Home Price Analysis for the Tallahassee Area:
A Historical Perspective

Is the Tallahassee area housing market healthy?  In a word, yes!

How do we compare in Tallahassee?
With home prices rising sharply in most parts of the country, there has been widespread media coverage on the possibility of a housing market bust.  A thorough analysis of the Tallahassee metro market reveals that there is very little danger of this.  In fact, the local housing market is in excellent shape with a potential for significant housing equity gains, particularly for homebuyers who plan to remain in their homes for the long run.

Leading indicators
Two of the statistics that lead to this conclusion are a favorable price-to-income ratio, the median home price divided by an estimate of the median household income, and an even better mortgage servicing cost-to-income ratio, which measures the percentage of one’s income that is devoted to paying for monthly housing costs.  Both indicators are below historical averages and have been trending down for more than 20 years.

Prices today
The current median price for local housing is around $170,000, which is 20% below the national average.  Median prices in the Tallahassee area have always been steady, neither declining nor rising quickly.  Home prices are very affordable in relation to other Florida markets, according to a recent Home Price Analysis prepared by the National Association of REALTORS.  Another factor that positions our region for continued growth is the fact that as many top southern retirement destinations are becoming unaffordable, some retirees may turn to more affordable regions of the country.  Our area is well positioned to draw many new retirees because of our proximity to the water, mild climate, friendly people, and the lack of state income tax.

Will my home value decrease?
Home price declines are very rare. In fact, the national median home price has not declined since the Great Depression of the 1930s. Stock market collapses, the OPEC oil crunch, economic recessions, and even wars have not negatively impacted national home prices since the 1930s.  There have been few times when local prices declined. In nearly all these cases, the price declines were accompanied by sharp, prolonged job losses. It is difficult to foresee a price decline in our job creating economy.

Other reasons for a bright future
Homes are traded far less frequently than other financial assets (about one home sale every seven to ten years for most homeowners).  Larger transaction costs are also associated with selling a home; for example, home inspections, title insurance, etc.  These additional expenses contribute to stability in home prices, as opposed to the fluctuating stock market, where there are less attendant costs associated with each transaction.

Keeping the tax man away
There are immense tax benefits to owning a home.  The number one tax benefit that most homeowners enjoy is interest deductibility; this deduction can account for significant tax savings for the homeowner.  Another example is a 1998 law that permits primary owner occupants to trade down without having tax consequences. Also, most home sales result in no capital gains tax. In addition, long-term capital gains tax rates were reduced in 2003, thereby providing higher return for home investors.

Now is the time to buy!
Is the Tallahassee area housing market healthy?  Yes!  We have a great place to live, a strong economic base that includes state government, two wonderful universities, a continually growing community college, and many prosperous small businesses.  Your dream home may be right around the corner awaiting you.

Statistical information provided by the National Association of REALTORS

 

lease look for article 4 in next week’s Sunday paper.

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