2018 started off strong, home values increased dramatically, and buyer demand was red hot. Mortgage interest rates increased towards the end of Summer, cooling demand, yet home values continued to go up. Now that we are already in February of 2019 and home values continue to rise, many of our readers are feeling a sense of déjà vu and are wondering if the next housing bubble crisis is on its way.
What Causes A Housing Bubble
Housing bubbles are created when the demand for houses decreases but inventories keep going up. The housing market of 2006 and 2007 in Tallahassee is a perfect example of this. The market was lifted by artificial investors from 2002 through 2005, and when they went away, it appeared as though nobody told the builders to stop building. The homes built in 2005 and 2006 over-supplied our housing market for the following six years.
Tallahassee Housing Inventory Trends
So, is the same thing happening now? Luckily the answer is no, we are not on the brink of the next housing bubble. Tallahassee is still facing a fairly significant housing inventory shortage. There is less than four months supply of homes for many of the popular price ranges and areas of town. In order to have a balanced market, there should be about six months supply of houses available for sale.
The last 48 years of residential permitting data shows that residential building permits have decreased 47% this decade compared to the previous decade. It is clear that Tallahassee is in need of more single-family homes to satisfy present demand levels, and if we do not provide them, then housing prices will continue to move too high, too fast.
Although demand has decreased slightly after the recent mortgage interest rate increases, there are no signs that demand will decrease to the point that current housing supply levels would be adequate. This means that Tallahassee needs more single-family houses (townhouses, condominiums, and single-family detached homes).
Tallahassee Population Growth
One would think that Tallahassee’s population growth rates would mirror the building permit trends. Presently, most experts indicate that Tallahassee is growing at a slower rate than its recent historical norm, so we should anticipate fewer new homes. Unfortunately, the rate of decline in new home construction exceeds the rate of decline in population growth, and thus we are left with our current situation of low supply and rising prices. There is a particular need for homes under $350K.
If you are planning on selling a home in 2019, you’ll probably be pleased to find a strong sellers’ market that will deliver top dollar with the appropriate marketing efforts. The key to getting the most money for your home sale rests in your ability to attract multiple buyers, not merely just one. When multiple buyers want a home, a negotiation commences, and the bids move the price higher. Most seller’s who hire a strong marketing agent will find that it is a great year to sell a home.
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