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).