Pending Home Sales Report For June 2020
The June 2020 Pending Home Sales Report reveals a strong and ominous pattern emerging in the Tallahassee real estate market.
We continue to see very strong contract activity, but if you've followed our other housing reports, you know that sales are down. So how is it that Realtors are writing a lot of contracts yet not seeing the results at the closing table?
June 2020 Housing Report Video
Do you want Joe to explain to you what's going on in the Tallahassee real estate market while also revealing the TWO records that were posted in May? Sellers and buyers can both do better in the market if they take a few minutes to understand what is really going on.
Watch the video, it takes less than ten minutes.
New Real Estate Contracts Written Each Month
The following graph was assembled from data in the Tallahassee MLS on June 14, 2020. On that date, I retrieved all sales that were closed from January 2019 through mid-June 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 are still working towards closing or ones that have closed escrow (thus the agreements were confirmed). What this data DOES NOT include are contracts that were written and subsequently failed to close. Each month when I assemble a Pending Home Sales Report, failed contracts disappear so that we are only left with ones waiting to close or those that successfully closed.
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. While we were amazed (last month) that April contracts had exceeded April 2019 contracts, we now find that so many fell apart that April 2020 contracts now trail April 2019 contracts by about 10%.
Currently, the number of contracts written through May is just four more than those written through May of 2019, and we know more contracts are going to fall out.
What Buyers Are Spending On Homes
Using the same data, I calculated the average home price in 2020 each month and compared it with the same months in 2019.
Buyers are clearly spending more this year than they did last year. 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 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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Home Values Are Rising (Faster Than Normal)
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 8.5% to as low as 6.5%. When we look back over the past thirty years, we find the average appreciation rate is 3.2%, less than 1/2 of what is occurring right now!
If you saw our recent report on new listings, then you know that sellers holding out for the end of the pandemic are the primary reason that we're seeing a run on prices and values. Inventory is too low and buyers are fighting over what is out there.
When Current Contracts Were Written
The next two graphs reveal the interesting market behavior that I mentioned at the beginning of this post. The information in the graph shows the current status of all homes sold or under contract by the date the contracts were written.
Currently, there are 659 Tallahassee homes for sale in the MLS that are under contract with buyers (pending contracts). This represents an increase of 20% since last month's report revealed 550 homes under contract.
Of those, 202 contracts were written in June (31%), 367 were written in May (56%), and the rest were written as far back as August of 2018! Simply put, 86% of the contracts were written in the past 45 days, and this appears normal.
What is not normal is what we see in the graph below!
Under Contract Does Not Always Mean Sold
Up to this point, we've demonstrated that prices and values are rising, and the number of contracts remains higher in 2020 than were written in 2019 (which was a very strong year for housing).
So take a look at the following graph which shows how closed home sales are doing in 2020 versus the same time period in 2020. This graph is arranged by date of closing (not contract date).
Home sales fell hard in April and then fell even further in May. So even as Realtors are writing contracts at a high rate, closings have not followed suit.
This is something that we are clearly seeing in the data, yet this is not something that I am experiencing in the field. Sure, we have contracts that have failed to close, but not more so than we normally do. This means that I cannot provide an exact reason why this is occurring, but I do have my suspicions. Now more than ever, sellers should be hiring highly experienced agents to ensure they get them not just under contract but sold!
Can you imagine getting your home under contract with a buyer, being all excited, and then going out and putting a contract on the home you plan to buy? It's an exhilarating and scary process, but what happens when your buyer cannot close on your home? Where does that leave you with the seller of the home you plan to buy?
There is a lot of money spent when preparing to buy a home, don't let it go because your real estate agent could not get you through the entire process. While there is a pandemic to deal with, sound business and contractual processes still apply. We would love to show you how we can help!
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