Tuesday, October 4, 2016
Friday, April 22, 2016
1st Quarter 2016 Tallahassee Residential Real Estate Market Snapshot And Year Over Year Market Statistics.
The residential real estate market here in Tallahassee started off the year in the 1st quarter of 2016 with robust activity. We saw gains in both the number of properties listed for sale and in the number of properties sold. The year over year increase in the number of properties sold was substantially higher than the number of new properties listed for sale though. This shows that the demand for homes is outpacing the new supply of homes becoming available for sale. With demand exceeding supply you would think that prices would be going up, but strangely enough the year over year prices decreased in Leon County in the 1st quarter of 2016. This is actually the second quarter in a row that we have seen decreasing year over year home prices in Leon County which seems to suggest that our market is experiencing a price correction resulting in the huge price increases we saw in early 2015 when year over year prices increased by nearly 20%.
In the first quarter of this year we also saw a year over year decrease in the average time it took to sell a home. Homes also sold for a little bit closer to their listing prices in the 1st quarter of 2016 compared to the 1st quarter of 2015. Finally, distressed sales made of a much smaller percentage of total sales in the 1st quarter of 2016 compared to the same time period a year earlier.
Lets start off by talking about the year over year increase in properties listed for sale and increase in properties sold. We saw a good sized year over year increase in the number of properties listed for sale in the 1st quarter of this year. To be exact, the number of properties listed for sale in the 1st quarter of this year increased by 5.7% compared to the same time a year prior. This is a good indication that homeowners are feeling more confident that now is a good time to sell their properties.
While the number of properties listed for sale increased, the number of properties that actually sold in the first quarter of 2016 saw even bigger increases compared to the 1st quarter of 2015. Year over year sales in the 1st quarter of 2016 increased by a whopping 14%. What this means is that the increase in demand for homes is outpacing the new supply of homes available for sale. This increase in the sales of properties over the number of new properties being listed for sale has created a very competitive marketplace for home buyers this Spring. Home buyers don't have a large inventory of homes to choose from, and often times homes that come up for sale that are priced right end up flying off the market before most interested home buyers even have a chance to place an offer on the property. With the increase in the demand for homes outpacing the new supply of homes, you would think that home prices would be rising, but that is not the case.
Year over year home prices in the 1st quarter of 2016 actually decreased by 4% compared to the 1st quarter of 2015. On the surface it might seem a little bit strange for home prices to go down when demand for homes is far out pacing the supply of homes. However, when we look at the situation more closely I think the reason why home prices have gone down is fairly simple.
In the 1st half of 2015 we saw double digit year over year price increases that reached nearly 20%. That is a huge increase in home prices in a very short period of time. That level of price appreciation is not sustainable, and I think our local real estate market is going through a price correction right now in response to the sharp price increases from a year ago.
When we look at the situation even more closely, I think there is another reason that we are seeing prices decrease. Over the past several years now, home prices have been on the rise. While home prices have been rising, people's incomes have not been rising. People's incomes over the past few years have been stagnant for the most part with only extremely small increases in some years. Overall though, home prices have been exceeding incomes by leaps and bounds. I think we are at the point now where people's incomes are limiting how much people can pay for homes, and until people's incomes start to go up then home prices will overall stay flat and not increase. So to sum it up, I think that year over year prices went down in the 1st quarter because of a market price correction and because people's incomes are not going up.
The average number of days that it took to sell a home in the 1st quarter of 2016 decreased by 6.7% going from 104 in the 1st quarter of 2015 to 97 days in the 1st quarter of this year. The average sale price/listing price ratio, which measures how closely a home ends up selling for compared to what it's listing price is, slightly increased going up to 97.19% from 97.09% in the 1st quarter of 2015. So this means that the average home in Leon County in the 1st quarter of 2016 sold for 97.19% of what it was listed for sale at. This indicates that we are in a strong sellers market here in Leon County.
Finally, we continued to see distressed sales (foreclosures and short sales) making up a smaller percentage of total sales in the 1st quarter of 2016. In the 1st quarter of 2016 distressed sales made up only 10.9% of all residential property sales. This is a big drop down from 17.9% in the first quarter of 2015. Distressed sales typically sell at a discount bringing down the values of surrounding properties. Everything else being equal, the fewer distressed sales we have, the higher home values should be.
Overall I think that the residential real estate market is Leon County is doing very good. The market is hot, and both listing and selling activity picked up a good bit in the first quarter of 2016 compared to the 1st quarter of 2015. Prices saw a small decrease in the 1st quarter of this year compared to the same time a year earlier, but I don't think this is a bad thing. Prices have been increasing so much over the last few years while incomes have not. If the home prices keep going up at a pace that exceeds income levels then we will eventually have a housing affordability crisis on our hands. I think the small price decreases are a good thing, and will serve to help keep housing affordable for home buyers.
Distressed sales have continued to go down and have reached a level of about 10% of total sales. This is still above the historical level of about 5% though, so hopefully we'll see distressed sales continue to decrease down towards that 5% mark as the banks continue to sell off their inventory of distressed properties. Of course the lower level of distressed sales will be good for property values, but it also means fewer opportunities for investors to pick up investment properties at steep discounts.
Looking ahead, what are some things we need to pay attention to that could drive the direction of our real estate market? Locally, I would say to look out at how new developments across Tallahassee could have an impact on property values and rents in certain areas. The new VA hospital on the corner of Blairstone and Orange Avenue is close to being finished, and will most likely bring new demand for both rental properties as well as new home buyer demand to that area. There will be people coming into town for new jobs there, and also there will most likely be veterans that move to Tallahassee to live close to the new VA hospital. Purchasing real estate in this area right now might be a smart move.
Another development is the opening of the new Centre of Tallahassee on the corner of John Knox Road and North Monroe Street. This place will bring new jobs to the area and people will want to live close to this development. It will include a big concert venue, shopping, dining and movie theaters. Purchasing real estate close by to this development might not be a bad idea either as demand for housing nearby is likely to go up.
Broadly speaking I think I would keep my eye on interest rates and people's wages. If interest rates go up then it could have a negative affect on home sales. The Federal Reserve is likely to increase the Federal Funds Rate again which could cause interest rates to rise. It could also cause stock prices to drop which could in turn make people more hesitant to purchase homes. With wages, I would pay attention to see if wages start to creep up substantially. If they don't then I would expect home prices to remain flat for the foreseeable future.
A summary of the 1st quarter year over year residential real estate market statistics for Leon County is below.
Tallahassee as a whole
- Listings increased by 5.7% (1,532 properties listed)
- Sales increased by 14% (871 properties sold)
- Average sale price decreased by 4%(Average sale price was $179,431)
- Average Sale price/list price ratio increased by 0.1% (average sale price to list price ratio was 97.19%)
- Average days on the market to sell decreased by 6.7%. (Average days on the market was 97 days)
- Proportion of distressed sales to total sales decreased by 7% (distressed sales made up 10.9% of total sales)
- Listings decreased by 1% (759 properties listed for sale)
- Sales increased by 3% ( 390 properties sold)
- Average price decreased by 2.2% (Average sale price was $248,484)
- Sale price/list price ratio increased by 0.24% (sale price to listing price ratio was 97.62%)
- Average days on the market decreased by 9% ( average days on the market was 90 days)
- The proportion of distressed sales to total sales decreased by 4.1%. (distressed sales made up 6.2% of all sales)
- Listings increased by 9.6%. (446 properties listed for sale)
- Sales increased by 16.2% (266 properties sold)
- Average sale price decreased by 2.1% (Average sale price was $112,699)
- Average sale price/list price ratio decreased by 0.35% (average sale price/listing price ratio was 95.59%)
- Average days on the market before a home sold increased by 10.5% ( the average home sold in 105 days)
- The proportion of distressed sales compared to total sales decreased by 7.2% (distressed sales made up 17.3% of all sales)
- Listings increased by 6.5% (212 total properties listed for sale
- Sales increased by 51.5% (147 properties sold)
- Average prices decreased by 2.9% (average sales price was $165,560)
- Average sale price/list price ratio increased by 0.39% ( average sale price/listing price ratio was 98.08%)
- Average days on the market before a home sold decreased by 16.1% (home sold on average after 94 days on the market)
- The proportion of distressed sales compared to total sales decreased by 10.4% (distressed sales made up 10.2% of all sales)
- Listings increased by 49.4% (115 properties listed for sale)
- Sales increased by 13.3% (68 properties sold)
- Average sales price increased by 14.3% ($74,417)
- Average sale price/listing price ratio increased by 0.78% (Average sale price/listing price ratio was 94.54%)
- Average days on the market before a property sold decreased by 26.5% (It took 111 days on average for a home to sell)
- The proportion of distressed sales compared to total sales decreased by 20.3% (distressed sales made up 14.7% of total sales)
Wednesday, January 27, 2016
Bobby's Real Estate Column
4th quarter 2015 Tallahassee Residential Real Estate Market Snapshot And Year Over Year Market Statistics.
After seeing robust year over year gains in sales and home prices in the first half of 2015, the residential real estate market underwent somewhat of a cooling off period in the 4th quarter of 2015. Both the number of homes sold and the number of properties listed for sale remained pretty much flat compared to the 4th quarter of 2014. Also, in the 4th quarter of 2015 average home prices actually saw a sizable 6.1% drop compared to the same time period a year earlier. This is the biggest year over year drop in home prices that we have seen in quite some time in Tallahassee, but I don't think this is something to be too concerned about. In a normal real estate market it's common to have some ebbs and flows in the market. In the first half of 2015 we saw year over year increases in home values reaching nearly 20%. The decrease in home prices that we saw in the 4th quarter is most likely the market correcting itself after a very hot selling season in the Spring and Summer of 2015. If we see year over year values continue to fall into the first half of 2016, then we might have something to worry about, but as of right now I would not worry about prices falling much further.
Besides the drop in home prices, the rest of the real estate market data that I analyzed seemed to show signs that our real estate market is doing fine. In the 4th quarter of 2015 the average time it took a sell a property was 86 days which was 15.7% quicker than what it took in the same period a year prior.
The average sale price/listing price ratio decreased by 0.16% year to year in the 4th quarter of 2015, but still was at a healthy level of 96.57%. This means that in the 4th quarter of 2015 the average home sold for 96.57% of it's listing price. That high of a sale price/listing price percentage shows that home buyer demand is very robust in our local real estate market.
Another indication that our local real estate market is doing well is that distressed sales (short sales and foreclosures) continued to fall, making up a smaller portion of all real estate sales. Distressed sales only made up 13.7% of total sales in the 4th quarter of 2015. This is down by 4.2% from the 4th quarter of 2014 when distressed sales made up 17.9% of total sales. Distressed sales typically sell at a discount compared to non distressed real estate sales, and they bring down the values of surrounding properties. The more distressed sales we have the harder it's going to be for homes to appreciate in value, so the decrease in distressed sales is very positive for our local real estate market.
Some areas of Tallahassee fared better than others. For instance, southwest Tallahassee was the biggest loser out of all four quadrants of Tallahassee in the 4th quarter of 2015. SW Tallahassee saw the biggest drop in home prices. At the same time, properties in the northwest seemed to do pretty well. In northwest Tallahassee we saw prices, sales and the number of properties listed for sale all go up while the average days on the market it took to sell a home and distressed sales both went down. Southeast and Northeast Tallahassee both saw modest decreases in home values as well as in sales and listing activity.
Overall I think our real estate market in Tallahassee is doing well and remained healthy in the 4th quarter of 2015. The nearly 20% year over year increase in home prices that we saw in the early part of 2015 was clearly not a sustainable rate of increase, and the decrease in value we saw in the 4th quarter was just the market correcting itself from such sharp gains recognized earlier in the year.
Another point worth noting is that the new government imposed regulations on mortgages which is known as TRID (Tila Respa Integrated Disclosure) rules went into effect on October 3rd. The TRID rules make the closing process take longer which most likely resulted in many closings that would have normally closed in 2015 get pushed into 2016. If not for the new TRID rules, it's very likely we would have seen more closings take place in the 4th quarter of 2015.
Interest rates also creeped up a little bit in the 4th quarter of 2015, and the stock market began to fall as well. These two things also could have had somewhat of a dampening affect on buyer activity in the 4th quarter of 2015.
I would expect the real estate market in Tallahassee to take off early in the year in 2016 the same way it has the past couple of years. I would expect activity to pick up in January and February, and by March the selling season should be in full swing. I would expect both sales and listings activity to increase early in the year while home values should remain flat or see very modest increases compared to the same time a year ago.
Two major developments in Tallahassee that should bring more jobs to Tallahassee are the new VA Hospital on the corner of Blairstone Road and Orange Avenue that is suppose to open up this year and also the new Tallahassee Center (formerly the Tallahassee Mall) which is set to open in Spring of this year. Both of these developments will bring new jobs to Tallahassee which will help bolster our local economy which in turn will strengthen our local real estate market. Just a tip...if you are an investor looking at purchasing rental properties...it may be a good idea to look for deals near these two new developments. These new jobs from the new devopements mean there will be people looking for housing close to their new jobs. Feel free to call me with any questions about properties in these areas.
A summary of the 4th quarter year over year residential real estate market statistics for Leon County is below.
Tallahassee as a whole