2nd quarter 2014 Tallahassee Residential Real Estate Market Snapshot And Year Over Year Market Statistics.
In the second quarter of 2014 Tallahassee's real estate market displayed somewhat of a mixed bag in terms of having some both positive and negative metrics. On the positive note, activity was up in the 2nd quarter of this year compared to the same time period a year earlier. Both the number of properties that sold and the number of properties that are listed for sale went up. We also saw an increase in average sale price/listing price ratio which shows how much a property sells for compared to what it's listed for sale at. In addition to that, we also saw a decrease in the amount of time on average that it took a home to sell in the second quarter of 2014 compared to the same time frame a year earlier.
On the negative side, we actually saw a decrease in the average price a home sold for. What!!!??? I know, I know...you see everywhere in the news that prices are going up, up, up. Well that might be true in some or most places, but it's just a good reminder that real estate is very local in nature, because in Tallahassee in the 2nd quarter of this year, the average sale price of residential property in Tallahassee fell by 6.7% compared to the same time a year earlier.
In addition to the decrease in the average sale price, distressed sales (foreclosures and short sales) accounted for a larger percentage of total sales compared to the same time period a year earlier. Distressed sales typically sell at a discount compared to non distressed sales, and they typically bring down the value of surrounding properties. The year over year increase in the distressed sales in Tallahassee in the 2nd quarter of 2014 is probably one of the main reasons prices also went down.
As mentioned above, the number of properties listed for sale and the number of properties sold went up. The number of properties listed for sale increased by 16.5%, and the number of properties sold increased by 2.1% In 2013 we saw big increases in prices of homes in Tallahassee. This increase in home values in 2013 has inspired many home owners to go ahead and list their properties for sale because they can now sell their properties for a price that is acceptable to them. I think that is the main reason the number of properties listed for sale has gone up so much.
This is good news for home buyers. Over the last few years home buyers have complained about the lack of housing inventory, so it seems that the increase in housing inventory is much needed. Buyers seem to have more homes to choose from now, which is a good thing.
The increase in sales was pretty modest at 2.1%, but nevertheless it is an increase which is good. This suggests that demand for housing is still good. The slowly improving economy and continued low interest rates on home mortgages most likely plays a very big part in the continued increase in home sales. I think what happens with interest rates in the next year will determine whether or not home sales continue to increase or not. If interest rates start to tick up like they are predicted to in 2015, then it could possibly hamper home sales. Job growth will also play a part in whether or not home sales will continue to get better.
The average time it took to sell a property decreased by 13% going down from 99 days in the 2nd quarter of 2013 to 86 days in the second quarter of 2014. Also, the average home sold for 96.77% of the asking price compared to 96.37% in the 2nd quarter of 2013. I think both of these statistics reflect that fact that people are listing their homes for less money on average then they did a year ago. The reduced listing and sales prices have caused homes to sell quicker and closer to what they are listed for sale at.
As mentioned above, the average home price decreased by 6.7% in the second quarter of 2014 compared to the same time a year earlier. This is a fairly significant drop. I think the reason for the decrease in prices are two fold. First off, there has been an increase in distressed sales in the last year. In the second quarter of 2014 distressed sales made up 20.9% of total sales compared to 17.9% in the second quarter of 2013. Distressed sales reduce overall home values because they sell at a discount and they bring down values of surrounding homes.
The second reason that I think average home values have gone down is that we had a large increase in the amount of properties listed for sale. We had a 16.5% year over year increase in the number of properties listed for sale in the 2nd quarter of 2014. I think that the increase in supply outpaced the increase in demand, and as a result prices went down.
I think that the residential real estate market in Tallahassee is still trending in a positive direction. Once we work through the inventory of distressed properties (foreclosures and short sales) prices will consistently trend upward at a moderate pace that is on par with historical averages (somewhere between 2%-5% a year). Part of the decrease in prices are due to the distressed sales, but a part of it is also a symptom of normal fluctuations in supply and demand.
I think the items to look out for that will influence the direction of the real estate market in the near future are interest rates and job growth. When interest rates go up, you can expect to see a slight drop initially in home sales and prices....especially if job growth is not strong. If job growth lags, you could also see the real estate market lag as well and vice versa.
Home prices are still affordable, interest rates are low, and the overall cost of owning a home is very affordable...especially compared to renting. Prices have come up some though over the last few years, so for sellers it's a lot better than it has been. With this being said I think our market is in more of an equilibrium than it has been in for a while. The only thing about our real estate market that is not normal historically is the high proportion of distressed sales.
The summary of the year over year real estate metrics for the 2nd quarter of 2014 I analyze are below.
- We saw a 16.5% increase in the number of properties listed for sale. (1,714 homes listed)
- We saw a 2.1% increase in the number of homes sold (1,006 homes sold)
- We saw a 6.7% decrease in the average sale price of a home. The average sale price was $177,333 compared to $183,902 in the 2nd quarter of 2013.
- We saw a 0.4% increase in the average sale price/list price ratio which measures what a property sells for compared to what it is listed for. The average sale price/list price ratio in the 2nd quarter of 2014 was 96.77%
- We saw a 13% decrease in the average number of days it took to sell a property ( 86 days)
- We saw a 3% decrease in the number of distressed sales compared to total sales (20.9% of all sales were distressed sales).