Pending Home Sales Report August 2020
Welcome to the August 2020 Pending Home Sales Report for the Tallahassee real estate market.
July continued the strong trend of new contracts that began in June that resulted in a 20% year over year gain in homes sold. Today's report is a thorough examination of new contracts in the Tallahassee real estate market.
VIDEO: Pending Home Sales Report
Are you interested in a thorough explanation of today's pending home sales report?
Watch the video, it will walk you through today's report.
New Real Estate Contracts Remain Strong
The following graph was assembled from data in the Tallahassee MLS on August 8, 2020. On that date, I retrieved all sales that were closed from January 2019 through the first week in August of 2020 and sorted them by contract date (not closing date). Additionally, I added all properties that are under contract and sorted the entire group by the date contracts were written.
What this data represents is all contracts written that are either still working towards closing or ones that have closed escrow (thus the agreements were confirmed).
What this data omits is all contracts that were written and subsequently failed to close. Each month when I assemble a Pending Home Sales Report, failed contracts are removed so that we are only left with ones waiting to close or those that successfully closed.
Because of this, there is a high likelihood of recent months containing active contracts that WILL NOT close, while most distant months will have very few open contracts remaining as all have either closed or have failed to close by now.
The blue lines in the graph above reports the number of contracts written in 2019 by month that are either still pending or have already closed. The gray lines report the same for 2020.
Currently, the number of contracts written through July has grown to 214 more than those written through July of 2019, a change of nearly 9% over last year's contracts.
As a reminder for returning visitors or a note to new friends, the pending home sales report only looks at current and closed contracts, thus contracts that fall apart are not considered in our data.
This means that the big rise of the July 2020 contracts is a bit inflated. It includes contracts that will fail, while only eight pending contracts remain from prior to August 2019 and the rest have already closed or been excluded as failures. So we're not really comparing apples to apples.
Ultimately, we know that when the future reports are produced, July 2020 contracts will NOT exceed July 2019 contracts by 35%, but there will be a gain that will result in more year-over-year home sales.
Average Home Prices
Using the same data, I calculated the average home price in 2020 each month and compared it with the same months in 2019.
Buyers continue to spend more this year than they did last year, ranging from as much as 12.1% more in February to just 5.3% more in April. July prices were 9.6% higher than July prices in 2019.
One thing to note though is that the MLS does not reveal the contract price for pending home sales. That means for homes that have closed, we're using the actual sales price, but for those still under contract, we are using the asking price.
This means that when all the homes tracked in this report close, it's likely we see the difference between the two years tighten up a little (as most closed prices will likely be at or lower than most asking prices).
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Average Home Values
The next graph tracks the average home value in 2020 each month and compares it with the same months in 2019.
The graph shows that the appreciation rate each month has ranged from as high as 9.3% to as low as 5.3%, with year over year value change in July reporting the highest of the year at 9.3% higher than June of 2019.
As reported in numerous other market updates, we continue to see low inventory levels in most areas and price ranges below $500K, and this is the biggest contributor to the accelerated appreciation rate. Now is a great time to sell a home.
The next graph identifies when the current pending contracts were written, and what we're seeing is a longer-than-normal tail of contracts, perhaps tied to new homes being built. It is not uncommon for a home to be "under contract" in the MLS for nearly a year if the contract is for a home to be built.
Currently, there are 610 Tallahassee homes for sale in the MLS that are under contract with buyers (pending contracts). This represents a decline of 8.6% since last month's report revealed 667 homes under contract.
Of those, 39 contracts were written in August (6%), 277 were written in July (45%), 133 were written in June (22%), and the rest were written in prior months and years. This means that 74% of the pending contracts were written in the past 70 days, so more than 1 in 4 contracts is fairly old. These are likely heavily laced with new construction homes that are being built.
One thing that does catch my eye in this graph is that one half of July contracts have already closed. Remember, this graph shows closed and pending contracts by the date they were written, and there were 277 contracts that were written in July and have already closed.
In last month's pending home sales report, I forecast June being the strongest month of the year thus far for new contracts that closed, and that has now come to pass. June contracts are the strongest since May 2019 and when the rest of the contracts close, June might even surpass that month as well.
It's important to understand what this means. There are more buyers active in the market now than in any month in the past two years! Buyers are wanting to take advantage of low mortgage interest rates, so now is the best time to sell that we've seen in (forever).
Year Over Year Home Sales Comparisons
We know that the number of contracts written continues to rise, and we are finally starting to see closings follow suit.
The number of closed home sales in July was 20% higher than those closed in July 2019. The month was so strong that it reduced the year-to-date decline to just 3.2%.
While the COVID pandemic continues to impact our way of life, its impact on the housing market is receding. Safe selling methods have buyers hot to buy and we're now waiting the anxious sellers return. If Tallahassee were to have a record-setting August for new listings taken, they would sell like hotcakes and we'd see a record for new contracts. So help get the word out to homeowners who have been scared to sell, now is the time!
Regardless of the outcome, we'll be here to keep you up to date on the listings and home sales in the Tallahassee real estate market.
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