4th Quarter 2018 Tallahassee Residential Real Estate Market Snapshot And Year Over Year Market Statistics.
In the 4th quarter of 2018 Leon County saw the inventory of homes go back down again by a small margin compared to the 4th quarter of 2017. This is a contrast to the first 3 quarters of 2018 when we saw year over year housing inventory levels go up by substantial margins. Sales were also down in the 4th quarter of 2018 compared to the 4th quarter of 2017. Even though both year over year listing and sales activity were down in the 4th quarter of 2018, home prices continued to charge ahead in the last quarter of 2018 going up substantially compared to last quarter of 2017.
The average number of days on the market it took to sell a home went down in the 4th quarter of 2018 compared to a year earlier. Also, the average sale price/ listing price ratio of homes was down by a little bit in the 4th quarter of last year compared to the 4th quarter of 2017. The sale price/listing price ratio measures how much a home sells for compared to the listing price of the home. Lastly, distressed sales (foreclosures and short sales) continued to go down in the 4th quarter of 2018 making up a lesser percentage of total sales compared to the 4th quarter of 2017.
As mentioned above, the number of properties listed for sale decreased in the 4th quarter of 2018 compared to the 4th quarter of 2017. Year over year listings only went down by 3%, but this reversed a trend of 3 straight quarters where we saw rising inventory levels of homes. Tallahassee's residential real estate market has been plagued with very low levels of housing inventory over the past 3 years, so the year over year decrease in housing inventory that we saw in the 4th quarter of last year is not a good thing. Buyer demand for houses has been increasing steadily the past several years as the economy has improved and wages have gone up. Because of this, we need housing inventory levels to go up to meet the growing demand. If we had more homes for sale, there is no doubt in my mind that home sales would be higher. Because of the lack of housing inventory to choose from (especially in the lower price range of homes) many would-be home buyers are sitting on the side lines and continuing to rent. This is no doubt a big factor in why we saw year over year home sales decrease in the 4th quarter of 2018. It should be noted that the hurricane that hit Tallahassee in October might have caused fewer people to list their homes in the fourth quarter causing the inventory levels to be lower than they would have been had the hurricane not hit Tallahassee.
Year over year sales of residential real estate decreased by 5.1% in the 4th quarter of 2018 in Leon County. I believe there are several factors causing the slow down in home sales. As mentioned above, the lack of homes to choose from has caused many would be buyers to opt to continue to rent instead of buying since they feel like there are not enough options of homes to choose from. Another reason I believe year over year home sales were down in the 4th quarter is because of the rise in interest rates on home loans. In the 4th quarter of 2018 interest rates got close to 5% for a 30 year fixed rate mortgage which is about a full percentage point higher than the rates were at the end of 2017. The higher interest rates combined with rising home prices is making buying a home more expensive, and this is pushing some would-be home buyers out of the housing market. Finally, I believe that the damage incurred throughout Leon County from Hurricane Michael in October also had a dampening effect on home sales in the 4th quarter.
Even though both the number of properties sold and the number of properties listed for sale went down in the 4th quarter of 2018, year over year home prices went up by a significant margin in the last quarter of 2018. On average, year over year home prices increased by 8.2% in the last quarter of 2018 in Leon County. Historically home prices increase by about 3%-5% a year, so this is well above an average level of appreciation for housing. It should be noted though that different areas of Leon County saw much more appreciation in prices than other parts. For example, in the Northeast Leon County homes appreciated by a whopping 15.3% while in NW Leon County, home prices actually went down by 5.1%. In SE Leon County, home prices increased by 2.6% while in SW Leon County home prices went down by a whopping 15.3%. So most of the appreciation in values was concentrated in the NE part of the county. This is likely due to the increase in the number of new construction homes that have been selling in NE Tallahassee which has pushed prices up in that part of Leon County.
The year over year average sale price/listing price ratio of homes went down by 0.29% in the 4th quarter of 2018. The average sale price/listing price ratio was 97.65% in the last quarter of 2018 compared to 97.94% in the 4th quarter of 2017. The sale price/listing price ratio measures what a home sells for compared to the asking price of the home. Even though we saw this metric decrease very slightly in the 4th quarter of 2018, it's still very high by historical standards, and it signifies that we are in a strong seller's market. The most likely reason we saw this metric go down by a little bit is because average home prices went up by a significant margin.
Homes sold faster on average in the 4th quarter of 2018 compared to the 4th quarter of 2017. In fact, in the 4th quarter of last year, the number of days a home sat on the market before selling decreased by 8.6% compared to a year earlier going from 70 days to 64 days. The decrease in the number of days it took for a home to sell is a combination of both fewer homes on the market and a strong demand from home buyers.
Finally, we saw distressed sales (foreclosures and short sales) go down in the 4th quarter of 2018 compared to a year earlier. Distressed sales only made up 3.21% of all home sales in the 4th quarter of 2018 compared to 5.07% in the 4th quarter of 2017. We have the lowest amount of distressed on the market now since before the housing market collapsed in 2007. The decrease in distressed sales is good because distressed sales typically sell at a discount bringing down property values of surrounding properties.
Overall the real estate market in Leon County is strong and stable. Home prices continue to go up on average as buyer demand continues to be strong. We still have less housing inventory than we need, and this has been and will continue to be our real estate market's greatest challenge for some time to come. The low level of housing inventory for sale is a long term problem I believe caused by an inadequate level of construction of affordable new homes. The issue is that it's extremely hard to build homes at an affordable price. Land prices are high, county and city permitting fees are high, construction material costs are high, and there is a shortage of labor in the construction industry. These problems mentioned above, which make it hard to build affordable homes, are not going to go away any time soon, so because of this I think our problem with a lack of housing inventory for sale is going to be with us for years to come.
In 2019 I think we can expect interest rates be fairly stable, increasing just slightly. I also think we will see home prices increase as well but more moderately than we saw in 2018. I would expect that we will have a robust Spring and Summer selling season here in Tallahassee. So if you are looking to sell your home this year, I would plan on getting on the market no later than in May so you don't miss out on the selling season. If you are looking to buy a home this year, I would start looking now before the market gets red hot between April and June. If buying a home, you will face lots of competition from other buyers during those peak selling months between April and June.
Below I have listed all of the metrics for Tallahassee as a whole and for each quadrant of Tallahassee for the 4th quarter of 2018.
Tallahassee as a whole
- Listings decreased by 3% (1,046 Homes listed for sale
- Sales decreased by 5.1% (841 properties sold)
- Average sale price Increased by 8.2% (Average sale price was $227,064)
- Average Sale price/list price ratio decreased by 0.29% (97.65%)
- Average days on the market to sell decreased by 8.6% (64 days on the market before selling)
- Proportion of distressed sales to total sales decreased by 1.86% (distressed sales made up 3.21% of total sales)
Northeast Tallahassee
- Listings increased by 1.5% (537 properties listed for sale)
- Sales decreased by 1.6% (426 properties sold)
- Average price increased by 15% (Average price was $306,211)
- Sale price/list price ratio decreased by 0.52% (average sale price/list ratio was 97.67%)
- Average days on the market decreased by 3.3% (59 days on the market on average before selling)
- The proportion of distressed sales to total sales decreased by 1.7% (distressed sales made up 1.6% of total sales)
Northwest Tallahassee
- Listings increased by 7.4% (277 properties listed for sale)
- Sales decreased by 7.1% ( 223 properties sold)
- Average sale price decreased by 5.1% (average sale price was $133,045)
- Average sale price/list price ratio increased by 0.3% (Average sale price/list price ratio was 97.88%)
- Average days on the market before selling went down 14.5% (65 days on the market on average before a home sold)
- The proportion of distressed sales compared to total sales decreased by 0.6% (distressed sales made up 4% of total sales)
Southeast Tallahassee
- Listings Increased by 3.4% (178 properties listed for sale)
- Sales decreased 7% (133 properties sold)
- Average price increased by 2.6% (Average sale price was $190,637)
- Average sale price/list price ratio increased by 0.2% (sale price/list price ratio was 98.11%)
- Average days on the market before a home sold decreased by 17.6% (61 days)
- The proportion of distressed sales compared to total sales decreased by 4.6% (distressed sales made up 3.8% of total sales)
Southwest Tallahassee
- Listings decreased by 23% (54 properties listed for sale)
- Sales increased by 13.5% ( 59 properties sold)
- Average sales price decreased by 15.3% (Average sale price was $93,067)
- Average sale price/listing price ratio decreased by 1.12% ( Average sale price/listing price ratio was 94%)
- Average days on the market before a property sold decreased by 16.2% ( 98 days)
- The proportion of distressed sales compared to total sales decreased by 3.2% (distressed sales made up 10.2% of total sales)
