Price Activity
 • The current price of $163,300 is 20% below the national average.
 
 • The median home price grew 11% in 2004 and by 20% in the past three years.

 • Past price trends have always been steady - neither declining nor rising very fast.
 
 • Home price is very affordable in light of improving job market conditions and from favorable in-migration trend into the region.
 
 • Home prices in Tallahassee are very affordable in relation to other Florida markets.

Affordability
 • The ratio of price-to-income has been remarkably stable in the past 15 years. By this measure, there is certainly no price bubble.
 
 • Mortgage rates declining to 45-year lows have been a major force in boosting home prices in recent years. Lower rates allow homebuyers obtain a larger loan without necessarily increasing monthly mortgage payments.
 
 • A more relevant measure for assessing the risk of a home price bubble is the median mortgage servicing cost relative to the median income. This ratio is currently well below the local historical average. It implies no widespread financial overstretching to purchase a home in the region and a huge potential for a significant price gains.

Local Fundamentals
 • The job market has been improving. There have been 2,600 payroll job additions in the past 12 months. Many new job holders seek their own housing units.
 
 • The region added in the past five years an estimated 14,000 new housing units of which about 8,000 were single-family units.
 
 • The ratio of five-year job gains to five-year new home construction shows the “hangover” impact of the housing shortage, or housing surplus. In our case, the local market is only mildly oversupplied as the ratio is less than one. With recent job gains and the expected continued economic expansion, the jobs-to-new home ratio will likely steadily increase.

Other Factors
 • There is no good information regarding interest-only loans in the local market. But if it reflects a national trend of a higher usage of interest-only loans, then some homeowners could feel the pinch of higher rates over time.
 
 • The baby boomers in their peak earning years and have been active in purchasing second homes, which many consider their future retirement homes. The baby boomer impact could continue for another decade.

 • With many top southern retirement destinations getting quickly unaffordable in the past five years, some retirees may turn to more affordable regions of the country. The local region is well positioned to draw many new retirees by being located in a state with no state income tax.

Stress Test
• Price declines in the local market are unlikely according to our stress test.

• The local housing market will experience a price decline of 5% only under extreme unlikely scenarios of much higher mortgage rates. For example, mortgage rates rising to 14% in combination with 4,000 job losses could lead to a price decline.
Such scenarios are highly unlikely. Most credible forecasts predict the region will create at least 5,000 jobs over the next 24 months and mortgage rates will hover around 7% by the end of 2006, which bodes well for future price gains.)

• Even in the unlikely event of prices declining by 5%, most homeowners will maintain sizable equity build-up in their homes. The table below shows the home equity gains if prices were to fall by 5% by homebuyers at various years of purchase.

Additional Discussion Points
 • 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 a job creating economy.

 • Homes trade far less frequently than financial assets (about one home sale every 7 to 10 years for most homeowners). There are also larger transaction costs associated with selling a home due to the lengthy careful examination demanded by home buyers and sellers. Therefore, home prices are not prone to fluctuations as in the stock market. There are neither panic sells nor margin calls associated with homes.
 
 • Many non-quantifiable factors could be important for this metro market in determining home prices. Access to cultural life, the quality of museums, nearby local and national parks, water views, exclusive neighborhoods, weather, the international airport, city vibrancy, restaurants, and a host of other non-quantifiable factors could have an important influence on the overall pricing.
 
 • There are immense tax benefits to owning a home. These tax considerations were not considered in the analysis. For example, the 1998 law permitting primary owner occupants to trade down without having tax consequences. Also most home sales results in no capital gains tax. In addition, long-term capital gains tax rates were reduced in 2003, thereby providing higher return for home investors. These positive benefits, if accounted for in the analysis, would have shown an even stronger case for housing fundamentals in supporting home prices.

NAR Research produces the premier measurement of residential real estate activity – the existing-home sales series – and analyzes how changes in the U.S. and international economies can impact the real estate business. It also examines trends in real estate practices, and how NAR members are adapting technology in their business operations. NAR Research looks at regulatory and legislative policy proposals and how those policies could affect REALTORS® and their clients, America’s property owners.
 
Some of our most popular neighborhoods include:
Tallahassee: Killearn, Southwood, Ox Bottom, BullRun and Fall Chase (which is a new development in the making).

Crawfordville (and surrounding areas): Shell Point Resort, The “C”

Midway: Rustling Pines, Magnolia Forest, and Orion’s Point

Below is a Census Data chart (courtesy of U.S. Census Bureau) of Tallahassee, Crawfordville, and Midway.