Bobby's Real Estate Column
|
3rd Quarter 2018 Tallahassee Residential Real
Market Snapshot And Year Over Year Market Statistics.
In the 3rd quarter of this year, Tallahassee's residential real estate market continued to do well. Home prices in the 3rd quarter of this year saw very strong gains compared to the same time last year. Also, housing inventory increased sharply compared to the same time a year ago. The increased housing inventory is much needed and is welcomed by home buyers. In the last 2-3 years, our residential real estate market here is Tallahassee has had a major shortage of homes for sale. This has made shopping for a home very frustrating for home buyers over the last few years.
Home sales saw a very slight decrease in the 3rd quarter of this year compared to the same time period a year ago. Rising home prices and rising mortgage interest rates seem to finally be slowing down home sales just a tad. The average number days it took to sell a home dropped down quite a bit compared to last year, and the average sale price/list price ratio, which measures how much a home sells for compared to it's listing price, stayed about the same as last year going down just slightly.
Lastly, we saw fewer distressed sales (short sales and foreclosures) in the 3rd quarter of this year compared to the same time a year ago. Distressed sales are not good because they generally sell at a discount compared to non distressed sales, and they bring down the values of surrounding properties. The reduction in distressed sales is a sign that the real estate market is doing well.
So let's start off by talking more in depth about the increase we saw in the number of listings available for sale in the 3rd quarter of this year. New listings jumped up by a whopping 16% in the 3rd quarter compared to the same time a year ago. Our market needs the higher level of housing inventory, so this is great news. Over the last 3 years, a growing number of home buyers have been fighting like cats and dogs over fewer and fewer listings. Multiple offers and properties selling above asking price has become the norm is seems! Last year in 2017, the number of listings on the market dropped to just a little over a 3 month supply of homes for sale. This is about half of the 6 month supply of homes that is considered normal. The months supply of homes means is that if no more homes were listed after today, it would take that many months to sell the remaining inventory of homes. So for example, with a 3 months supply of homes it would take 3 months to sell all existing inventory if no more homes were listed for sale.
We're now starting to see big jumps in housing inventory levels due to more new construction taking place and more homeowners deciding to cash in on the high prices and put their homes on the market. If housing inventories continue to go up like we saw them go up in the 3rd quarter of this year, then we could be back to a normal 6 month supply of housing inventory within the next couple of years.
Despite the growing number of properties listed for sale, home prices continued on a sharp upward trajectory in the 3rd quarter of this year. Average year over year sales prices in the 3rd quarter of 2018 in Tallahassee increased by a whopping 9.1%. This is far above the 3%-5% range that's considered historically normal. The strengthening economy is creating more demand for homes as more people have jobs and incomes are going up. Although the supply of homes is starting to finally go up, it's still very low. Low levels of housing supply along with strong demand from home buyers has caused home prices to continue to go up. With the number of homes for sale continuing to go up, we can expect to see price growth cool off within the next year or so. I think next year we will most likely see home prices fall back into a normal range of appreciation between 3%-5%.
Home sales stagnated in the 3rd quarter in Tallahassee, going down just slightly compared to the same time last year. It appears that rising home prices and rising interest rates are finally starting to curb home sales as the cost of owning a home has gone up quite a bit in the last year. Again, the average home price went up by over 9% within the last year, and the average rate on a 30 year fixed rate mortgage went up from 3.89% a year ago to 4.85% at present time. The combination of higher home prices and interest rates means that people's mortgage payments are going up. Even though people's wages are going up, the cost of home ownership is far outpacing the increase in people's wages.
The average number of days a home sat on the market before selling went down by 17.2% in the 3rd quarter of this year compared to the same time a year ago. Average days on the market to sell a home dropped from 64 days in the 3rd quarter of 2017 to 53 days in the 3rd quarter of 2018. The shorter selling time is an indication that demand from home buyers is strong.
The year over year average sale price/listing ratio, which measures how much a home sells for compared to it's listing price, went down just slightly in the 3rd quarter of this year dropping from the 97.88% in the 3rd quarter of last year to 97.82% in the 3rd quarter of this year. This high sale price/listing price ratio again confirms that we are in fact in a seller's market with sellers getting about 2% under asking price. Not too bad if you are a seller!
Finally, distressed sales in Tallahassee (short sales and foreclosures) as a percentage of total sales, dropped down in the 3rd quarter to the lowest level that I have seen since before the housing market collapsed back in 2007. Distressed sales only made up 2% of overall sales in the 3rd quarter of this year. This is down from 3.6% in the 3rd quarter of 2017. If you are an investor with lots of cash burning a hole in your pocket, you probably miss the days when distressed sales made up nearly 30% of properties and people could not give their properties away! Today's market is definitely not a good market for investors looking to capitalize on buying distressed sales at a discount. The good deals on investment properties are now far and few between.
Overall I think that our real estate market is in the process of transitioning from a seller's market to more of a normal market that will be about equally favorable for buyers and sellers. Prices are still going up, but as housing inventory continues to grow, we will see prices start to soften and level out within the next year or two as sellers have to compete with more homes in order to get their homes sold. Also, rising interest rates will probably have a modest affect on home sales causing home sales to stay about the same or go down a little bit. The market is certainly not going to drop off the cliff like in 2007. It's just going to be a gradual leveling out.
If you are a home buyer this means you will have more choices of homes, and you won't feel as much pressure to move so quickly or to over pay to get the house you want. If you are a seller, it means that you are going to have to make your home nice and presentable and price it competitively and in line with what other comparable homes are selling for. I do think that 2019 will still be a seller's market here in Tallahassee, but by 2020 I think we will be in more of a balanced market.
For a list of the the real estate metrics for Tallahassee as a whole as well as for each quadrant of Tallahassee, please see below.
Tallahassee as a whole
Northeast Tallahassee
Northwest Tallahassee
Southeast Tallahassee
|
