This blog is a continuation of my post from Saturday, September 11th. Please refer to that post for the historical sales numbers over the last decade.
At the end of Saturday's post, I mentioned that we appear to be selling a historically normal number of residential units based on sales figures from the 1990s. However, the counterpoint to the encouraging bit of news is that the Leon County population has increased 18% since the mid-1990s when we were also selling around 2400 residential units per year.
Therefore, if the sales rate did not grow, but merely kept pace with the population growth, we would expect to see closer to 2800 units sold per year. The fact that we are below the population adjusted sales figure makes sense when the current supply and demand situation is taken into account. At present, Leon County has 12.5 months of inventory which is more than double the supply in a balanced market (6 months).
NOTE: Months inventory is the number of months that it would take to sell all of the homes on the market at the current sales pace, assuming no new homes were listed for sale. For example, if 1000 homes were on the market for sale, and the sales pace was 100 sales per month, then there would be 10 months of inventory (1000/100 = 10).
With 15 new homes coming on the market for sale each day, and only 7 homes being sold each day, the market is going in the wrong direction. As in any other market, excess supply puts downward pressure on prices. If we want to see price stabilization in our local housing market, then we need to balance supply and demand. We can do that in one of two ways, either 1) Increase demand or 2) Decrease supply. It is the opinion of this author that we must have a plan that targets both supply and demand in order to be effective in balancing the market.
Check back in tomorrow for some ideas on how to fix the problem.
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