Tallahassee Housing Supply Would Be Fine At Average Rate Of Demand

While we know there is an abundance of homes or glut in the Tallahassee housing supply, it is important to know that the real issue is not a supply-side problem anymore.

All the questions and signs make it appear as if housing supply (or over-supply) is the culprit:

• Are there too many homes for sale in Tallahassee? Yes.
• Is the wave of new foreclosures only going to add to the housing supply in Tallahassee? Yes.
• Is the shadow inventory of homes and the large group of homes that failed to sell recently a major source for our future housing supply? Yes.

Then why is this problem not a supply-side problem?

Tallahassee Housing Supply Is Fine For Historical Demand

Because our current rate of demand is running at just above 50% of traditional averages. When we calculate an expected level of home sales in Tallahassee, and then plot the current supply against the demand, the following graph is produced.

In the real estate graph above, the red line shows the average months of supply of homes today when compared with our historical rate of sales (each month is shown with its seasonal adjustment).

As we can see at the far right in the graph, the current supply of homes would be just over 6 months of supply if demand were at average historical levels. This would be a level in which market equilibrium would be met, thus we could call the market in balance.

The Real Tallahassee Housing Supply Issue

Ultimately, we know there is more housing supply sitting on the sidelines, so the real estate market equilibrium would not really be this close. But it would be far better than our current reality.

And our current reality is dealing with a demand problem. There are so many homeowners who want to move and buy another home, but they are trapped in their current homes. They cannot sell, so they cannot buy.

The demand-side issue is what needs to be fixed and then time will cure the rest of the housing market woes.

Home values are still declining, so people who are waiting to sell a home in Tallahassee are either going to wait five or more years, or they are just performing an exercise in futility until they decide to move.

Right now, banks are offering favorable solutions to homeowners who are upside down, and smart home sellers are jumping on these deals.

If you think a short sale is a solution for you, but you are concerned about the consequences, just drop me a note and we can schedule a time to provide you expert guidance.

If enough home sellers short sale today, they will be qualified to buy in just a few years, and that would help bring back demand to the market. We need this increased demand to reduce the housing supply.