Many people believe that understanding real estate market trends is too technical or difficult to comprehend, but it’s much easier than you think. All you need to do to anticipate real estate market movements is study the short and long term trends in housing inventory. Alternatively, you can read my market recap, below.
There are four rules about the housing industry that are helpful in discerning market trends:
- A “good” real estate market simply means that you can sell your home when you want to move.
- A “balanced” market occurs when housing inventory levels are in the 4 to 7 months of supply range.
- A “sellers” market occurs when inventory levels drop below 4 months of supply.
- A “buyers” market occurs when the inventory exceeds 7 months of supply.
Tallahassee Real Estate Market Trends
In 2008, I predicted that the long term trend in Tallahassee would show that housing inventory would decrease, causing prices to rise. This is exactly what’s happening right now. With only a 3 months’ supply of homes for sale in some areas in town, homes are appreciating at a rapid pace. This means homes prices are increasing quickly, so if you purchased a house a year ago, it could already be worth anywhere from 6% to 20% more, depending on the neighborhood.
Right now, the only way to slow down appreciation is to increase the supply of homes for sale. So if you’re in the construction industry, you should buy whatever lots you can and start building homes immediately.
If you’re a homeowner, you may think appreciation is a great thing – your house is now worth more than what you bought it for. However, if appreciation continues, it means that people in the market to buy cannot find affordable housing and may be forced to rent…or move out of town altogether.
Home seller success rates have been growing in recent years, as reduced inventories and rising demand from buyers have made this a seller’s market. Right now, there are approximately 2,300 homes for sale in Tallahassee and current data shows that over 80% of home sellers are successful in selling their home.
For the homes that are not selling, there are two possible problems. Either the home is not being marketed aggressively by a comprehensive multi-channel marketing campaign, or the home is priced too high. Looking at the long term trends of Tallahassee housing inventory, you can expect to continue seeing increasing values and decreasing inventory.
The Role of Seasonality in Real Estate
As we enter the Fall, it is important to understand how seasonality plays a role in the real estate market. Typically, people move in the Spring and Summer, causing inventory to stay low and prices to remain high. As we enter the Fall and Winter, you can expect the real estate market to become slightly less active. This will likely result in a larger number of homes on the market, a longer amount of time homes remain on the market, and there could be a dip in sale prices (although with the current inventory shortage, it’s unlikely).
What it All Means For Sellers and Buyers
If you’re planning to sell your Tallahassee home, with the right marketing plan in place and an experienced real estate agent by your side, you could make quite a profit in today’s market. If you’re a buyer, do not wait to purchase. Home prices will continue to increase in the foreseeable future and interest rates have been slowly ticking up as well. If you wait to purchase, you may pay 6% or more next year on what it would cost now. To put it in perspective, on a $250,000 home, with a 6% increase, you’re looking at a new sales price of $265,000.