Is This Proof Of Runaway Appreciation For Homes?

As a homeowner, I am happy when home values move higher, but is there a point where it becomes too much of a good thing?As a homeowner, I am happy when home values move higher, but is there a point where it becomes too much of a good thing?

Over the years, we've come to expect "normal" real estate appreciation to be just over 3%, but homes are appreciating much faster than a normal rate. Home values are moving higher fast enough to cause alarm bells to ring, and today's report will show you exactly how the housing market has performed and where we are likely headed from here.

So hold on to your seat, take a look at a few of the median-priced homes for sale in Tallahassee, then prepare to be accurately informed on the changes to the median homes in Tallahassee.

Median Priced Homes For Sale

25 Properties
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When reporting on single-family homes, most real estate reporters combine the sales of single-family detached homes, townhomes, and condominiums. This is useful information, but you seldom see these reports dig into value trends, rather they focus too often on price trends. Also, our report today will use the median home value, rather than merely the average.

The Median Home Value In Tallahassee

The first of four graphs in today's median home report segments the market by property type. The red lines plot the median single-family detached home value, while the solid blue line plots the median townhome value, and the dashed-blue line plots the median condominium value.

Graph plots the median home value over time in Tallahassee

This segmentation is great because most people only own one home. This breaks the market into three separate categories and each homeowner can assess their specific market situation.

What's very clear in this graph is that the value of single-family detached homes and townhomes are soaring higher, while condominium values do not appear to be moving much at all.

Of the three property types, condominiums have the most fluctuation in what falls into the category. As I write this report, there have been 416 condominium sales in Tallahassee this year, priced from as low as $35K for a 700 square foot student rental to as high as $725K for a penthouse unit in the Tennyson in downtown Tallahassee.

Additionally, there have been many units sold in new condominium neighborhoods that look very much like a traditional single-family detached home, but the neighborhoods were set up as condominiums. These are fetching from $300K to over $500K, so they definitely skew the median higher. For this reason, we could see a huge jump in the median condominium value should the number of student rental sales fall below the downtown and new condominium unit sales.

New Versus Existing Homes

This next graph segments the market between new and existing homes, reporting the collective median value for single-family detached homes, townhomes, and condominiums.

Graph plots the median new home value and median existing home value over time

They say that a picture is worth a thousand words, and this graph might be doubly so. Even with no arrows or annotations, I believe we all can see why today's market conditions are nothing like what we saw in 2006 when the housing bubble burst.

Back in the housing market expansion phase from 2003 through 2006, builders were able to bring homes to the market at values many buyers could afford. In fact, they were so affordable that there was very little difference in values between new and used homes. But times change!

The value differential between new and used homes has resulted in the builders not being able to bring homes to the heart of the market, rather they are only servicing the top 20% or so of homebuyers. Existing home values still remain far behind what builders can supply today, so the receding inventory is not being resupplied. There has been a new construction shortage of several thousand homes going back to 2016 when the market hit equilibrium.

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For our readers who want to know what buyers are spending today, the median home price graph below segments the market between new and existing homes.

Median Home Price

Much like we saw with the previous graph, the middle of the market prices are soaring in 2021.

Graph plots the median new and existing home price over time

From 1991 through 2010, the median new-home price and median existing-home price were usually within $50K of each other. But oh how things have changed.

By 2013, the median new home price was nearly double the median existing-home price, making it very difficult for local homebuilders to supply the most active segment of the housing market. With low mortgage interest rates fueling demand and builders not being able to deliver the supply, we've seen the median existing-home price soar. But so too are new home prices.

There are too many underlying factors that suggest the divide between new and used will remain, as inflation and the rising cost of wages have already heavily impacted the market. Couple that with the lack of developed lots and there is plenty of reason to fear the median new home price will push above $400K in the next few years.

Runaway Appreciation In Real Estate

At the beginning of this post, I pondered whether the rapid appreciation of homes was too much of a good thing. I believe the final graph and explanation make it clear that yes, it has been far too much of a good thing.

Graph plots the annual appreciation for homes in Tallahassee

The graph above plots the median home value each year and reveals the impact that the diminished inventory of homes for sale is having on home values. The market has been undersupplied since the end of 2016, so home values continue to move higher at an accelerating rate.

When the year began, I forecast double-double-digit appreciation. Through mid-November, the median home value has risen more than 11% which is an annualized rate of nearly 13%. The demand for homes is approaching the peak market years of 2005 and 2006, but new construction is far lower today than what the market has consumed, so the supply of homes continues to trail demand.

The lack of inventory is only going to increase the pressure on home values. Yes, it's nice to see home values rise, but double-digit appreciation is going to eventually destroy home affordability and convert our market to one of haves and have nots.

The relative supply of homes is stuck near an all-time low, and the bidding wars are making it very difficult to buy a home today. We need builders to step up the production and give the market the homes it needs, all the while paying attention to mortgage interest rate movement which will eventually slow demand.

Joe's Recent Housing Report Videos

Real Estate Supply Update
Today, you really have to track the real estate supply and demand for homes so that you know just how aggressive and flexible you will need to be when it comes time to find a home to buy.
How Soaring Home Prices Are Impacting The Housing Market
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Available Housing Inventory Is Rising
Two important market statistics about the available housing inventory that all Realtors, buyers, and sellers should know if they want to be in a position to properly negotiate a transaction to its best outcome.
Foreclosure Wave? The End Of The Mortgage Moratorium And Forbearance
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When we study the US median market rent, we see signs that paint a clear picture of the future of home prices and home values.
New Versus Existing Home Values Creates Bubble?
New Versus Existing Home Values | Is A New Housing Bubble Forming? Have you noticed the difference between new versus existing home values and wondered is a new housing bubble forming?
Pending Home Sales Report October 2021
Pending Home Sales Report provides an early insight into housing market activity, as we look to present conditions with contracts as opposed to waiting for home sales to close.
Homeownership Rate Crash #shorts
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Housing Shortage Confirmed: Median Market Rent Explosion
The lack of home builder production has home prices and home values soaring, now look at what's happening to rents too!
Multi-Family Properties - Are They Appreciating Fast Too?
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Luxury Home Sales July 2021
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Average home prices, average home values, and average home sizes in each of the 8 counties of Central North Florida
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The evidence that points to a very clear picture of where the real estate market is heading and what is going to happen to the new home construction market specifically.
What Do Low Mortgage Interest Rates Really Mean?
Every article or video about mortgage interest rates conveys that rates are low, but do you really know what it means?
Housing Market 2021 And Beyond Boom Or Bust?
Housing Market 2021 And Beyond Boom Or Bust? What's going on with US Home Sales in 2021? Are we getting ready to relive the 2005 market? Or perhaps the 2006 market as it all came tumbling down? This comprehensive report with graphs and third-party data gives you the answers you need to know! #housingmarket2021 #realestatemarket2021
Home Affordability Forecast and Housing Report 2021 Q1
A look at how home affordability is likely to change over the next twenty years. I produced the forecast by using data from the past and applying it forward, including inflation, home prices, home values, and mortgage interest rates. If you have a stake in the housing market, you don't want to miss this forecast
Are Home Sales Sustainable At Today's Pace?
The housing market is hot, but is it too hot? Can we keep selling homes at the rates we're seeing today, or is this a case of what goes up, must come down? The answer to are home sale sustainable can be found with a study of historic home sales rates and population growth trends, allowing us to forecast future home sales.
Here's Where Home Affordability Is Heading
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Real Estate Supply And Demand Update March 2021
Real Estate Supply And Demand Update March 2021: Prudent homeowners and prospective buyers are wise to study the supply and demand for homes in the market in which they live. Today's report on the supply and demand for homes in Tallahassee parallels what other markets are reporting. The consistent message for more than two years is that we need more homes! 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 oppor
Real Estate Market Forecast 2021
Real Estate Market Forecast 2021 - Are you curious about what will happen in the 2021 housing market? There are so many videos making a housing market forecast, many which use shocking headlines about the coming real estate market crash that I felt it would be good to produce a fact-based housing market forecast. I summarize how the market performed last year, look at current supply and demand ratios, assess the major variables impacting the market, and then conclude with a reasonable expectation from that
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