Bobby's Real Estate Column
1st Quarter 2018 Tallahassee Residential Real Estate Market Snapshot And Year Over Year Market Statistics.
The residential real estate market in Tallahassee in the first quarter of 2018 took off like a rocket with both the number of properties sold and home prices seeing huge gains compared to the first quarter of 2017. While we saw home prices and the number of properties sold go up, the number of properties available for sale went down. Shrinking levels of housing inventory is a trend we have consistently seen over the past two or three years, and that trend continued in the first quarter of this year. The combination of increasing demand for homes and a decreased level of housing supply to meet the growing demand, has created a fiercely competitive seller's market where homes are flying off the market quickly and at prices we have not seen in over a decade. This combination of increasing demand for homes and shrinking supply of homes has led to a significant drop in the average time it took a home to sell in the first quarter of 2018 compared to the same time a year earlier. The average sale price/list price ratio, which measures how much a home sells for compared to it's listing price, went down very slightly in the first quarter of 2018 from the first quarter of 2017. Last but not least, distressed sales (foreclosures and short sales) continued to make up a smaller percentage of overall sales. Distressed sales typically sell at a discount compared to homes that are not distressed, and they bring down the values of surrounding properties. The decreasing levels of distressed sales is a consistent trend we have seen since 2012 when the housing market began it's recovery.
The number of properties listed for sale was down 1.5% in the first quarter of 2018 compared to the first quarter of 2017. The number of homes that sold in the first quarter of 2018 increased by a whopping 11.9% compared to the first quarter of 2017. An improving economy and a coming of age of the millennial generation, who many are now deciding to purchase their first home, caused a boom in home sales in the first quarter of 2018. Unfortunately, the boom in demand for homes has been met with a shrinking level of homes to choose from. The lack of adequate housing inventory is a long term issue in my view, and it could take years before inventory levels reach normal levels. Years of inadequate construction of new homes following the housing bust combined with the fact that people are staying in their homes longer are the main two causes of the shortage of available homes for sale.
Home prices rose 8.6% in Tallahassee in the first quarter of 2018 compared to the first quarter of 2017. Historically, homes have increased by about 3%-5% per year, so the 8.6% year over year increase we saw in Tallahassee in the first quarter of this year was well above what would be considered average. This is of course great news for homeowners looking to sell their homes. The rapidly increasing home prices are making purchasing a home much tougher for home buyers though since increases in home prices are far out outpacing increases in people's wages. When you also factor in increasing mortgage rates on top of increasing home prices, the cost of owning a home has gone up quite a bit over the last year.
The average amount of time it took a home to sell in the first quarter of 2018 went down a whopping 24.4% compared to the first quarter of 2017. On average it only took 68 days for a home to sell in the first quarter of 2018 compared to 90 days in the first quarter of 2017. The reason for this is simple. Fewer homes available for sale combined with an increased demand for homes is causing homes to sell much quicker than last year.
The average sale price/listing price ratio, which measures the average of what homes are selling for compared to what they are listed for, remained flat for the most part going down only very slightly. In the first quarter of 2018 the average sale price/listing price ratio was 97.69% compared to 97.89% in the first quarter of 2017. This means that in the first quarter of 2018 the average home sold for 97.69% of the asking price. This high sale price/listing price ratio confirms that we are in a seller's market.
Distressed sales only made up 4% of total sales in Tallahassee in the first quarter of 2018. This is down from the first quarter of 2017 when distressed sales made up 6.3% of total sales. As mentioned earlier, fewer distressed sales is indicative of the fact that the real estate market and the economy as a whole are improving, and is also a good indication that home prices will continue to increase for the foreseeable future.
Overall, the real estate market here in Tallahassee is very robust with lots of activity. Despite the very low levels of housing inventory available for sale, home sales have continued to increase sharply. If we had more homes available for sale, home sales would probably be even higher. The only aspect of our local housing market that could be considered bad is the lack of homes available for sale. don't expect this problem to go away anytime time soon. We need a boom in new housing construction to provide the needed supply of homes to meet the growing demand of home buyers. A shortage of land to build on combined with increasing construction costs and a shortage of construction labor is making it tough for builders to build homes...especially homes in the lower price ranges which is where the biggest shortage of homes exists.
In the year ahead I would expect demand for homes to continue to grow as the economy improves and more and more people begin to feel the extra income from the tax cut legislation that passed in December of 2017. I expect inventory of homes to remain well below adequate levels. I would also expect to see interest rates on home loans increase throughout the end of the year. I think we could expect the average rate on a 30 year fixed rate mortgage to rise to 5% by year end. If you are a home buyer I would not delay making a purchase if you are in the market. Affordability will continue to get worse for the foreseeable future. If you are a home seller, now is a great time to sell your home. If you price your home right and you get it in great condition so it shows well, you will sell it for good money and quickly.
For a list of the the real estate metrics for Tallahassee as a whole as well as for each quadrant of Tallahassee, please see below.
Tallahassee as a whole