Real Estate Supply And Demand Favors Homebuyers
The real estate market in Tallahassee is heating up, as the annual seasonal buyers are making their trek to view (and purchase) homes over the next six months. If you are currently in the market to buy a home or sell a home in Tallahassee, then you should understand the current real estate supply and demand dynamic.
Real Estate Supply And Demand
Inventory continues to fall in the Tallahassee MLS, with the total number of listings down about 20% since the peak at the beginning of 2008. The graph below was compiled with data from the multiple listing service, going back to 2003.
The real estate graph shows the one year trend of homes for sale in the Tallahassee MLS (red line) and the one year trend of homes sold (green line), while the relative supply (purple line) measures months of supply based upon the non-seasonal rate of sales. With a current supply of 18 months, buyers still have great opportunities and sellers are facing pricing pressures.
Year Over Year Pending Home Sales
A great way to "see" current buyer activity in the market is by plotting year over year pending home sales. The number of new contracts in January fell slightly when compared to one year ago, but this is not a great surprise as last January saw numbers increase due to the Homebuyer Tax Credit.
In the real estate graph above, the purple bars show a comparison between each month and its corresponding month from the previous year. After three months of gains, February still only fell about 2%. Don't be surprised if we see falling year over year pending home sales through April, the anniversary of the end of the tax credit.
Inventory Levels In Tallahassee Real Estate
The inventory levels are down, and the sales appear to be on the rebound, but the ratio between sales to listings is still way out of whack. The graph below shows how the market has completely inverted from the healthy level in 2003.
In the real estate graph above, condo and townhouse listings are plotted in read, while single family detached home supply is shown in blue. The one-year trend of sales is shown in green. The vertical arrows show a great sales to listings ratio in 2003 (annual home sales were far greater than supply), while our current sales to listing ratio has inverted and supply is outracing demand.
What this means for home buyers is value. The competition among sellers is such that we are still seeing falling prices, and some variables exist that will start to begin appearing in the market. Interest rates appear to be staying near historic lows and most likely will do so through the end of the year. Were this to change and interest rates start spiking towards historic norms, then home affordability will drop. This would not be good news for the home sellers that have already taken quite a beating.
Additionally, we need to look at the flow of distressed properties and past failed home sellers that could have an impact on the current supply. This too would bring more pressure to values and will likely remain a threat to home sellers for the next two or three years.
Finally, from the standpoint of optimism, if we see improvement in the money supply, we might start seeing a rise in homebuyer activity. There is a lot of political lobbying working to restore the banking system, and hopefully, it will trickle down to the Tallahassee real estate market.
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