Real Estate Supply Is Falling

The real estate supply levels continue a five year trend of declines, yet the relative supply of homes continues to grow due to falling demand. We have recently reported that the major reason for falling demand is that half of our home buyers must first sell a home, and many of these sellers are either upside down in their homes or competing against a large supply of distressed properties that are priced far lower than sellers are willing to compete with.

Announcement: Today is my Mother’s birthday, so if you happen to see Mary Lou Manausa, please remind her about dinner this weekend . Also, it is Alison and Danny Manausa’s 19th wedding anniversary, so cut Danny some slack if he is delaying your home closing for a day at the Manausa Law Firm.

I was looking through our real estate supply and demand tracking system to find something that might be interesting for this morning’s blog, and I came across two graphs that paint a clear picture of our present situation. The first is the one year trend of the real estate supply level in Tallahassee, and the second is the graph that measures the rate of success for recent home listings. As you will see, only forty two percent of people who tried to sell a home in Tallahassee were successful last year.

Real Estate Supply Continues To Decline

Our first real estate graph measures the inventory leaving the market and entering the market. The departing real estate supply could occur through a sale or for any other reason where the listing is no longer active in the Tallahassee MLS, while inventory entering the market is simply the measurement of all new listings (even those being listed after the termination of a previous listing period).

When we take this information and form a one year trend, then the real estate supply level changes are easy to observe. As this is a one-year trend, there is no impact from the seasonal changes that occur during different times of the year.  Both sets of information are tracked right on top of each other, so it is clear to see that departing inventory has led new inventory for the past four years.

Real Estate Supply Affects Home Selling Success Trend

The next graph shows the departing inventory, broken down into successful home sellers and home owners who failed to sell their homes. Currently, 58% of hopeful home sellers are failing, thus ensuring a future inventory of real estate supply.

Don’t be fooled into believing that the declining real estate supply means that home values will soon be on the rise. More homes are leaving the market due to a failure to sell than are those that were sold. This means that these home sellers will re-enter the market when either values are more favorable for sellers, or when circumstances dictate that they must sell the home at today’s values. We will continue to monitor the real estate supply and demand situation in Tallahassee to keep you informed.

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