Market gradually absorbing inventory

By Greg Lane • Tallahassee Democrat • November 18, 2008

The past two years were like a whirlwind to those of us in the real estate business. The market was like a record wind gust.

When the excitement stopped in the fall of 2007, the slowdown hit us hard and fast, like a tornado. Real estate professionals, buyers and sellers seemed unprepared for the torrential drop in volume from August 2007 to September 2007.

This pivotal period is a traditional seasonal slowdown, a time when local real estate activity takes a back seat to school preparations, parades and family gatherings. But during the pivotal period in 2007 we were not prepared for the 45-percent drop in the amount of transactions of condos, townhouses and single-family homes.

In contrast, there was virtually no change in volume from July to August 2007; this left us ill prepared for such a plunge a month later. Fast forward to 2008. How did our market react this time during the same pivotal period? Surprisingly, we only noticed a 15-percent decrease from August to September, not the monumental landslide like the year before.

Is this a sign that our market has hit bottom? Might we see a recovery soon? I don't think we can rush to any major conclusions based on this data. First of all, our October 2008 was no better than September — sales volume actually decreased again, compared to virtually no change for the same time period in 2007.

The good news is that building permits are down, new construction activity has come to a halt and active listings are down. The peak of our listing inventory in Leon County this year (single-family homes, townhouses and condos in MLS) was 3,430 in May. It is now down to 2,941, a 15-percent decrease. Existing new construction is slowly being absorbed and we are starting to see the bottom in many market segments.

It used to seem that buyers were sitting on the fence, and then it appeared that they were sleeping on the fence. Today, the buyers are still there, but they are hiding behind the fence, waiting for the right price.

Our forecast for this quarter is the same as it was every year before the "gold rush" of 2006-07. We should see slow activity in October and November, with a typical increase the first few weeks of December. Based on historical data, our market will warm up again in the spring, but we will need a red-hot summer to carry us through the fall of 2009.