Despite the current pandemic of Covid-19 that is causing all kinds of disruption in our everyday lives and in the broader economy, our local real estate market had a very strong start to the year in the 1st quarter here in Leon County. On average, our local real estate market saw year over year improvements in the first quarter of this year for every metric that I measured!
On average throughout Leon County, the number of listings increased (which we badly need with our shortage of available homes for sale), we saw an increase in the number of homes that sold, and we saw a big jump in average home prices. The average sale price/listing price ratio went up. The average sale price/listing price ratio measures how much a home sells for compared to the home's asking price. The average number of days it took a home to sell went down. Lastly, there were fewer distressed sales (foreclosures and short sales) relative to the total number of homes sold in the 1st quarter of this year compared to the same time period a year prior.
There was some variation in the different quadrants of the county for the average number of days on the market, the sale price/listing price ratio and with change in the level of distressed sales. However, the number of listings, the number of homes sold and average prices all saw an improvement across the board in all 4 quadrants of the county. This is quite impressive.
Let's start off by talking more about the improvement we saw in the number of listings here in the 1st quarter of this year. Compared to the first quarter of 2019, the number of properties listed for sale went up by 2.6% in the first quarter. of this year. It's not a big increase, but with our shortage of properties available for sale, any increase in listings is great news at this time! The increase in the number of listings is likely due to a combination of an increase in new construction homes for sale and also more homeowners deciding to sell their home to take advantage of today's high home prices.
In addition to a higher number of listings, we also saw a healthy increase in the number of homes that sold in the 1st quarter of this year compared to the 1st quarter of 2019. Year over year, we saw a 5.7% increase in the number of homes that sold. This increase in home sales was fueled by a strong job market and low interest rates. Whether or not this trend will continue for the remainder of the year is a big question for most people. It's hard to say right now with what's going on with Covid-19 and the partial economic shut down. Hopefully we'll be okay and it won't have too much of an impact! Time will tell.
Home prices in Leon County saw a huge jump in the 1st quarter of this year compared to the 1st quarter of 2019. To be exact, we saw a year over year increase of 10.2% in the 1st quarter of this year. That is huge! The historical average rate of increase for home prices is between 3%-5% a year, and the increase we saw in Leon County in the 1st quarter is more than double that. The increase in home prices was caused by a strong job market fueling buyer demand and low level of housing inventory. It's basis economics, folks! High demand coupled with low supply equals an increase in prices!! It's a tough market if you are buying a home, but a great market if you are selling.
Even with all that's going on with the Covid-19 Pandemic, it's my opinion that home prices will stay strong this year. I think that the inventory of homes is so low that even at a lower level of demand from home buyers, prices will stay steady. I think that home prices will not increase as fast, but I do not think home prices will go down this year.
The next metric that also saw a year over year improvement was the average sale price/listing price ratio. Again, the average sale price/listing price ratio measures how much a home sells for compared to what the asking price of the home is. In the first quarter of 2020, the average sale price to list price increased by 0.97% from the first quarter of 2019 jumping up to 98.41%. This means that on average, in the first quarter of 2020, homes sold for 98.41% of the home's asking price. This is indicative of the fact that the 1st quarter of 2020 was a seller's market here in Tallahassee. The combination of high demand and low housing supply forced home buyers to pay very close to seller's asking prices with very little room to negotiate.
Another improvement we saw in our local housing market in the 1st quarter of this year, was that it took less time on average for homes to sell compared to the 1st quarter of 2019. In fact, we saw a year over year decrease of 21% in the amount of time in took a home to sell in the first quarter of this year, dropping from 76 days a year ago to only 60 days in the first 3 months of this year. Again, properties selling faster in the 1st quarter of this year was likely a result of the increased demand for homes that we saw coupled with a low supply of homes for sale.
Finally, distressed sales (foreclosures and short sales) made up a smaller amount of total sales in the first quarter of this year compared to the first quarter of 2019. In the first quarter of this year, distressed sales only made up 2.04% of total sales. This is down from 2.16% in the first quarter of 2019. Nowadays distressed sales are pretty much a non-event with the level being so low, but it's good to keep an eye on them because if the level of distressed sales starts going up, that could be a sign of a change coming in the market. So far this year though, it looks like levels of distressed sales are remaining very low.
Overall Tallahassee's residential real estate market had a very strong start to the year in 2020. Throughout the county, every metric I measured saw year over year improvements. Even though the year started out strong, a lot of people are wondering how the real estate market will play out for the remainder of the year. No one knows for certain at this point, but I think we can make a fairly educated guess of what to expect based on the information we have now.
First and foremost, I think that overall activity will probably slow down in the 2nd quarter of this year and possibly may stay slower than normal even into the 3rd quarter. Slower activity will be in the form of fewer home sales and a fewer number of people listing their homes for sale. How much of a slow down we will see is hard to tell at this point. It depends on a lot of things that we really have no or very little control over at this point.
Despite the slow down in activity, I don't think we will see any negative impact on home prices this year. I think it's very possible that home prices will not increase as much as they were going to increase had the Covid-19 Pandemic not hit, but home prices will not decrease. How do I know that you ask? I know that because we have such a shortage of homes for sale, that even if home sales decrease substantially, we will still be in a seller's market because our housing inventory is so low.
Keep in mind that in a balanced real estate market where housing demand and supply are about equal, we would have about a 6 to 7 months supply of homes for sale. This means that if no one else listed their homes for sale, it would take 6 to 7 months to sell all of the homes at the existing level of demand. That is a balanced market. In today's market, we have been running at about just over a 3 month supply of homes. This is about half of the level of a balanced real estate market. So home sales would have to decrease by over 50% in order to go from a seller's market to a buyer's market. We have NO indication or data that suggest we are going to see a slow down of that magnitude.
If you were planning on buying a home this year, and you are still able to buy a home, then keep looking for a home. If you were planning on selling your home this year, then continue to plan on selling if you need to sell. If you want to and have to luxury to wait a couple months for things to get better and more buyers to enter back into the market before you list your home, that is fine. If delaying selling is going to cause you a hardship though, then don't delay. Carry on as you were, with your real estate plans.
I'm currently working with both buyers and sellers right now, and nice homes that are priced right and show well are still selling quickly and receiving multiple offers! So if you are wanting to sell, get your home nice and spruced up, and find a good real estate agent to price your home right and properly market your home, and you should be fine.
To see all of the real estate statistics for Tallahassee as a whole and by each quadrant, please see below.
Tallahassee as a whole
- Listings Increased by 2.6% (1,646 homes listed for sale)
- Sales Increased by 5.7% (930 homes sold)
- Average sale price Increased by 10.2%(Average sale price was $243,050)
- Average Sale price/list price ratio went up by 0.97% (Average Sale price to list price was 98.41%)
- Average days on the market to sell decreased by 21.05% (60 days on the market before selling)
- Proportion of distressed sales to total sales decreased by 0.12%% (distressed sales made up 2.04% of total sales)
Northeast Tallahassee
- Listings Increased by 8.4% (848 properties listed for sale)
- Sales increased by 3.7% (417 properties sold)
- Average price increased by 10% (Average price was $323,468)
- Sale price/list price ratio increased by 1% (average sale price/list ratio was 98.49%)
- Average days on the market decreased by 26.8% (52 days on the market on average before selling)
- The proportion of distressed sales to total sales decreased by 0.3% (distressed sales made up 1.44% of total sales)
Northwest Tallahassee
- Listings Increased by 4.4% (454 properties listed for sale)
- Sales were unchanged ( 289 properties sold)
- Average sale price increased by 17.3% (average sale price was $170,002)
- Average sale price/list price ratio increased by 1.54% (Average sale price/list price ratio was 98.03%)
- Average days on the market before selling decreased 44.8% (58 days on the market on average before a home sold)
- The proportion of distressed sales compared to total sales increased by 0.7% (distressed sales made up only 2.08% of total sales)
Southeast Tallahassee
Southwest Tallahassee
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- Listings decreased by 1.7% (235 properties listed for sale)
- Sales increased by 14.6% (157 properties sold)
- Average price Increased by 5.9% (Average sale price was $220,790
- Average sale price/list price ratio decreased by 0.1% (sale price/list price ratio was 99.03%)
- Average days on the market before a home sold increased by 3.2% (64 days)
- The proportion of distressed sales compared to total sales decreased by 1.1% (distressed sales made up 2.55% of total sales)
- Listings decreased by 4.4% (109 properties listed for sale)
- Sales increased by 28.9% ( 67 properties sold)
- Average sales price increased by 4% (Average sale price was $109,788)
- Average sale price/listing price ratio increased by 1.81% ( Average sale price/listing price ratio was 96.8%)
- Average days on the market before the property sold increased by 5.8% (109 days on the market before selling)
- The proportion of distressed sales compared to total sales decreased by 1.29% (distressed sales made up 4.48% of total sales)
