In the 1st quarter of this year we saw a little bit of a slow down compared to the 1st quarter of 2018. Both the number of properties listed for sale, and the number of properties sold went down. After seeing an uptick in the number of properties listed for sale in the previous 3 quarters of 2018, the first quarter of 2019 was the first time in a year that we have seen a year over year drop in the number of properties listed for sale. With already having a shortage of housing inventory to meet the growing demand for housing in our improving economy, the year over year decrease in the number of homes available for sale that we saw in the first quarter was bad news for home buyers. We also saw an increase in the average number of days on the market it took to sell a home.
Despite the slow down in sales and number of listings, year over year home prices continued to climb at a modest pace in the first quarter of 2019. The average sale price to listing price ratio was basically flat in the first quarter of this year compared to the same time a year ago, going down just slightly. The average sales price/listing price ratio measures how much a home sells for compared to it's listing price.
Lastly, distressed sales (foreclosures and short sales), made up a smaller percentage of total sales in the 1st quarter of 2019 compared to the same time period a year prior. Distressed sales sell at a discount compared to non distressed sales, and they bring down the values of surrounding properties.
Let's start out by talking more about the number of properties listed for sale. As mentioned above, the number of properties listed for sale saw a drop in the 1st quarter of 2019 compared to the first quarter of 2018. Year over year property listings decreased by 1.9% in the first quarter of 2019 which was a reversal of trend from the last 3 quarters of 2018 where we saw the number of listings going up for the first time in several years.
Over the last few years, we have had a major shortage of homes available for sale to meet the growing demand from home buyers. The reduction in listing inventory that we saw in the 1st quarter of this year is bad for our real estate market because we are still well below what is considered a normal and balanced level of housing inventory. Because of this shortage of housing inventory, many would-be home buyers are continuing to rent because they don't feel they can find the home that they want. It's possible that the 1st quarter of this year was just an anomaly instead of a reversal of a trend of growing inventory levels. This is something to keep an eye on. If housing inventory levels start going back up then that is a good thing. If they continue to go down or remain flat, then it could be bad news for our real estate market in the form of fewer home sales.
We did see home sales go way down in the first quarter of 2019 compared to the 1st quarter of 2018. Home sales fell 10.9% in the first quarter of this year compared to 1st quarter of 2018. This was the worst year over year drop in sales we have had in quite some time. Lack of available homes for sale is one contributing factor to the drop in home sales. Also, it's possible that the damage Tallahassee incurred from Hurricane Michael in October could have had a negative impact on home sales in the first
quarter of this year. If home sales go back up in the 2nd and subsequent quarters of this year, then it's likely that the 1st quarter slowdown we had earlier this year was just a temporary slow down. If we see a continuation of decreased year over year sales, then it probably means the slow down is being caused mainly by broader economic conditions such as low inventory levels and/or a trend of more people choosing to rent instead of buying.
Despite the number of listings and the number of sales falling in the first quarter of this year, home prices continued to go up in the 1st quarter of this year in Leon County. Home prices went up 3.8% in the first quarter of this year compared to the first quarter of 2018. This rate of increase falls in line with what would be considered a historically normal rate of increase between 3%-5%. The overall strong economy, with increasing wages, has kept buyer demand for housing strong. This strong demand for housing is one of the big factors contributing to home values continuing to rise. Also, the shortage of available housing inventory is the second major contributor to increasing home values. It's really basic economics that is driving up home prices. Strong demand for homes coupled with a low supply of homes is a recipe for increasing home prices!
The sale price to listing price ratio was pretty much flat in the 1st quarter of 2019 compared to the first quarter of 2018 with just a very small decrease. In the first quarter of 2019 the average sale price/listing price ratio was 97.44% which means that on average, homes sold for 97.44% of the listing price. This is a high sale price/listing price ratio, and it's indicative that we are in a very strong sellers market. In the first quarter of 2018, the average sale price/listing price ratio was 97.73% which was just slightly higher then it was in the first quarter of this year.
We did see a pretty good size year over year increase in the average number of days it took a home to sell in the first quarter of this year. In the first quarter of this year, on average it took 75 days on the market before a home went under contract. This is up from 67 days in the first quarter of 2018. Most likely it's the increasing home prices that are causing homes to sit on the market longer than they did last year. With the decrease in sales, it's clear there are fewer people buying homes this year than last year. With the higher prices and fewer number of people buying homes this year, it's only natural that homes would be sitting on the market a little bit longer this year than last year.
Distressed sales made up a smaller percentage of total sales in the first quarter of 2019 compared to the same time a year ago. Again, distressed sales are short sales and foreclosures. They typically sell at a discount compared to non-distressed sales. Distressed sales only made up 2% of total sales in the first quarter of 2019 which is down from 4% in the first quarter of 2018. Fewer distressed sales is good for helping to ensure that home prices continue to go up.
Overall, we had a bit of a slow first quarter this year, but no indications of any serious issues with our real estate market. It is very possible that the slow down can be partly attributed to the damage that many homes incurred from Hurricane Michael in October 2018. Many homes in Tallahassee suffered damage from Hurricane Michael and plans for people listing their homes for sale could have been delayed because of the damage. Whether it was Hurricane Michael that caused the slow down or whether it was other broader economic factors such as increasing home prices, it does seem that the slow down we saw in the first quarter will be short lived. The 2nd quarter thus far has been very busy, so things seem to be picking back up. I think the remainder of the year we will see home sales at about the same pace we saw in 2018 or possibly just slightly less.
The problem we are having with low levels of housing inventory will most likely continue to persist for the remainder of the year and even beyond. As i've said before, I think the problem we are having with low levels of housing inventory is a long term issue that won't easily or quickly be resolved. New construction prices are being driven up by a scarcity of land to build on, high permitting fees from the city and county, increasing construction material costs and a small and largely under-skilled pool of construction labor. Until the price of new construction homes comes down, I think we will see both inventory levels and home sales lower than they should be.
One thing I would pay attention to this year is the overall economy and trade deals with other countries...especially China. Currently the economy is doing good and jobs and wages are increasing. We have some trade negotiations that are underway right now, and if these trade deals get worked out it could cause construction material prices to go down some and help ease the high costs of new construction homes. If we get a trade deal worked out with China, it will help the real estate market and the overall economy by reducing costs of goods and services and boosting consumer confidence. Higher consumer confidence equals more people buying homes!
I would also pay attention to interest rates. Interest rates have continued to stay low. They will most likely remain low throughout the rest of the year, but if they do start going up, this could curb home sales.
To see a list of the real estate metrics I compiled for Leon County as a whole as well as by individual quadrant, see below.
Tallahassee as a whole.
- Listings decreased by 1.9% (1,570 Homes listed for sale
- Sales decreased by 10.9% (876 properties sold)
- Average sale price Increased by 3.8% (Average sale price was $226,614)
- Average Sale price/list price ratio decreased by 0.29% (97.44%)
- Average days on the market to sell increased by 12% (75 days on the market before selling)
- Proportion of distressed sales to total sales decreased by 2% (distressed sales made up 2% of total sales)
Northeast Tallahassee
- Listings decreased by 4.7% (755 properties listed for sale)
- Sales decreased by 18.7% (399 properties sold)
- Average price increased by 10.5% (Average price was $294,880)
- Sale price/list price ratio decreased by 0.26% (average sale price/list ratio was 97.5%)
- Average days on the market increased by 24.6% (71 days on the market on average before selling)
- The proportion of distressed sales to total sales decreased by 1.1% (distressed sales made up 1.5% of total sales)
Northwest Tallahassee
- Listings decreased by 2.2% (469 properties listed for sale)
- Sales increased by 5.5% ( 289 properties sold)
- Average sale price decreased by 3.9% (average sale price was $144,953)
- Average sale price/list price ratio decreased by 1.5% (Average sale price/list price ratio was 96.49%)
- Average days on the market before selling increased 12% (84 days on the market on average before a home sold)
- The proportion of distressed sales compared to total sales decreased by 4.1% (distressed sales made up only 1.4% of total sales)
Southeast Tallahassee
Southwest Tallahassee
- Listings decreased by 2.1% (234 properties listed for sale)
- Sales decreased 5.5% (136 properties sold)
- Average price increased by 3.8% (Average sale price was $208,763)
- Average sale price/list price ratio increased by 1.35% (sale price/list price ratio was 99.12%)
- Average days on the market before a home sold decreased by 18.9% (60 days)
- The proportion of distressed sales compared to total sales decreased by 0.5% (distressed sales made up 3.7% of total sales)
- Listings increased by 5.8% (112 properties listed for sale)
- Sales decreased by 29.7% ( 52 properties sold)
- Average sales price decreased by 0.04% (Average sale price was $105,573)
- Average sale price/listing price ratio decreased by 0.84% ( Average sale price/listing price ratio was 94.99%)
- Average days on the market before the property sold increased by 10.8% (103 days on the market before selling)
- The proportion of distressed sales compared to total sales decreased by 1% (distressed sales made up 5.8% of total sales)
