In the 3rd quarter of this year in Leon County we mostly saw a continuation of recent trends in the residential real estate market, but out of the six metrics I looked at, we did see a change in the direction of a couple of the metrics. The changes we saw could be an indication that the market is starting to cool down. Overall though, the local real estate market is still strong with healthy buyer demand that is supported by a strong economy.
The number of properties listed for sale continued it's downward trend in the 3rd quarter of this year with fewer properties being listed for sale compared to the 3rd quarter of 2018. The number of properties sold continued to go up at a healthy pace, indicating that buyer demand for homes is still strong. Home price appreciation slowed down quite a bit in the 3rd quarter of this year though, with average home prices only going up by a very small amount compared to the 3rd quarter of 2018.
The average sale price to list price ratio, which measures how much a home sells for relative to it's listing price, went up by only a small amount, and on average it took homes longer to sell in the 3rd quarter of this year compared to last year. Finally, for the first time in a long time, distressed sales (foreclosures and short sales) went up and made up a larger percentage of the overall sales compared to the third quarter of last year.
Let's start off by talking more about what's going on with our housing inventory here locally and the number of properties listed for sale. As you probably know, we have a shortage of residential properties available for sale here in Leon County and have had a shortage going on for about 3 years now. In the 3rd quarter of this year, that shortage got worse with the number of properties available for sale going down by 5.8% compared to the 3rd quarter of last year. We currently have about a 3-4 months supply of housing inventory, meaning that if no properties were listed for sale after today, all the remaining inventory would sell in 3-4 months. A normal level of housing inventory is about a 6 months supply.
This low level of housing inventory is making it tough for home buyers to find properties. It's taking most home buyers more time to find the right home, and in some cases home buyers have decided to hold off on buying a home because they can't find what they are looking for. The low housing inventory issue is a complex problem that is not going to go away for some time. The only way to solve this issue is to build more affordable homes. A lot more! Locally, that will be a challenge due to the limited amount of land available for sale to build on, the high cost of city and county permitting fees, strict government regulation, and high cost of building materials and construction labor. If we had more homes available for sale then we would have higher home sales, but despite the low housing inventory, home sales are still strong.
Home sales in the 3rd quarter of 2019 saw a year over year increase of 4.6% compared to the same time a year ago. A strong job market, rising wages, consumer optimism and low mortgage interest rates are fueling demand for homes. As long as the economy remains strong, so will home sales. We just need more homes for people to buy!
Year over year home prices in Leon County did go up in the 3rd quarter of 2019, but only by a very small amount. On average, home prices went up by 0.3% compared to the same time last year. We did see some variation throughout different areas of the county though. Most notably, NE Leon County saw year over year average home prices go down in the 3rd quarter of this year by 2.5% compared to the 3rd quarter of 2018. In the 3rd quarter of 2018 the average home price in the NE was $306,301 whereas this year it went down to $298,592. I believe this is a correction. Average home prices in the NE part of the county have risen so quickly over the last few years, and now the market is correcting itself. The other three quadrants of Leon County all saw home prices go up with the NW seeing the biggest year over year price increase at 8.6%.
The average sale price to list price ratio increased very slightly in the 3rd quarter of this year compared to the 3rd quarter of 2018. The average sale price to list price ratio measures how much a home sells for compared to it's listing price. In the 3rd quarter of this year the average sale price to listing price ratio was 98.14% compared to 97.83% in the 3rd quarter of last year. With homes selling for over 98% of the asking price, it's easy to see we are still in a seller's market. This is largely due to the low level of housing inventory.
The average time it took to sell a home in the 3rd quarter of this year was up from a year ago. On average, homes that sold in the 3rd quarter of this year sat on the market for 64 days before selling. This is up from 54 days in 2018. With the low housing inventory and increased buyer demand, it's hard to pinpoint why homes took longer to sell this year on average than they did a year ago.
Finally, in the 3rd quarter of this year, we saw an uptick in distressed sales (foreclosures and short sales) compared to the 3rd quarter of last year. Distressed sales made up 2.23% of total sales this year compared to only 2.04% in the 3rd quarter of 2018. This is the first year over year increase in distressed sales I have seen in a very long time. However, distressed sales still make up a very, very low percentage of overall sales at only 2.23% so I don't think this means we are going to see a wave of distressed properties hit the market. I think we are now back at a historically normal percentage of distressed sales and the uptick is just a normal fluctuation.
Again, the real estate market is strong here in Leon County, and it appears it will remain strong for some time to come as long as the overall economy remains strong. I do predict that home prices will probably flat line in the next year. For a number of years now, home price gains have been outpacing increases in people's wages, and I think now the market is correcting itself. I think price gains will be flat next year or only go up very slightly. This trend might go on for the next couple years before we start to see average home prices go up again by any significant amount.
Interest rates will most likely continue to be low over the next year making it a good time for buyers to lock into a mortgage. I think one thing that people should pay attention to is the trade deals being made with various countries, and especially with China. If a trade deal is struck with China this will likely make building materials less expensive and might enable builders to build more homes for less money. This could help with our housing inventory issues. If a trade deal is struck with China this will also have other positive effects on the economy such as making the stock market go up which ultimately will increase consumer confidence which is good for housing demand. If a trade deal is struck and signed into law with Mexico and Canada, this will also have a positive effect on the economy and housing.
To see all the year over year housing metrics for Leon County as a whole and by each quadrant of Leon County, see below.
Tallahassee as a whole
- Listings decreased by 5.8% (1587 homes listed for sale)
- Sales Increased by 4.6% (1239 homes sold)
- Average sale price Increased by 0.3%(Average sale price was $227,778)
- Average Sale price/list price ratio went up by 0.31% (Average Sale price to list price was 98.14%)
- Average days on the market to sell increased by 18.51% (64 days on the market before selling)
- Proportion of distressed sales to total sales increased by 0.19%% (distressed sales made up 2.23% of total sales)
Northeast Tallahassee
- Listings decreased by 4% (799 properties listed for sale)
- Sales increased by 3.95% (607 properties sold)
- Average price decreased by 2.5% (Average price was $298,592)
- Sale price/list price ratio increased by 0.55% (average sale price/list ratio was 98.32%)
- Average days on the market increased by 18.75% (57 days on the market on average before selling)
- The proportion of distressed sales to total sales increased by 0.05% (distressed sales made up 1.49% of total sales)
Northwest Tallahassee
- Listings decreased by 7.4% (435properties listed for sale)
- Sales increased by 5.9% ( 375 properties sold)
- Average sale price increased by 8.6% (average sale price was $149,883)
- Average sale price/list price ratio decreased by 0.43% (Average sale price/list price ratio was 97.41%)
- Average days on the market before selling increased 11.7% (67 days on the market on average before a home sold)
- The proportion of distressed sales compared to total sales increased by 0.16% (distressed sales made up only 2.7% of total sales)
Southeast Tallahassee
Southwest Tallahassee
- Listings decreased by 10.1% (240 properties listed for sale)
- Sales increased by 2.9% (177 properties sold)
- Average price Increased by 6.2% (Average sale price was $201,589
- Average sale price/list price ratio increased by 0.55% (sale price/list price ratio was 98.84%)
- Average days on the market before a home sold increased by 1.8% (57 days)
- The proportion of distressed sales compared to total sales increased by 0.03% (distressed sales made up 2.26% of total sales)
- Listings decreased by 2.6% (113 properties listed for sale)
- Sales increased by 8% ( 81 properties sold)
- Average sales price increased by 0.72% (Average sale price was $115,828)
- Average sale price/listing price ratio decreased by 0.78% ( Average sale price/listing price ratio was 96.35%)
- Average days on the market before the property sold increased by 73% (116 days on the market before selling)
- The proportion of distressed sales compared to total sales increased by 3.6% (distressed sales made up 6.2% of total sales)
