Tallahassee 3rd quarter real estate market update.

3rd quarter 2015 Tallahassee Residential Real Estate Market Snapshot And Year Over Year Market Statistics.

The real estate market here in Leon County shifted gears quite a bit in the 3rd quarter of 2015 compared to what we saw over the past few previous quarters.  By no means would I say that the local real estate market here in Tallahassee is doing bad, but I would certainly say it is cooling off and seems to be cooling off big time. This is especially the case when you compare the 3rd quarter numbers to the numbers we saw in the 2nd quarter of this year. While we saw double digit percentage year over year price increases in the 2nd quarter of this year, the year over year home prices in the 3rd quarter of this year pretty much stayed the same only increasing by a very meager half of a percent. It's like the home price truck was cruising along at 80 miles per hour then all of a sudden slammed on the brakes.   Other than home prices though, all of the other metrics I looked at to gauge the status of our local real estate market seemed to look good. We saw a small increase in the number of listings from the same period one year ago. We saw a very healthy increase in the total number of residential properties that sold.  The average time it took to sell a property went down quite a bit. The average sale price/listing price ratio (what a home sells for compared to what it's listed for sale at) pretty much stayed about the same only going down 0.7%.  Last but not least, distressed sales (foreclosures and short sales) made up a smaller percentage of total sales then compared to the 3rd quarter in 2014.  Overall the market looked pretty good. The we did not see the staggering gains that we saw in the 2nd quarter but overall most of the numbers were healthy.  The only metric that lagged in this 3rd quarter of this year was average home prices. 

Let's start off looking at the number of listings and total sales.  As you have probably heard by now, we are in a sellers market. This means that we have a shortage of housing inventory compared to the demand for housing. This has fueled price increases over the past couple years and has also fueled home buyers's frustrations.  In the 3rd quarter of this year we saw a 2.3% increase in the number of properties listed for sale compared to the same time a year ago.  While we wish that number could be a little bit higher, the slight increase in the amount of homes available for sale is very much a good sign.  The price increases of the past couple years have lifted a lot of people out of the doldrums of negative equity to where they can actually sell their homes now and not lose money at closing. This along with the increased overall confidence in the marketplace from the positive gains we have seen over the past couple years should cause this trend of growing housing inventory to continue in the near future. I think the trend of increasing housing inventory will be a very slow but steady trend.  The sellers market caused by a lack of housing inventory could last for a while though. 

Total home sales continued to be robust in the 3rd quarter of this year. The market in Leon County saw a strong 13.3% increase in total home sales compared to the same time period a year earlier.  Continued job growth, the return of of people with foreclosures and short sales on their records to the home buying market and the increase in the number of Millennial home buyers in the market place has continued to fuel home sales. This trend will likely continue due to the fact that improvements in the economy seem to be fundamentally strong and lasting. 

Usually when you have a situation where percentage gains in home sales are far exceeding increases in housing inventory you get price increases.  It's the old economic principal of when demand exceeds supply prices go up.  For some reason this quarter that principal did not really seem to apply.  Despite the fact that demand far exceeded new supply of housing inventory, year over year prices pretty much were at a stand still compared to the same time last year. We saw only about one half of a percent increase in average year over year home prices in the 3rd quarter of this year.  In the 2nd quarter of this year the we saw over a 16% increase in the year over year price increases. A 16% yearly increase is obviously not a sustainable level of price appreciation so it's possible that the market is just correcting itself due to the fact that price increases in the 2nd quarter were so robust. That is the only feasible explanation I can come up with to explain the major slow down in price growth in the 3rd quarter of this year. 

The next two metrics to look at are the sale price/listing price ratio (which compares what a home sells for on average to what the home is listed for) and also the average days on the market before a home sold. The average sale price to list price ratio stayed about the same in the 3rd quarter of this year as it was the same time a year ago.  In the 3rd quarter of this year the average home sold for 96.92% of what it was listed for sale at. Last year it was 96.99%.  A sale price/list price ratio of nearly 97% is a very strong number and is very much indicative of the fact that we are in a sellers market still. 

Average days on the market went down quite a bit with average time on the market before a home sold going down by 16.3% compared to the same time a year ago. Again this is another metric that supports the fact that we are in a sellers market right now. 

Last but certainly not least, let's take a look at distressed sales. Distressed sales are foreclosure sales and short sales. These properties sell at a discount and bring down property values of surrounding properties. They are bad news for the overall health of the real estate market.  That is why it's a very good thing that distressed sales continued to make up a smaller percentage of total sales here in Tallahassee compared to the same time a year ago. In the 3rd quarter of 2015 distressed sales only made up 10.03% of total sales compared to 15.85% of total sales during the same period a year prior.  A few years ago during the height of the foreclosure crisis, distressed sales made up about a third of home sales here in Leon County. While we still have some work to do to get that level down, we have come a long way at working our way through the inventory of distressed sales. 

Overall I would say that the market here in Leon County is still strong, and the fundamentals of our market are still good. Sales are still increasing, the average time it took to sell a home went down, the average home is selling for very close to what it's listed for sale at, and more people are putting their homes on the market to help out with alleviating the shortage of housing inventory. While home prices did not go up this quarter, they did remain stable from a year ago. Like I said above, I think the slow down in price growth is just the market's  natural reaction to the sharp price increases we saw earlier in the year. Prices can't continue to go up at double digit annual percentage gains.  If they did prices would get out of control and no one would be able to afford a home. 

In the near future look out for possible increases in the interest rates.  The Federal Reserve has been talking about increasing the Federal Funds Rate which will in turn increase mortgage rates.  It's expected that they will increase the rates this year.  This could have a dampening effect on home sales and prices.  Although the increase in rates will most likely be very small, so the effect on prices and sales will most likely be small.  The increase in rates could have a negative effect on stock prices as well though which could in turn lead to a decrease in consumer confidence which could also dampen home sales. As long as job growth continues to get better though the market should continue on the stable path that it's currently on. 

 

A summary of the 3rd quarter year over year residential real estate market statistics for Leon County is below.

 

Tallahassee as a whole

 

• Listings increased by 2.3% (1,456 properties listed for sale)

• Sales increased by 13.3% (1087 properties sold) 

• Average prices increased by 0.5%. (Average sale price was $191,481)

• Sale price/list price ratio decreased by 0.07% ( 96.92%) 

• Average days on the market decreased by 16.3% (82 days)

• Proportion of distressed sales to total sales decreased by 5.82% (distressed sales made up 10.02% of total sales). 

 

Northeast Tallahassee

 

• Listings decreased by 1.5% (716 properties listed for sale) 

• Sales increased by 18.27% ( 589 properties sold) 

• Average price decreased by 0.7% ( average sale price was $249,466)

• Sale price/list price ratio decreased by 0.43% ( 96.87%) 

• Average days on the market decreased by 23.5% (75 days on the market) 

• The proportion of distressed sales to total sales decreased by 3.24%. (Distressed sales made up 6.8% of total sales)

 

Northwest Tallahassee

 

• Listings increased by 4.6% (413 properties listed for sale) 

• Sales increased by 11.93% ( 272 properties sold) 

• Average sale price increased by 5.4%(Average sale price was $119,046) 

• Average sale price/list price ratio increased by 0.43% (97.04%) 

• Average days on the market before a home sold decreased by 17.8% (79 days) 

• The proportion of distressed sales compared to total sales decreased by 8.9%.  (distressed sales made up 12.5% of total sales). 

 

Southeast Tallahassee

 

• Listings increased by 2.9% (215 properties listed for sale) 

• Sales decreased by 2.6% (152 properties sold) 

• Average prices decreased by 7.86% (average sale price ($154,630) 

• Average sale price/list price ratio increased by 0.82% (97.32%) 

• Average days on the market before a home sold decreased by 17.3% (78 days) 

• The proportion of distressed sales compared to total sales decreased by 9.3%. ( Distressed sales made up 12.5% of total sales) 

Southwest Tallahassee

• Listings increased by 21.7% (112 properties listed) 

• Sales increased by 19.4% ( total number of sales 74)

• Average price increased by 9.3% (average property sold for $71,882) 

• Average sale price/listing price ratio increased by 2.19% (95.77%) 

• Average days on the market before a property sold increased by 34.7% (163 days) 

• The proportion of distressed sales compared to total sales decreased by 4.2%.  (distressed sales made up 21.6% of total sales). 

Tallahassee Residential Real Estate 2nd Quarter Market Update.

Bobby's Real Estate Column

     Tallahassee's residential real estate market is certainly heating up hear in Tallahassee.  Double digit percentage increases in both home sales and home prices coupled with a slight decrease in the number of properties listed for sale pretty much was the main theme of Tallahassee's real estate market in the 2nd quarter of this year. We also saw a sharp decrease in distressed sales (short sales and foreclosures) in Tallahassee which is contributed to improving our real estate market in the 2nd quarter.   As the economy continues to improve, more jobs are being created, and that means there are more people with steady incomes who are jumping into the market to buy a home.  Also, we are now about 7 years out from the collapse of the real estate market and the start of the great recession, and the first wave of homeowners who lost their home to foreclosure or short sale from the recession are finally jumping back into the market to buy homes as lenders are finally willing to loan money to those people to buy homes again. Also, first time home buyers, especially those in millennial generation, are getting out of their parents basements and are now buying homes.

The effect of everything I mentioned above is that demand for homes is surging this year.  While the demand for homes is surging, the supply of homes for sale is actually going down.  Also, while home values are going up, there are still a lot of homeowners out there who are underwater on their mortgage which is keeping those home owners from selling their homes. There are also a lot of homeowners who took advantage of the historically low interest rates over the last 3 years who don't want to sell their homes and lose the 3%-4% fixed interest rate that they have on their mortgages.  These factors are keeping people from selling their homes which is constraining housing inventory.

In analyzing Tallahassee's residential real estate market in the 2nd quarter, let's first look at home sales  As mentioned above, we saw a surge in home sales in the 2nd quarter of 2015 compared to the same time a year prior.  In the 2nd quarter we saw an increase in home sales in Tallahassee of 13.3% compared to the the 2nd quarter of 2014.  In certain areas of Tallahassee the increase is even higher.  For instance, in Northeast Tallahassee home sales increased by a whopping 23.8%!

Now that we talked about home sales (a.k.a. the demand for homes) let's now look at the figures for property listings (a.k.a. the supply of homes).  Overall, Tallahassee saw a 1.9% decrease in the number of properties listed for sale in the 2nd quarter of 2015 compared to the same time a year earlier.  Normally such a slight decrease in the number of homes listed for sale would not have a major impact on our market, but when you have a 13.3% increase in home sales, any decrease in the number of homes listed for sale is going to be felt strongly in the marketplace by way of price increases which brings me to my next point...home prices.

As I mentioned above, we saw big surge in average home prices in Tallahassee in the 2nd quarter of 2015 compared to the 2nd quarter of 2014.  Specifically, we saw a 16.5% increase in average home values in the 2nd quarter of Tallahassee compared to the same time a year before.  To put this in perspective, a historically normal  annual increase in home values is between 3%-5%.  The annual increase in home values we saw in Tallahassee in the 2nd quarter of 2015 was 3 to 4 times more than the historical average.  That is a pretty serious increase.  In northeast Tallahassee home prices skyrocketed a whopping 20.5% in the 2nd quarter compared to the same time a year ago.

As we almost  reach the end of the 7th year since the full collapse of the real estate market and of the broader economy, the number of distressed sales (foreclosures and short sales) continued to decrease.  In the 2nd quarter of 2015 in Tallahassee distressed sales only made up 14.36% of total sales compared to 20.8% in the 2nd quarter of 2014.  Distressed sales typically sell at a discount compared to non distressed sales, and they bring down the value of surrounding properties.  The sharp decrease in distressed sales that we saw in the 2nd quarter was an instrumental part of the corresponding increase in home values that we saw in Tallahassee in the 2nd quarter of this year. New homes entering the foreclosure process are way down now since mortgage underwriting standards are so strict and have been the last few years. This means that we have far fewer mortgages entering foreclosure process while many of the foreclosure properties on the market are being sold off. This means that the trend of decreasing distressed sales is expected to continue.

On average homes took a little bit longer to sell in the 2nd quarter of 2015 compared to the same time a year earlier.  More specifically, homes sat on the market 4.6% longer in the 2nd quarter of 2015 before selling compared to the same time a year earlier.  With home prices going up so much this year I think that the slight increase the number of days it took to sell a home on average is normal.   Normally you have to market  a home for a longer period of time when you list a home at a higher price, so this is not much of a surprise. To put it in perspective, it only took 4 days longer on average to sell a home in the 2nd quarter of 2015 compared to the 2nd quarter of 2014.  This is a pretty small increase and is nothing to worry about.

The final metric that I looked at when analyzing our real estate market was the average sales price/listing price ratio.  In simple terms this is just looking at what the average home sells for compared to what it was listed for sale at.  Typically the higher the average sale price/list price ratio is, the stronger the market is.  In the 2nd quarter of 2015 the average sale price to list price ratio was 96.83% which means that the average home sold for 96.83% of what it was listed for sale at.  This was up very slightly from the 2nd quarter of 2014 when the average home sold for 96.79% of what it was listed at. In essence the average sale price to listing price ratio was about the same as it was last year. A sale price/listing price ratio of nearly 97% is indicative that we have a very strong demand for homes in our market, and this positive market metric is consistent with the surge in demand for homes that we have seen over the last year.

Overall the residential real estate market here in Tallahassee in the 2nd quarter of this year showed that it is very vibrant and healthy.  The strong demand that we have seen from buyers seems like its the product of a broader economic recovery, and is most likely a trend that will continue.  The challenge that we face here in our local real estate market is getting the increase in housing supply that we need in order to match the growing demand for homes that we are seeing.  Throughout town we are seeing more new construction going up, so hopefully the construction of new homes will help add to supply.  Also with prices going up so much it's likely that more sellers will begin to put their homes on the market when they realize how much prices have been going up.  I expect this will be the case, but I think it will take some time for homeowners to recognize the strong upward shift in home prices that is needed to spur them into taking action and putting their homes on the market. Unlike the stock market which reacts very quickly to information, the real estate market is very slow to change course.  I would say in the next year or so we should expect to see housing inventory go up though.

The other thing to watch for in the near future is increasing interest rates. After much talk about rising interest rates we have finally begun to see interest rates go up with the average 30 year fixed rate mortgage going above 4% again. Interest rates are expected to go up even more when the Federal Reserve raises the federal funds rate sometime later this year. The rate increase is suppose to be gradual, so it should not have any large detrimental effects on our real estate market.  In fact the increase could initially spur more home buyers into action who are hoping to lock in rates before they rise more which could help the market in the short term.  I would expect our real estate market to continue on the path we saw in the 2nd quarter, but in the next few months I would expect that the market will cool off some from the double digit increases we saw this Spring.

A summary of the 2nd quarter year over year residential real estate market statistics for Leon County is below.

Tallahassee as a whole

• Listings down 1.9% (1,729 properties listed for sale)
• Number of properties sold up 13.3% (1,149 properties sold)
• Average Sales Price up 16.5% (Average sales price $199,729)
• Average days on the market up 4.6% (91 days)
• Average sale price/listing price ratio up 0.04% ( 96.83%)
• Distressed sales (foreclosures and short sales) were down and only comprised 14.36% of total sales compared to 20.8% of total sales in the 2nd quarter of 2014. 

Northeast Tallahassee

• Listings down 2.6% (897 properties listed for sale)
• Number of properties sold up 23.8% (604 properties sold)
• Average sales price up 20.2% (Average sale price $263,981)
• Average days on the market up 6.8% (78 days)
• Average sale price/listing price ratio increased by 0.06% (97.23%) 
• Distressed sales only made up 10.4% of total sales compared to 19.5% the same time a year prior. 

Northwest Tallahassee

• Listings increased by 2.8% (475 properties listed for sale)
• Number of properties sold increased by 7.5% (316 properties sold)
• Average sale price up by 9.8% (Average sales price $127,879)
• Average days on the market increased by 12.6% (107 days)
• Average sales price to listing price ratio decreased by 0.02%  (95.7%)
• Distressed sales only made up 16.5% of total sales compared to 22.8% of total sales the same time a year earlier. 

Southeast Tallahassee

• Listings down by 7.3% (254 properties listed for sale)
• Sales up by 3.7% (167 properties sold)
• 11.96% DECREASE in average purchase price (Average sales price  $147,637)
• 2.2% decrease in average days on the market (91 days)
• Average sale price to listing price ratio decreased 0.44% (96.49%)
• Distressed sales went up slightly making up 19.2% of total sales compared to 18.6% of total sales the same time a year earlier

Southwest Tallahassee

• Listings decreased by 2.8% (103 properties listed for sale)
• Number of properties sold DECREASED by 12.7% (62 properties sold)
• Average sale price increased by 3.4% (Average sales price $80,302)
• 11.8% decrease in the average number of days on the market (127 days)
• Average sale price/listing price ratio increased by 2.19% (95.35%)
• Distressed sales made up a higher proportion of total sales comprising 29% of total sales in 2nd quarter of 2015 compared to 26.8% a year earlier. 

Tallahassee Spring Market update and year over year market statistics for April 2015

As most of you all know, I normally send out my year over year quarterly market summary for Leon County every 3 months.  Well I was compelled to give you all an interim market update after looking over the year over year market statistics for April of this year. After looking over April's data,  I saw some surprisingly strong signs of improvement in our real estate market here in Tallahassee that I wanted to share with you.  In summary, the Spring residential real estate market here in Tallahassee seems to be red hot.  

Let's start with price.  In April of this year the average home price of a property in Leon County skyrocketed a whopping 18.3% from the same time one year ago.  That is about 3 to 4 times what would be a historically normal increase in price. 

The number of properties that sold increased by a staggering 32.7% from the same time last year while the number of properties listed for sale increased by 7% from the same time last year. 

Also, average days on the market  it took to sell a home went down by about 2%, and the average home sold for just under 96% of what the average home was listed for sale at.  

Last but not least distressed sales (foreclosures and short sales) only made up 16.5% of total sales in April 2015 compared to 20.8% in April of 2014.  Distressed sales sell at a discount and bring down values of surrounding homes, so this is good news for property values. 

Overall the market is doing better here in Tallahassee in pretty much every respect from the same time last year.  If you are a seller it means it's a great time to put your home on the market.  If your home is presentable and in good condition, you might be able to get a much better price for it that you have not been able to get in recent years. 

If you are a buyer you can expect competition from other buyers and expect multiple offers on properties that are priced at market value and are in good shape.  The demand for homes has greatly outpaced the supply for homes, so if you are a buyer you need to move quickly and have a prequalification letter or, proof of funds if paying cash, to accompany your offer so that the seller knows you mean business. This will help you stand out from the pack and hopefully get your offer accepted over other offers.  

The year over year market stats for April in Leon County are below. 

-Listings up by 7% (626 homes listed for sale).

-Sales up 32.7% (357 homes sold)

-Average prices up 18.3% (average sale price $198,452

-Average days on market down 2.9% (102 days on average to sell a home). 

-Sale to list price ratio at 95.95% (average home sold for 95.95% of asking price)

-Proportion of distressed sales compared to total sales decreased by 4.3% (distressed sales comprised 16.5% of total sales.)

1st quarter 2015 Tallahassee Residential Real Estate Market Year Over Year Market Statistics.

Tallahassee's residential real estate market had a very strong and robust 1st quarter in 2015 and saw vast improvements compared to the 1st quarter of 2014.  We saw both strong improvements in the number of properties sold as well as an increase in the average price that a home sold for. The number of listings available for sale actually went down just a little bit from the same time last year which has created a situation in which we have a fairly scarce amount inventory available for sale to meet the rising demand for homes.  Also, the average sale price to listing price ratio went up slightly which means that homes are selling closer to the price that they are listed for sale at.  The average time it took to sell a home increased a little bit going from a 104 day average in the 1st quarter of 2014 to 107 days in the 1st quarter of 2015.  Finally, distressed sales (foreclosures and short sales) made up a smaller percentage of total sales in the 1st quarter of 2015 compared to the same time period a year earlier.  Distressed property sales typically sell at a discount compared to non distressed sales, and they bring down the values of surrounding properties.  With distressed sales now making up a smaller portion of total sales, our market is now in a better position to see long term sustained appreciation in values compared to a year ago. 

Let's begin by talking more about the year over year increase we saw in the number of properties sold and the increase in the average selling price.  Residential property sales in Leon County went up a whopping 15.76% in the 1st quarter of 2015 compared to the 1st quarter a year earlier.  The increase in home sales is mostly attributable to an overall improvement in the economy and the increase in jobs. More jobs mean more people can buy homes. Also, we are now just over 7 years from when the first wave of homeowners went through foreclosure from the great recession.  Many of those homeowners who lost their home to foreclosure 7 years ago are now eligible again to buy a home. These folks are known as the "boomerang buyers" and having them back in the market seems to be helping home sales. Finally, lending standards eased up a little bit in the 1st quarter of 2015 making it easier for people to get a mortgage which has brought more home buyers back into the market.  Probably the most note worthy change is the roll out of 3% down payments for conventional mortgages.  This has allowed more people to get into homes with less cash up front, and has probably helped first time home buyers the most. 

Average prices in Leon County in the 1st quarter of 2015 went up by a very solid 9% which is much better than the historical average of 3%-5% a year.  It appears that it's just the simple laws of supply and demand that have driven up home prices in the last year.  The supply of homes has slightly  fallen in the last year while at the same time demand for homes has gone way up.  A decrease in the supply of homes for sale combined with an increase in the demand for homes equals an increase in the price of homes.  In this case a 9% increase.  It's simple economics. Also, the decrease in the proportion of distressed property sales (foreclosures and short sales) compared to total sales has also most likely helped contribute to the increase in prices. 

As discussed above, we saw a decrease in the number of homes listed for sale in the first quarter of 2015 compared to the same time a year prior.  The decrease was very slight though with inventory of homes falling by less than half a percent.  The most likely reason that we don't have more properties on the market for sale right now is that we still still have an abundance of homeowners who are upside down on their mortgage (they owe more on their mortgage than the home is worth) and they actually can't sell because of that.  As time goes by though prices will continue to creep up and homeowners will pay their mortgage down, and the number of homeowners who are upside down on their mortgage will continue to come down over time.  This will eventually spur many more people to put their homes on the market. 

The average number of days on the market that it took a property to sell for was up in the 1st quarter of 2015 compared to the 1st quarter of 2014.  The increase was very slight though only going from 104 days in 1st quarter of 2014 to 107 days in the 1st quarter of 2015.   Normally seeing an increase in the number of days on the market that it takes to sell a property means that the market could be softening some.  However, the increase was so slight that it's not really anything to worry about.  

The average sale price/listing price ratio went up in the 1st quarter of 2015 compared to the same time period a year earlier.  In the 1st quarter of 2015 homes in Leon County sold for 97.06% of their listing price on average.  In the 1st quarter of 2014 homes sold for only 96.15% of their listing prices on average.  97.06% of the selling price is a very strong sale price/listing price ratio and indicates that the local real estate market here in Leon County is currently skewed in favor of sellers.  This of course is due to the increased demand for homes coupled with the meager amount of housing inventory. 

Last but certainly not least, distressed sales made up a smaller portion of total residential property sales in Leon County in the 1st quarter of 2015 compared to the same time a year earlier.  Distressed sales in the 1st quarter only made up 17.67% of total sales compared to 20% the same time a year earlier.  Distressed sales have plagued the real estate market ever since the real estate bust happened in 2007, and they have continued to keep home prices suppressed.  A key part of obtaining a full recovery in the real estate market is getting distressed sales back down to a level that is considered historically normal which is under 5%.  While we still have a ways to go, we have come along way from where we were at at the peak of the foreclosure crisis back in 2010-2011.    

Overall the residential real estate market in Leon County is very healthy and robust right now.  The number of sales is way up from last year,  and home prices are way up from last year.  The inventory of homes is tight which can make it tough for home buyers to find the right property at times. Usually a home buyer here in Tallahassee can find the right home, but they often have to wait a little bit for the right property to come onto the market and jump on it quick when it does. Home sellers are seeing that it's relatively easy to sell their homes, but it's not like it was during the real estate boom.  During the real estate boom of the mid 2000's all you really had to do was stick a sign in your yard and your home would sell.  Now days sellers are having to make sure their properties are presentable and move in ready or at least close to move in ready. Sellers that are pricing their homes right and who get their homes ready to sell by taking care of needed repairs and making the homes look good for showings are finding that there are plenty of willing and able buyers out there to purchase their home. Sellers who are putting their homes on the market in bad condition though are having trouble selling their homes and often times get much less money then they would if their homes were in good condition.  

For investor clients in Leon County there are still good opportunities on both rental properties and flip properties.  Often times investors have to monitor the market closely though and wait for the right deal to come up.  If the deal is good enough, investors are often times having to go above listing price to outbid competing offers.  

First time home buyers are probably the ones who have the most trouble finding a homes since it's the homes between $100K-$200K that are in most demand here in Tallahassee. 

The big thing to watch out for that could have an impact on the market is a rise interest rates.  The Federal Reserve has said that it will most likely be raising the Federal Funds rate this year which would in turn  increase mortgage rates.  Some were speculating that the rate hike could take place as soon as June 2015, but the recent downturn in hiring and other economic indicators has made it more likely that the Fed will wait until later in 2015 or maybe even 2016 to raise interest rates.   Also, lending standards have eased up and will probably continue to ease up slightly this year which will make it easier for people to obtain mortgages and buy homes.  

The Year over year residential real estate market statistics for Leon County in 1st quarter of 2015 are listed below. 

• The number of properties listed for sale decreased by less than half of a percent (1,422 properties listed for sale)

• The number of properties that sold increased by 15.76% (764 total properties sales)

• Average sale price increased by 9% (average sale price was $187,113)

• Average number of days it took to sell a property increased by 3 days to 107 days. 

• Average sale price/listing price  ratio increased by 0.91% (average home sold for 97.06% of what it was listed for sale at.)

• The number of distressed sales expressed as a percentage of total sales decreased by 2.33%  (17.67% of all home sales were distressed sales).

4th Quarter 2014 Tallahassee's Residential Real Estate Market Update

Tallahassee's real estate market continued to improve and is looking pretty healthy in the 4th quarter of 2014.  The level of inventory available for sale in the 4th quarter of 2014 remained relatively unchanged compared to the same time a year earlier while the number of properties for sale saw a big increase and average prices saw a modest, but by historical standards, a very healthy and sustainable increase.  The average time it took a property to sell in the 4th quarter of 2014 also remained relatively unchanged from a year earlier which indicates that the balance between demand from buyers and supply from sellers has remained pretty steady.  The average sale price to listing price ratio, which is what the average property sells for compared to what it's listed for sale at, also remained relatively unchanged.  This is another supporting indicator that the balance of homebuyers and home sellers has stabilized and has found a steady equilibrium. 

The only statistic that seems a little surprising is the fact that distressed sales (short sales and foreclosure sales) increased in the 4th quarter of 2014 from the same time period a year earlier. Distressed sales typically sell at a discount compared to non distressed sales, and they typically bring down home values of surrounding properties.  If it were not for the increase in distressed sales, it's safe to say that average home prices would have increased more than they did in the 4th quarter of 2014.  This is good news for investors though, because it means there were more good deals on distressed properties to be had than there were a year ago.

It should be noted though that the increase in distressed sales is not an indication that our real estate market is getting worse.  The increase in distressed sales is simply due to the fact that banks are ramping up the sale of the existing inventory of properties that they have on their books.  The amount of properties entering into the beginning stages of foreclosure is way down, and the increase in distressed sales is not an indication that more people are getting foreclosed on, it's just an indication that the banks are more willing and ready to unload their existing housing inventory at a faster pace.  This is actually a good thing, because the quicker we get rid of distressed sale, the quicker we will get to a full recovery from the real estate bust that began in 2007. 

As mentioned above, the inventory level of homes available for sale remained relatively unchanged in the 4th quarter of 2014 from the same time a year earlier.  The number of properties for sale only increased slightly by 0.6% year over year going from 1053 homes listed for sale in 4th quarter of 2013 to 1060 homes listed for sale in the 4th quarter of 2014. 

While the amount of housing inventory for sale stayed about the same in the 4th quarter of 2014, the number of homes sold saw a big increase.  In the 4th quarter of 2014 we saw a 14.8% increase in the number of properties sold compared to the same time period a year earlier.  Sales of residential properties increased in Tallahassee from 709 sales in the 4th quarter of 2013 to 814 sales in the 4th quarter of 2014.  The increase in home sales can most likely be attributed to two main causes.  

First off interest rates saw a pretty big year over year decrease in the 4th quarter of 2014.  In the 4th quarter of 2014 the average rate on a 30 year fixed rate mortgage was hovering around 4% compared to 4.5% in the 4th quarter of 2013. Lower interest rates make buying a home less expensive for people purchasing a home with a mortgage.  This of course can lead to an increased demand for buying homes. 

The second main reason that home sales most likely saw a year over year increase in the 4th quarter of 2014 was because we saw an increase in jobs.  The more people that are employed leads to a bigger pool of potential home buyers which in turn leads to more home sales. 

The average number of days it took for a property to sell remained relatively unchanged.  In the 4th quarter of 2014 it took a property 102 days to sell on average.  In the 4th quarter of 2013 it took a property 101 days to sell on average.

The average sale price/listing price ratio shows what percentage on average a home sells for compared to what it was listed for sale at.  This ratio increased by 0.44% in the 4th quarter of 2014 from the same time period a year prior.  In the 4th quarter of 2014 the average home sold for 96.72% of what the home was listed at compared to 96.28% in the 4th quarter of 2013.  96.72% is a pretty high sale price/listing price ratio , and it shows that buyer demand for homes is very strong right now compared to the level of homes available for sale.  This also indicates that sellers are pricing their homes where they need to be priced at in order to get them sold

The 4th quarter of 2014 also brought about an increase in the number of distressed residential property sales in Tallahassee compared to the same time period a year earlier.  In the 4th quarter of 2014, distressed sales made up 17.94% of total sales compared to only 16.08% in the 4th quarter of 2013.  Due to the fact that distressed sales suppress home values, we probably would have seen a slightly larger increase in average home prices had it not been for the increase in distressed sales.  On the flip side though, if you are a buyer who is searching for good deals on investment properties then this is good news to you because it means that the number of opportunities out there to pick up a good deal on an investment property has gone up. 

Overall, Tallahassee's real estate market is doing good.  Prices are continuing to increase at a healthy rate that is in line with the historical average rate of 3%-5% per year, sales are up, the inventory of homes for sale seems to be at a level that provides buyers with a good number of choices of homes to look at, but at the same time our market is certainly not flooded with too many homes for sale.  Homes are selling pretty quick with it only taking a little bit over 3 months on average for a home to sell. Also, sellers are getting pretty close to their asking prices with the average home selling for 96.72% of what sellers are listing their homes for sale at.  Finally, with an increase in the number of distressed properties being sold, investors who are looking to get good deals on investment properties have more opportunities to find good deals than they did last year.

In the near future look out for a slight increase in interest rates in 2015 as the Federal Reserve is supposed to be increasing the Federal Funds Rate sometime this year which will in turn cause an increase in mortgage rates.  Depending on how abrupt the increase in the mortgage rates are, the increase in mortgage rates could have a dampening effect on home sales and home prices.  Most likely though, the increase in interest rates will be modest, and the overall improvement in the economy will continue to spur home buying and price increases despite the increase in mortgage rates. Another important subject to take note of is the recent decrease in gas prices (which is suppose to be long lasting) will cause more people start buying homes in suburbs and on the outskirts of town due to the cost of commuting going down.  

A snapshot of the year over year real estate metrics for 4th quarter 2014 in Leon County are listed below.

• The number of properties listed for sale increased by 0.6% (1060 properties listed for sale.

• The number of properties that sold increased by 14.8% ( total properties sold was 814)

 

• Average sale price increased by 2.6% (average sale price was $186,077)

 

• Average number of days it took to sell a property increased from 101 days in 4th quarter of 2013 to 102 days in 4th quarter of 2014. 

 

• Average sale price/listing price  ratio increased by 0.44% (average home sold for 96.72% of what it was listed for sale at.

 

• The number of distressed sales expressed as a percentage of total sales increased by 1.86 %.  (17.94% of all home sales were distressed sales)