Thursday, June 5, 2014

1st quarter 2014 Tallahassee Residential Real Estate Market Snapshot And Year Over Year Market Statistics

Tallahassee's residential real estate market was pretty stable in the 1st quarter of 2014.  Overall the market here improved in 1st quarter of 2014 from the first 1st quarter of 2013.  The number of residential property sales has increased, the number of properties listed for sale has increased, the average number of days a home sat on the market before it sold decreased and the percentage of distressed sales (foreclosures and short sales) compared to total sales has come down since the first quarter of 2013. 

For the first time in a while though, we did see a very slight decrease in average sale price in the 1st quarter of 2014 compared to the same time period a year before.  We also saw a very slight decrease in the average sale price/listing price ratio which compares how much the average home sells for compared to what it's listed for sale at.  These decreases were so small though (less than 1%) it's probably fair to say that prices and the sale price/listing price ratio was flat in the 1st quarter of 2014 instead of decreasing.  Nevertheless though, it is the first time in quite a while that we have not had a quarter with a year over year increase in prices. 

As mentioned above we saw an increase in the number of properties sold in the first quarter of 2014 compared to the same time the year before.  Sales of residential properties increased by 12.21% which I would say is a substantial gain.  The selling season jumped off to an early start this year compared to years past.  Being on the front lines here, I noticed this from my own business.  I think that people jumped into the market a little earlier this year because there was a sense of urgency to buy due to fear that interest rates would be going up.  This along with an overall improvement in the economy and job market is probably why year over year sales were up in the first quarter of this year. 

The number of properties listed for sale also increased year over year in the 1st quarter of 2014.  Listings increased by 4%.   The increase in listings I believe is due to the price increases we saw in 2013.  Due to prices increasing last year, more homeowners feel like it's a good time to list their homes for sale, because they can now get the price they want for their home. 

Average home prices decreased in the 1st quarter of 2014 down 0.59% from the 1st quarter of 2013.  Even though the price decrease was very small and is best described as saying prices are flat, it's still a change from the trend of increasing prices we have been seeing over the past few years.  However, to me it's not all that surprising.  For the past couple years, we have seen pretty substantial increases in prices.  In the first part of 2013 we saw year over year price increases of close to 10%.  That rate of increase was not sustainable.  Interest rates have increased somewhat this year compared to last year, so the higher interest rates could have something to do with prices not going up.  The average rate on a 30 year fixed rate mortgage in the 1st quarter of 2013 was 3.5%, and in the 1st quarter of 2014 it was 4.35%.  Higher interest rates decrease the buying power of people purchasing homes with a mortgage, so it would make sense that people are wanting to pay a little less for homes due to increased interest rates.  Besides this, I think the very slight decrease that we saw in home prices is a result of home prices just leveling out due to the balancing of supply and demand of homes

The average sale price/listing price ratio of homes also very slightly decreased in the 1st quarter of 2014 from the 1st quarter of 2013.  In the first quarter of 2014 the average home sold for 96.10% of what the home was listed for sale at down from 96.44% in the 1st quarter of 2013.  96.10% is still a very healthy average sale price/list price ratio, and is indicative of a good balance in the supply and demand of homes.  The 0.34% decrease we saw this year is probably a result of the market just balancing out and interest rates going up.  Nothing to be worried about though.
The average number of days a home sat on the market before it sold decreased in 1st quarter of 2014 by 14% coming down to 104 days compared to 121 days in 1st quarter of 2013.  When homes sell quicker this is healthy indicator for our real estate market.  It means that demand for homes is increasing and that sellers are pricing their homes right instead of overpricing their homes which causes homes to linger on the market without selling. 
Finally, the percentage of total properties sold that were distressed sales (foreclosures and short sales)  decreased in the 1st quarter of 2014 compared to a year earlier.  In the 1st quarter of 2014 distressed sales made up 19.81% of total sales in Leon County.  This is down from 23.1% in the 1st quarter of 2013.  Distressed sales sell at a discount compared to non distressed sales, and they bring down the property values of surrounding properties.  A decrease in the number of distressed sales is a positive sign that our real estate market is improving, and it's needed so that property values can increase in value over time.  As the distressed sale inventory continues to be sold off, we can expect distressed sales to continue to decrease.  Most distressed sales were a result of bad loans made during the housing bubble.  Most home loans made after 2009 have been good loans with low default rates, so the rate at which distressed sales are being sold is much greater than the rate of new distressed sales entering the pipeline. 
Overall the market improved in the 1st quarter of 2014 compared 1st quarter of 2013.  I think we can expect the market to continue to be stable in 2014.  With interest rates being higher this year, I think it's possible that prices could go down a little bit.  Since we had solid price increases over the last few years, I don't think it's anything to be worried about.  It's simply the market adjusting to increases in interest rates coming up from the historic lows we saw last year.  The fundamentals of our local real estate market are strong with sales and listings going up and distressed sales going down.  The important thing to realize is that if you are a buyer, it's still a great time to buy.  Interest rates are historically low, and prices are still very affordable. It's certainly more affordable than renting!  If you are a seller it's probably the best time to sell that we have seen since 2006.    A summary of the year over year market statistics for residential real estate for 1st quarter of 2014 in Leon County are below. 
The number of residential properties sold increased by 12.21% (651 properties sold)
  • The number of properties listed for sale increased by 4% (1,395 properties listed for sale)
  • The average sale price decreased by 0.59% ( average sale price of $171,419)
  • Decrease in the average sale price/listing price ratio of 0.34% (average property sold for 96.1% of it's listing price)
  • Decrease in the average days on the market of 14% (average days on market before sold was 104 days)
  • Decrease of 3.3% in the overall percentage of distressed sales compared to total sales (distressed sales made up 19.81% of total sales).
  • Average rate on a 30 year fixed rate mortgage increased from 3.5% in 1st quarter of 2013 to 4.35% in first quarter of 2014.