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It has been a while since we have reported on new home sales in the Tallahassee real estate market. This historically important piece of the Tallahassee economy has been hit very hard since the market started to fall in 2006. Most new home inventory has been consumed, and Tallahassee home builders have not been quick to add more inventory to a market filled with a glut of homes for sale.
Supply Of New Homes Continues To Drop
The graph below shows the relationship between new single family home sales to single family home permits. When the results peak above the “100%” grid line, then we can say that the market is consuming inventory. More homes are being sold than being permitted.
The opposite to this is that when the results fall short of “100%,” we can say that the inventory of new homes is growing, as more homes are permitted than sold. Finally, we have what we call the “Average Ratio Lne,’ which represents the average position of this graph over the long-term. The Average Ratio Line historically has fallen just under 98%, which means that the difference between sales and permits is about 2%, corresponding to the growth rate in Tallahassee.
Good News In Graph, Not In Market
The good news in the graph is that we are currently reducing the inventory of new homes. The graph shows 7 straight months above the “100%” line. The bad news in the housing market is that the shadow inventory looms in the background, waiting to fill the role of “supplier” that is usually performed by the new construction market.
Tallahassee home builders have been wisely paying attention to their toughest new competitor, and that is the inventory of homes waiting to hit the market. These include foreclosures, short sales, and listings that failed to sell in previous marketing periods. As we have reported in the past, this represents more than a years’ supply of homes based upon current rates of sales. Below, the new home sales and permitting graph shows that new home construction is at its lowest rate of production in the past twenty years.