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).
- 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)
- 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).
- 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)
- 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).