Looking at a graph of residental sales for the Pensacola real estate market could make you feel a bit like you are racing down the back side of a roller coaster's big loop. The number of sales has fallen dramatically from the late 2005 and early 2006 highs. However, actual Pensacola area home sale prices haven't fallen nearly as dramatically. What are the numbers and what do they mean?

Escambia and Santa Rosa Counties (Pensacola Area) Total Number of Single Family Resales

Last week I attended a presentation by Al Muller from Metro Market Trends, a company that has been tracking and reporting on real estate sales since 1990. Some of the points he made about Pensacola area real estate home sales trends are well worth sharing. The graph above shows a 12 month moving average of actual home sales in the Pensacola area: Escambia (Blue Line) and Santa Rosa (Green Line) counties.

Some of the conclusions to be drawn include:

• The run up (2002 to 2006) was a historic economic event which has never happened before, or as Al put it, "a boom of historic proportions."
• The graphs for most Florida counties look roughly the same, as shown when comparing Escambia and Santa Rosa.
• Hurricane Ivan was not really significant in spurring the run up; the market was already hot.
• 2001 was the last year of a "normal" real estate market.

Below is another great graph Al provided which shows the residential resale numbers in Escambia County from 2005 to 2008. The trends look almost identical for Santa Rosa County. Note that the monthly number of Pensacola area real estate resales peaked in 2005 (Jan. to June) at roughly 800 units. In 2008 this peak was only about 270. By anyone's measure, this is a huge decline.  

Escambia and Santa Rosa Counties (Pensacola Area) Median Price for Residential Resales

But what has happened to home sale prices as Pensacola real estate sales have declined so precipitously? Well, they haven't dropped nearly as much as you would expect. Al's next graph shows how the sales have slowly inched down.

There are probably numerous reasons why prices have not fallen more dramatically. Many sellers have "chased the market down" by pricing their homes above the true sales value. Many sellers that bought from 2004 to 2006 feel stuck in their homes as they paid more than for them than they can sell them for today. And many sellers have just been slow to recognize the market for what it is.

As an agent I will admit to finding myself "chasing the market down" on more than one occassion when dealing with reluctant sellers. More than a year ago I instituted a policy of NEVER taking overpriced listings. My total number of listings has dropped, but my success rate measured in closed sales has increased since making that decision.

So Where is the Bottom of the Pensacola Area Real Estate Market?

That's the question we all have. Al Muller thinks he has the answer. At least he has the best backed prediction that I have seen and here it is:

This graph shows (Dotted Yellow Line) the historic real estate sales rate for the Greater Pensacola Bay Area. It also shows (Blue Line) the actual real estate sales rate. Where the two lines intersect should be the elusive "Bottom" of the Market. The sales trend for Santa Rosa Count residential real estate resales looks much the same.

What can we conclude from this graph?

• Prices for residential real estate in the Greater Pensacola Bay Area must still drop. Al Muller estimates a necessary 7% drop for Escambia County and a 16% drop for Santa Rosa County.
• Equilibrium, or "the Bottom" of the market will occur in late 2010.

Implications for buyers and sellers in Northwest Florida

As a buyer, you are in a window of opportunity. Mortgage rates are inching up and credit is getting tighter so if you are in the market go ahead and make your offer. Negotiate fiercely knowing that the market is still overpriced.

As a seller you have two choices. Reduce your price to match the current market and sell now or take your home off the market until it reaches your expectations and then relist.

All graphs were provided my Metro Market Trends