UPDATE: Impact Of New Home Construction In Tallahassee

We've been writing about the housing inventory shortage for more than a year now, and one can simply look to the new home construction market to see if we should expect a big change.

Today's article starts with a look at all new homes for sale in Tallahassee and then explores whether or not Tallahassee is over-building homes. We then examine the building permits in the queue and close with a look at the current relationship between the supply of homes and current buyer demand.

New Home Construction Listings In Tallahassee

Are We Over-Building Tallahassee

One of the most common questions that I've received since 2015 is "are we over-building new construction homes in Tallahassee?" There is great concern that we'll see another housing bubble and subsequent collapse.

First of all, with the experience we gained from the housing market collapse, this is a wise and prudent question for all of us to ask from time to time. It's so important that I have created several systems in order to track and forecast another housing bubble.

One such system is a measurement of new home construction permits and sales, which you can observe in the graph below:

The graph above tracks the trend of permits and sales, and what we're keeping an eye open for is when there is a large surge of new permits or a great separation between permits and sales. For example, look at how new permits (red line) raced higher from 2001 through 2004, and then again from 2005 through 2006. Sales (green line) eventually followed, but not without great losses.

Notice how tight permits and sales have been since 2008. This is a clear sign that builders are being very conservative in their pace of permitting and building new homes. If the graph above was the only piece of information we had to evaluate the health of the market, we could conclude that it is very healthy indeed. New home permits are not surging higher, and in fact, they are occurring at a rate less than 1/2 of what we saw in the 1990s.

Supply And Demand For Tallahassee Homes

The most critical measurement that we monitor is the relationship between the supply of homes for sale and the current rate of demand. We refer to this as the relative supply of homes, and it is measured in months of supply. Historically, a very healthy market is 6.0 months of supply.

When relative supply rises above 6.0, the market is over-supplied and we refer to this as a buyers' market. When relative supply falls below 6.0 months of supply, the market is under-supplied and we refer to this a sellers' market.

Currently, the overall Tallahassee housing market is undersupplied (sellers' market) for homes priced below $450K, and oversupplied (buyers' market) for homes priced above $450K.

In 2018, fewer than 5% of all homes sold in Tallahassee were priced above $450K, so we can conclusively say that the market is undersupplied right now. This is the very opposite condition of a housing bubble (too many homes for sale and supply levels rising) and in fact, we need more homes built right now.

Recent New Construction Home Sales

The following table lists that 1,000 most-recent new home construction sales in Tallahassee. You can sort by any column header if you would like to find something specific.