We have faced many struggles in the Tallahassee real estate market over the past few years, but I suspect we might be heading into the worst of it right now. All of the housing reports that we monitor to give us a picture of current trends are negative, with most of our models predicting another downward move in the market for the foreseeable future.
As I always like to point out when bringing negative news, I am entirely bullish on the long term of Tallahassee real estate. We are (and will be) trading below cost in the housing market, due to the gross over-supply that came with the boom-market that ended in 2006. We over-built homes in Tallahassee, and it will take time for the consumption to bring us back to a balanced market. But once that balance is achieved, we can expect real estate values to spring back to levels that parallel the replacement cost of homes in the market.
Tallahassee Real Estate Inventory Reports Rising Relative Supply
The real estate graph above shows that the relative supply of homes for sale in the Tallahassee real estate market continues to climb, mostly due to the slowing rate of purchases. The purple line shows relative supply in the entire Tallahassee MLS approaching 18 months again, after a nice reduction that occurred during the Homebuyer Tax Credit era.
Leon County is doing better than the overall market, but housing supply in Leon County still remains above a year’s worth of homes, not including the large supply of homes known to exist in the shadow inventory.
Pending Home Sales Report
The easiest way to predict future home sales is to look at the number of homes that are under contract in the Tallahassee MLS. The following graph is a very revealing report, showing that we are likely heading towards a new low in the number of home sales that we had hoped was achieved last July.
How To Interpret The Reports
Home sellers need to understand that values are dropping. Any reports that appear contrary to this are wrong. Period. Homes that get sold now will fetch more than homes sold over the several months (and most likely years) due to the glut of competition in the market. Home buyers have the ability to pick and choose, so the better values are what we are going to be see selling.
Now more than ever, home sellers need to take the time to interview the real estate company that they think is best suited to sell their home in today’s difficult market. Roughly 60% of the homes that entered the market in the past 365 days failed to sell, and the home sales success rate is dropping now. The selection of the right real estate company could mean the difference between success and failure, and ultimately tens or hundreds of thousands of dollars.