Real Estate Supply Update August 2021 (2024)

Real Estate Supply & Demand UPDATE

Real Supply Of Homes Best In 6 Months

Thisgraph displays the current homes for sale, separated by whether or not they are under contract with buyers.

Real Estate Supply Update August 2021 (1)

Homes for sale that are already under contract with buyers are shown in blue, while those for sale not yet under contract with buyers are shown in red. The ratio of homes under contract to all homes listed for sale is shown as a solid green line and measured on the right vertical axis. The green-dashed line reports the one-year trend of this under-contract percentage.

Right now, there are 483 homes for sale in Tallahassee that are not yet under contract with buyers. This is the most we've recorded since the 535 that were available in January. To provide some context for these numbers, we saw about 530 homes sold and closed in each of the past two months, so the actual available inventory is only enough for about four weeks worth of buyers (meaning it's less than one month's supply of homes that are available!).

The percentage of homes under contract dropped for the second month in a row, but this is due to the normal seasonal influx of new listings as opposed to a slowing level of demand from buyers. Currently, 60% of the listings in the MLS are under contract with buyers which is significantly higher than the 48% recorded one year ago. I expect to see the percentage of homes under contract rise again next month as we've reached the end of the historic-seasonal rush of sellers listings their homes.

When we take in the big picture of the graph, it is clear how things are so different today than they were ten years ago. It shows how the market has gone from a strong buyers' market to a strong sellers' market.

From left to right, look at how the percentage of homes under contract has reversed. On the left side of the graph, the height of the red bars was about four times the height of the blues, meaning there were far more homes for sale NOT under contract than there were homes under contract with buyers.

Right now, 60% of all current listings on the market are already under contract withbuyers, meaning that today, three out of every five activelistings have contracts today versus less than one-half just one year ago.

Buyers must understand that when they go online and look at homes for sale, most of the homes they see are not really available, as other buyers have them secured with contracts. I can't tell you how many times a buyer calls us to go see a home they found on Zillow and we have to tell them it has already been put under contract. This is why we recommend you use the manausa.com property search tool, it updates every 15 minutes and is the best source of current listing statuses on homes for sale in Tallahassee.

As I have been saying for years, the supply of homes for sale is far too low for buyers to be able to casually shop for a home. The situation has improved slightly for the time being, so if you are a buyer in the market, you might want to get aggressive right now before the rest of the market responds.

Let’s take an in-depth look at the supply side of the housing market and examine exactly what's happening that is causing the low level of availability of homes for sale.

Fresh Listings Year-Over-Year

After three consecutive months of gains, the number of fresh listingsentering the market fell in July.

Real Estate Supply Update August 2021 (2)

The graph above shows how each month fared (percentage-wise) compared to the same month in the prior year for fresh new listings entering the MLS.

I use the term “fresh” to describe homes listed for sale that were not previously listed. These are homes that are truly new to the market, not merely old inventory that was canceled and relisted by the agent or a new agent.

Three of the past four months have seen gains in the number of homes listed for sale in 2021 when compared to the same months in 2020, but let me remind you that April through June were the months that declined greatly last year when COVID became a reality in Tallahassee. So the gains this year were more a reflection of the decline last year than a rise this year.

I believe the same explanation can be used for the decline in July this year versus July of 2020. Last July, there was a surge of pent-up supply that hit the market that would have normally entered in months prior, so the big July month last year can be blamed for the apparent decline in fresh listings in July of this year.

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Fresh Existing Listings

While the previous graph showed a month-to-month comparison of fresh new listings, this one reports fresh listings of existing homes from January through July of each year.

We see that the number of fresh (existing home) listings has risen 9% in the first seven months when compared to the same seven months last year. So how does 2021 compare with the previous seven years? 2021 now ranks third-best of the recent eight years when ranking them by the number of fresh existing listings entering the market.

Real Estate Supply Update August 2021 (44)

The housing market started the year with too few homes for sale, so even a healthy 9% rise in fresh existing home listings has done nothing to bring balance to the market. The continuing low supply of homes coupled with heightened demand has pushed prices higher and has accelerated real estate appreciation to unhealthy levels.

You might believe this is "good news" for sellers as their homes are now worth more, but you also have to remember that most sellers are going to be buying another home in the same market (with the same soaring prices and the same lack of inventory).

Of course, the existing home sales market does not stand alone. We also need to examine what the home builders have been doing.

Fresh New Construction Listings

Similar to the previous graph that showed fresh listings for the existing homes market, this graph shows freshly listed new construction homes.

Real Estate Supply Update August 2021 (45)

The number of listings for new construction homes entering the market is a little more than one-half of what was reported last year. The 249 new construction listings represent just over one-half of the 481 new construction listings created in 2020. This low production level is not going to solve our problem. Tallahassee needs local builders to produce more homes.

As a matter of fact, that was my message to homebuilders when I spoke to the Tallahassee Builders Association at their general membership meeting recently, and you can hear what I said by watching the video below.

With home builders producing homes at a slower rate, rapid appreciation has taken over the housing market. Last year's appreciation of 9.3% was nearly triple what we would expect in an average year, and this year's rate currently is annualized at more than 16%. As I have warned in previous reports, home values could very well surpass 20% growth this year.

New Versus Used Home Sales

This graph plots new home construction sales versus existing home sales annually from January 1991 through July 2021. The number of existing homes sold is shown in blue, while the number of new homes sold is shown in red. The gray line plots the new construction percentage share, while the dashed gray line plots its ten-year average.

Real Estate Supply Update August 2021 (46)

Back in the 1990s, builders were bringing more than 1,100 new homes per year to the market. In the next decade, the average was over 1,300 homes. The last decade saw that average decline to 434 homes per year.

Initially, the decline in new construction was needed, as the market was grossly over-supplied and required time to consume all the extra homes. That correction was completed in 2016, so we needed "normal" building operations to commence.

With today's relative supply of homes for sale sitting at three months of supply, our inventory could easily be doubled, so builders today can comfortably permit another 1,000 homes on top of what is already permitted. You have to remember, while demand is high, it has been stifled by a lack of inventory, so having more homes in the past would have resulted in more sales.

Slow production means that builders missed an opportunity to sell an additional several thousand homes over the past five years. The void that these missing new construction homes did not fill has created a lopsided market with home values going out of control.

Now that we've covered existing and new construction homes separately, let's examine the global view of the supply side of our market, where we combine new homes with used homes which produces the following graph detailing the total number of fresh new listings that have entered the market through May.

Fresh Listings Of Homes For Sale

This graph reveals that the combination of builder homes and existing homes has 2021 ranked #3 of the past 8 years for new inventory entering the housing market. 2021 trails only 2018 and 2019, and if all the new home permits posted earlier this year turn into inventory, we might see 2021 move into the top position. Remember, today's sky-high demand has created optimal market conditions for sellers, so there is no reason for incoming listings to be so low.

Real Estate Supply Update August 2021 (47)

This year might have topped all others were it not for the number of new construction homes declining. In fact, when coupled with heightened demand, the current stream of fresh listings has kept the relative supply of homes for sale near record lows. So what doe this mean?

It means tough sledding for buyers. Buyers right now are hyperactive due to near-low mortgage interest rates, but we find the inventory far too low to satisfy this demand. Now, let's make this simple. Supply is low, demand is high, so home prices are going through the roof.

Stale Inventory Is All But Gone

Another set of listings we track is those that have recently been listed for sale, left the market without selling, and then returned with a new real estate broker. These are the "stale" listings.

Real Estate Supply Update August 2021 (48)

The graph above shows the stale listings coming back into the market each year from January through July. With inventory low and home sellers' success rate near 90%, this list continues to get smaller.

The 247 stale listings that have entered the market through July in 2021 measure 63% fewer than the 664 stale listings that entered the market in the first seven months of 2015, and 29% fewer than what we reported last year. The number of listings that go stale will never go away, but today's count is fewer than any year going back to the market crash of 2006.

Relative Supply Of Homes

This table measures the supply of homes for sale, relative to the current rate of demand. The resulting number for each area and the price range is measured in "months of supply," and what makes the market balanced is a measure of 6.0.

Historically, a market with six months of supply has produced steady home sales and an appreciation rate of just over 3%. When the relative supply drops below 6 months of supply, we call this a seller's market as there are more buyers than sellers. When the numbers rise above 6, we refer to that as a buyer's market, as there are more sellers than buyers. Red shaded areas reveal a seller's market condition. Orange areas remain in a buyers' market, while the few white-shaded areas are fairly balanced.

Real Estate Supply Update August 2021 (49)

The table segments the market through home price categories in $50,000 increments up to $1M.

These results clearly show that the supply of homes for sale, relative to the current hot rate of demand, remains near a record low. With the decline of fresh new listings combined with the growth of the buyer pool, the months of supply of homes for sale is woefully low. This table shows you why such a high percentage of our current listings are already under contract with buyers.

Right now, the overall market below $800K is facing strong sellers' market conditions. There are areas and price ranges on the west side of town down to about $300,000 that remain in a buyers' market, and overall across Leon County, homes priced above $800,000 remain in a glutted buyers' market.

The very bottom line of the table shows you last month's relative supply, and an interesting shift has occurred. Overall, the relative supply of homes for sale is the same this month as it was last month. But when we look at each quadrant, we see fewer available homes in NE Tallahassee and SE Tallahassee, the same relative supply remains for NW Tallahassee, but the relative supply of homes has grown in SW Tallahassee.

We'll keep a close eye on this to see if a trend is forming, but for now, pay close attention to the area and price ranges for the homes you plan to sell and buy. Overall, know that market is crazy hot right now, so you have to have a good plan.

For every buyer that closed on a home in July, there was more than one buyer that missed out on the chance to buy a home. The closings could have been more than double the rate closed had there been more available listings.

We need builders to step up and produce inventory in the areas and price ranges shaded in red if they are capable. Obviously, we're not going to see a builder bring in new units under $100K in NE Tallahassee, but there are a lot of red-shaded areas in our table that should be pursued.

If I were a builder and wanted to ensure that I did not build homes that the market does not need, I would look at the red-shaded areas with a value below 5 months of supply. The market is demanding these homes, why not build and sell them?

If you are a local home builder who would like analytical guidance on where and what to build, I’m happy to help, just give me a call.

For non-builders, you should know that this is the hottest seller's market ever, so if you've been thinking about moving, it's time to act.

Right now, mortgage interest rates remain very low resulting in sky-high demand for your home. Rising rates will eventually reduce demand, resulting in fewer buyers for your home.

Rising mortgage interest rates will not likely reduce the value of your home any time soon, but the rising cost of borrowing money will increase your monthly payment on the home you buy next.

If you plan on buying a home after you sell your current one, take advantage of low mortgage interest rates, or just take advantage of the strong demand that these low rates have created.

One day in the future, you will look back at 2021 as perhaps the last chance ever to get a home at these low prices and be financed with a 3% mortgage interest rate. In the future, not only will home prices be higher, but so too will be the rate you pay when you borrow money for the home. Don't let this opportunity slip away!

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Real Estate Negotiation Strategies For Each Market Condition

If you mishandle the negotiation on a home, several things will possibly happen, and all of them are bad. First and foremost, you’ll leave money on the table through either the sales price or the terms that are negotiated. Today, buyers are losing out on homes they want to buy and it’s often due to poor positioning in the negotiation. And while we are in the midst of a historic sellers’ market, I’m seeing sellers leave money on the table even when they have multiple offers! #realestatenegotiation #homenegot

Four Smart Ways To Use A Real Estate Contract Assignment

Contract assignability allows buyers to give or sell their rights to another buyer, and that creates opportunity. Tune in to discover four reasons to assign a real estate contract (including contract assignment profits)

What Does A Transaction Coordinator Do?

When you are selling a home or buying a home, a critical member of your support team is your transaction coordinator. Here's what to expect!

Real Estate Appraisal Versus Fair Market Value Of A Home?

What is the difference between a real estate appraisal and the fair market value of a home? If there is one practice that confounds both home buyers and home sellers alike it's the fact that the majority of real estate transactions close at the mercy of an appraisal conducted for a purpose that most consumers do not consider. Understanding these differences will save you money when it comes to buying or selling a home, and it will help you appreciate the need and value of a real estate appraisal. But here’s

What Is A Real Estate Hot Sheet?

What Is A Real Estate Hotsheet? - When agents are new to the real estate industry, they are trained to monitor the " MLS Hot Sheet" every morning in order to stay informed of the inventory changes. So what is a real estate hot sheet, and can non-Realtors get access to it??? Link to the current real estate Hot Sheet: https://www.TallahasseeHotSheet.comUp until now, the hot sheet was proprietary information only available to paid members of the MLS. But recognizing that inventory is so low in the Tallahass

Who is responsible for determining the value of the home you want to buy?

If you are planning on buying a home now, or within the next three to six months, you are going to have all sorts of questions pop up for which you’ll want answers. Among the most important of these will have to do with figuring out what a home is worth. As a matter of fact, I was recently asked this question “Who is primarily responsible for determining the market value of the home you want to buy?” Questions about valuation are very common from buyers of all experience levels because nobody wants to overp

What Is The Definition Of Distressed Property?

What Is The Definition Of Distressed Property? I received this question from "Rich" who asked: Joe, what is your definition of a "Distressed Property" - foreclosure, disrepair, time on market, location? That's a great question because we have a ton of people who have registered to receive our regularly updated list of distressed properties for sale in Tallahassee, so I know the topic is very popular today. In fact, it’s not uncommon for people just entering the market to buy a home to be focused on distress

Why Use A Buyer's Agent For New Construction?

Why Use A Buyer's Agent For New Construction? - I was recently asked about the benefits of having a buyers agent for new construction. Specifically, she asked why she should use a buyer's agent for new construction?My short answer is that you should always hire a well-trained advocate to help you buy any real estate, including new construction homes.This video though will specifically address several benefits of having your own advocate when purchasing a brand new home, whether it has already been built

What Is A Seller's Market In Real Estate?

You might have heard that we have a huge seller’s market right now in real estate. Do you know what that means? This real estate frequently asked question comes up from time to time when somebody is buying a home or selling a home. They want to know if its a buyer’s market or a seller’s market. Is now a good time to buy a home in the Tallahassee real estate market? I have prepared this short video to demonstrate the conditions that make this a seller’s market, and then we’ll show you the numbers and how we

What Is A Swimming Pool Worth?

What Is A Swimming Pool Worth? Recently, a customer buying a home asked me a simple question. She inquired “how much does a pool add to the value of a home?” Pretty simple question, right? Well, by the end of this short video, you’ll know the not-so-simple answer (and why this is so important).

How Many Times Will A Home Seller Counter Offer?

This real estate frequently asked question is from a recent home buyer. If you are about to buy a home in Tallahassee Florida or beyond and you’re trying to better understand how the real estate negotiation process will work, then understanding how to better control the negotiation is going to keep some of your hard-earned money in your pocket!

What You Should Know About School Zones When Buying A Home

What You Should Know About School Zones When Buying A Home - Buyers always ask about school zones, even when they do not have school-aged children. They understand that homes in the highest-rated school zones often fetch the most money, so they believe they are putting themselves in the best position for a future sale by purchasing a home in an acceptable school zone today.Unfortunately, this logic is flawed. If you are buying a home with no need for a school yet plan on including your opinion of the publi

Real Estate Is Local - What This Means!

If you plan on buying a home, or selling a home, you’ll want to understand the local nature of real estate and use it to your advantage.

Do's And Don'ts During The Home Loan Process

During the home loan process, you'll want to avoid negatively impacting your loan pre-approval in any way

Your Local Expert In Tallahassee

When moving to, in, or from Tallahassee, you will fare better if you work with a local expert. We are here to help. If you have further questions on the Tallahassee real estate market, you can leave a comment below,give us a call at(850) 366-8917, ordrop us a noteand we'll give you the local information needed to ensure a successful, smooth transaction.

As a local born and raised in Tallahassee with a focus on customer service, I promise you'll find great success when working with Joe Manausa Real Estate, just as have our past customers. You can read thousands of their reviews reported on Google, Facebook and Zillow right here:Real Estate Agent Reviews Tallahassee.

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Think all REALTORS are alike?

Read what people are saying about working with Joe Manausa Real Estate! You can see thousands of real customer reviews reported on Google, Facebook and Zillow at this link:CLICK HERE FOR REAL ESTATE AGENT REVIEWS.

Real Estate Supply Update August 2021 (2024)
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