4th Quarter 2013 Tallahassee Residential Real Estate Market Snapshot And Year Over Year Market Statistics.
Tallahassee's residential real estate market continued to rally in a positive direction in the 4th quarter of 2013. Year over year, every single metric that I used to analyze the condition of our local residential real estate market improved in the 4th quarter of 2013 from the same time period a year earlier.
The big improvement though came in the number of properties listed for sale. Year over year we saw a 22.4% increase in the number of properties listed for sale in the 4th quarter of 2013. This is very good news because over the past year or two our local housing inventory has been tight. This has made it difficult for home buyers to find the right house. It has also led to many situations where there have been multiple bids on properties leaving many home buyers frustrated when they are not the winning bidder.
The increase in the number of properties listed for sale is probably caused by a combination of factors. The overall improvement in the job market and economy has given life to move up buyers who are selling their smaller homes to purchase larger homes. Also, home prices have started to climb over the last year or so which has brought many homeowners out of negative equity and into positive equity allowing them to sell their homes without having to bring money to closing. This combination of events has caused an increase in the number of properties listed for sale. Hopefully this year, home buyers in Tallahassee will find shopping for a home a little easier since they will have more homes to choose from.
The second area of improvement that we saw in the 4th quarter of 2013 was an increase in the average sale price. The average year over year sale price of residential properties in Tallahassee increased by 1.7%. While this increase is small, it is still an increase. It's important to keep in mind that earlier in the year, we were seeing year over year increases of around 8% in property values. That level of increase is not sustainable, and now it looks like our local real estate market is starting to balance out, and prices are starting to go up at a sustainable rate. Historically, an average annual increase of 3%-5% is considered normal, so in the 4th quarter of 2013, prices rose just a little below that level. As the market heats up in the spring and summer though, annual price increases will probably jump up into that 3%-5% range.
The third area of improvement that we saw in the 4th quarter of 2013 was in the number of residential properties sold. In the 4th quarter of 2013 we saw a 5.6% year over year increase in the number of properties sold. The increase in home sales along with an increase in average sale prices are the most important signals that our housing market is improving. The increase in sales is attributed to again the improving economy, as well as to a slight easing on mortgage lending standards. Lenders have slightly relaxed their lending standards making it easier for buyers to get loans to purchase homes. Finally, it seems that more people are buying homes because they have stopped worrying that properties will lose value and people once again have regained confidence that homes are good long term investments that will appreciate over time.
The next metric where we saw improvement in is the average days on the market it took to sell a home. Year over year the average time it took to sell a home in Tallahassee decreased by 30% going down from 141 days in the 4th quarter of 2012 to 98 days in the 4th quarter of 2013. The decrease in the average amount of time it took to sell a property is a sign of stronger demand from home buyers which is a tell tale sign of an improving real estate market.
We also saw an improvement in the average sale price to listing price ratio. This ratio simply measures what a home sells for compared what it is listed for sale at. In the 4th quarter of 2013, the average house sold for 96.26% of it's list price. This ratio is high and is also indicative of strong buyer demand for housing.
Last but certainly not least, in the 4th quarter of 2013 we saw a decrease in the portion of homes sold that were distressed sales (short sales and foreclosure sales). In the 4th quarter of 2013 distressed sales accounted for 16.2% of all single family residential property sales in Tallahassee. This figure is down from 23.6% in the 4th quarter of 2012.
Distressed sales typically sell at a discount compared to non-distressed sales, and they bring down values of surrounding properties. For a while now, distressed sales have been suppressing home values. Now that they are decreasing in both total number as well as decreasing as a portion of total sales, property values will have an easier time continuing to increase as they have done historically.
Overall Tallahassee's real estate market is on strong footing, and we are transitioning back into a healthy and balanced real estate market. The average annual price increases are back to historical and sustainable levels. Also, the level of housing inventory and buyer demand for housing is balancing out.
As we move into the new year I think we can expect to see home prices increase slightly in Tallahassee as well as slight increases in both number of homes sold and the number of homes listed for sale.
There could be a couple of things that could hinder our local real estate market going forward. First off, it seems that banks are starting to unload more foreclosure properties on to the market. If we have a sharp increase in the number of foreclosure properties on the market, this could hurt home prices. Also, the new qualified mortgage lending standards went into effect on January 10th 2013 which could make it tougher on some looking to obtain mortgages to purchase homes. This could hurt home sales. Most likely though the increase in buyer demand for homes and the improvement in the overall economy and job market will be enough to overcome these obstacles, and our real estate market will continue to improve modestly and move in a positive direction in 2014. The Tallahassee year over year 4th quarter real estate market metrics are below for you to review.
- 22.4% increase in number of properties listed for sale (996 properties)
- 5.6% increase in the number of properties sold (703 Properties)
- 1.7% increase in the average sale price ($181,356)
- 1.32% increase in the average sale price/listing price ratio (96.26%)
- 30% decrease in the average number of days it took to sell a property (98 days)
- 7.4% decrease in the proportion of distressed sales compared to total sales (distressed sales made up 16.2% of total sales).