Real Estate Inventory Report January 2021
If you are an active buyer in the Tallahassee real estate market, then you know the supply of homes for sale is low.
And when I say low, I mean the supply of homes is at an all-time low, with very little to choose from at prices below $550,000. And this is not a temporary seasonal issue, the supply of homes has been far too low for going on 4 straight years.
Today’s report focuses on the supply-side of the housing market, looking at what’s coming in and what present levels mean for home values and buyer opportunities today.
Let's start with a list of all active listings, and you'll quickly note that many are already under contract with other buyers. The report that follows explains why this is so.
Homes For Sale In Tallahassee
Video: Real Estate Inventory Update
Real Estate Inventory & Seasonality
Today's report focuses on the current supply of homes for sale and comparing it with the past. I do want to make an important point clear before we dig into the data.
The inventory of homes for sale is usually at its lowest for the year in early January, but that is not a factor in today's report. I have removed the seasonal impact of seller activity by using annualized data for the entirety of this report.
This means that we do not ascribe today's conditions as merely the result of this being January. Today's real estate supply is incredibly low, and it will lead to some problems if we do nothing about it.
Year Over Year Fresh Listings Fall
For the first time in six months, the number of fresh new listings entering the market declined when compared with the same month in the year prior. Considering that demand remained super-hot (even for December), the result was a decline in the relative supply of homes for sale.
The graph above shows a comparison of how each month fared (percentage-wise) compared to the same month in the prior year for fresh new listings entering the MLS.
I use the term “fresh” to describe homes listed for sale that were not previously listed. These are homes that are truly new to the market, not merely old inventory that was canceled and relisted by the agent or a new agent.
Even though eight of the twelve months last year posted gains, the overall number of new listings fell when compared to 2019. When you consider that the year started off under-supplied, then you can understand why it is so hard to find a home right now.
I attributed the huge declines posted in April, May, and June, to the global pandemic that first started impacting Tallahassee in March. I believe many potential sellers decided not to move due to concerns about the economy as well as their health and safety.
We had hoped that many of these reluctant sellers would come into the market by year's end, and most did, but there is still a small group of these prospective sellers who could represent growth in the inventory in 2021.
I'm expecting historical seasonality to return to the supply-side of the real estate market this year, as low mortgage interest rates have helped the housing market overcome the fear and the resulting indecision caused by the pandemic in 2020.
There are a lot of people who endorse Joe for the job of selling your home, from Barbara Corcoran (Star of ABC's Shark Tank) to Preston Scott (host of Tallahassee's top daily "Audio Magazine," as well as the thousands of happy customers Joe has helped in the past. Listen why!
Fresh Existing-Home Listings
While the last graph showed a month to month comparison of all fresh new listings, this graph shows cumulative fresh existing-home listings each year.
We see that the number of fresh (existing home) listings declined by about 7% in 2020 when compared to 2019. Even though 2020 finished off as the middle-ranking year for fresh existing-home inventory coming into the market, one must remember that sales were higher than in any of the seven years shown in the graph.
The housing market started the year with too few homes for sale, so the reduction in fresh listings, coupled with heightened demand, has pushed prices and values higher and created pent-up demand for homes.
While this might seem like "good news" for sellers as their homes are now worth more, you also have to remember that most sellers are going to be buying another home in the same market (with the same soaring prices).
Of course, the existing home sales market represents just one source of new listings. We also need to examine new builder inventory during the same time periods.
More (But Not Enough) New Construction
Similar to the previous graph that showed fresh listings for the existing homes market, the following graph shows freshly listed new construction homes.
Homebuilders picked up the pace of building new homes in 2020, but they failed to produce enough homes to provide for today's current demand.
Back in the 1990s, builders were bringing more than 1,000 new homes per year to the market. Right now, with a large shortage of homes, they should be building about 1,500 per year and monitoring the supply and demand numbers to ensure that they're not building too many at any given price point.
This means that builders missed an opportunity to sell an additional 600 to 900 homes in 2020 (which is more new homes than actually sold, meaning builders produced less than one-half of the homes that the market would bear). The void that these missing homes did not fill is the primary reason we've reached a historic-low amount of homes for sale in 2021.
To get the global view of the supply side of our market, we combine new homes with used homes which produces the following graph detailing the total number of fresh new listings that have entered the market each year.
New Listings In Tallahassee Come Up Short
This graph reveals that the combination of builder homes and existing homes entering the market in 2020 made it the 3rd-best year (of the past 7 years) for new inventory. Remember, today's sky-high demand has created optimal market conditions for sellers.
Despite this influx of new homes, the relative supply of homes for sale has fallen even lower. So what does that mean?
The Relative Supply Of Homes Continues To Drop
This table measures the supply of homes for sale, relative to the current rate of demand. The resulting number for each area and price-range is measured in "months of supply," and what makes the market balanced is a measure of 6.0.
When the relative supply drops below 6 months of supply, we call this a seller's market as there are more buyers than sellers. When the numbers rise above 6, we refer to that as a buyer's market, as there are more sellers than buyers. Red shaded areas reveal a seller's market condition.
As you can see in this table, the supply of homes for sale, relative to the current heightened rate of demand, is lower than ever. Even with more new homes and a decent amount of existing homes, the growth of the buyer pool has reduced the months of supply of homes for sale.
For every buyer that closed on a home in December, there was more than one buyer that missed out on the chance to buy a home. The closings would have been more than double the rate closed had there been more available listings.
We need builders to step up and produce inventory in the areas and price ranges shaded in red if they are capable. Obviously, we're not going to see a builder bring in new units under $100K in NE Tallahassee, but there are a lot of areas here that should be pursued.
Just in NE Tallahassee alone, there are less than five months of supply of homes for sale at all prices below $550K! One would think there would be ways of producing new homes in NE Tallahassee for $300K to $500K! Remember, this report includes all single-family detached homes, townhomes, and condominiums, so it's not like demand is limited to single-family detached homes on an acre!
If I were a builder and wanted to ensure that I did not build homes that the market does not need, I would look at the red-shaded areas with a value below 4 months of supply. The market is screaming for these homes, why not build and sell them?
If you are a local home builder who would like analytical guidance on where and what to build, I’m happy to help, just give me a call.
For non-builders, you should know that this is the hottest seller's market ever, so if you've been thinking about moving, it's time to act.
If you are a homeowner who has been "sitting on the fence," unsure about selling your home during the pandemic, please reach out to us and let us explain how we can sell your home safely and for top dollar!
Sellers today can enjoy the strongest seller's market ever recorded in Tallahassee, but they need to understand that time might be working against them.
Right now, mortgage interest rates are low and you have sky-high demand for your home. But when mortgage interest rates begin to rise, demand will soften in the middle of the market, and nearly stop at the top of the market.
Rising mortgage interest rates will not likely reduce the value of your home, but it will increase your monthly payment on the home you buy next.
If you plan on buying a home after you sell your current one, take advantage of low mortgage interest rates, or just take advantage of the strong demand that low rates have created.
Don't let the "future you" regret not having taken advantage of today's low mortgage interest rates. Sell your home and buy your next one, locking in these incredible rates.
Recent Housing Market Reports
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