Historic Home Sales Predict Future Path - Astounding!
Having just experienced the toughest year in real estate brokerage since before 1991, my thoughts have already turned to 2009 and beyond, wondering what the future has in store for this battered real estate market. As the eternal optimist, an old, favorite John Dryden quotes comes to mind "Fight on, my merry men all, I'm a little wounded, but I am not slain; I will lay me down for to bleed a while, Then I'll rise and fight with you again."
Home Sales Down To Levels Lower Than 1991
While home prices have remained relatively strong, the number of home sales in Tallahassee has dropped to a level not seen since prior to 1991. Why is 1991 my "beginning point?" That is the year that I entered the Tallahassee real estate market and therefore do not have data prior to that point.
If you look to the graph below, you will see the red line represents the average home price in Tallahassee while the blue line represents the number of homes sold in Tallahassee.
Home Prices Are Dropping In Tallahassee
With the number of homes sales in Tallahassee dropping so severely, one might wonder how the average sales price continues to remain so stable. For those of you who visit here often, you already know my thoughts on that. In a nutshell, buyers still have the means (stable jobs and low interest rates) to pay the same for a home, they are merely buying "more home" rather than pay less for the same home. The average home today, while similar in price to the average home two years ago, is a bigger home. Home prices are dropping, and I have presented proof that Tallahassee home prices are dropping in a previous blog.
The Future Of The Tallahassee Real Estate Market
So we have reviewed the fact that the number of home sales has dropped and home prices have dropped, but what do we have in store for us in the coming years? When is this market going to turn? What will 2009 - 2011 look like in the Tallahassee real estate market? Well ...
I Am Looking For Reader Feedback
I want to know what you think. For the most part, you either live or own property in Tallahassee, or you are highly interested in real estate for you to be reading this blog. Give us some feedback in the comments below (if you are an email subscriber, click through to the blog to post your feedback) and tell us what you think the market will do. Will unit sales be stronger? Will home prices continue to drop? And here is why I want to see your comments today....
Tallahassee Real Estate Market Prediction 2009-2011
Tomorrow will be the "Mack-Daddy" Blog Of The Year. I will provide a thesis and quantitative support for where I see the market heading over the next three years. It will surprise you. It will astound you. You absolutely must tune in to tomorrow's real estate blog to find out about the future of the Tallahassee real estate market.
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Discussion
You asked for feedback about the future of the real estate market here in Tallahassee for 2009 though 2011. I think we’ll see more of the same early on, followed by rising prices. The prices will initially stagnate as excess supply is finding new owners. But the volume of sales will continue to increase as banks lose their fear of the home mortgage market and begin to ease on the required downpayments and credit scores. It won’t be like it was, but the banks must loan money to make money and new safeguards and incentives will get them to more readily lend money. On the downside, picky banks and people’s fear are the only thing that will dampen the market going forward. But ultimately, here’s a list of the things that will pull it up.
Excess inventory drying up.
Interest rates are still low
Inherent “stickiness” of the market. Even if my home is worth less, I won’t sell it because I’d just have to buy another. Plus, I wouldn’t want to take a loss. That mentality keeps new supply off the market and its really only the excess supply of houses that gets hurt until it dries up.
Continuous expansion of the population due to our expanding colleges (and their teachers and faculty)
I think we’ll see more retirees moving here directly from up north, or moving up from south Florida.
Rents are climbing due to taxes and insurance and landlords disappearing due to improper financial preparation. Higher rents makes buying more attractive.
So in summary, over the long term, things look good for real estate here in Tallahassee. We just need to get over this hump and let time erase the pain. Seems like its happening already.
Steve
Although I do not live in Tallahassee, I always enjoy your stats and graphs Joe. I believe that come January, we will have a decent idea of the new bailout effort on the part of the feds, we will have a new President sworn into office, and Spring will be just around the corner. Until then, we need to hold on to our seats...it's a bumpy ride.
Joe,
I am bearish on the real estate market. Today, Wells Fargo sent an ominous message about our future mortgage rates. They have raised their current jumbo 30 year fixed rate to 9.2%. Rate hikes like this will not encourage the buyers that are hiding, to come out. It may be healthy overall for the economy, but will not do much to ease the pain in the near term for the housing market.
I personally believe that our real estate market will continue to bear the brunt of massive "de-leveraging" for years to come. Steve makes a very astute commentary about the relationship between rent and ownership. And, I agree with his supposition that higher rents make ownership more attractive.
Unfortunately, I don't believe that the rents are anywhere close to high enough to make this a tangible difference at this point. If you tour what is available to rent for $1300 per month, and compare it to what you can buy for $1300 per month, you are in for a rude awakening.
2009 will see home prices slide until the rent vs. ownership ratio comes back to "normalcy". Having said that, there are tremendous opportunities on the buying front. Creative, determined, and savvy buyers will have unprecedented opportunities to buy "up". By this, I believe that the really good buys will be on the higher end of the market. I think 2009 will provide many opportunities for the able buyer to find the some of the most motivated sellers of Tallahassee real estate history.
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