $180K!

This buying power, strengthened by today's low mortgage interest rates, is the primary reason demand as remained so strong during the pandemic. Had there been no COVID-19, we might have double the buyers in the market.

If you have been holding off selling, then it likely means that you've been holding off buying too. If you are strong enough to pay cash, then this is not necessarily a big deal. But if you plan to finance your next home, you should strongly consider getting your home sold and getting into the next one with today's cheap money.

Housing Market Report Information

I hope our September 2020 Housing Market Report has given you insight into today's conditions. Do you have any questions you'd like answered in this or other housing market reports? If so, you can leave a comment below or give us a call anytime!

When moving to, in, or from Tallahassee, you will fare better if you work with a local expert. We are here to help. If you have further questions on the Tallahassee real estate market, 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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