My market is just North of Orlando. Parts of Orlando are definitely declining in value because of the available inventory being so high, but other areas are doing pretty well. Same for our market, it's not due to some magical unknown indicator whether an area is doing good or not - it's supply and demand. Our supply is going down and demand is going up, so our values are a little more stable here. Unfortunately, because of our proximity to Orlando, we are lumped in with them for the "declining market" status.
I think it has more to do with the how willing the lenders are to accept appraisals. If they feel the market values will continue to decline, they are looking harder at the appraisals and the comparable sales. In my area, they are looking at all sales in a subdivision for an indication of falling values, and not just the ones the appraiser used to justify value. If there seems to be a downward trend, or if there are many short sales or foreclosures, they ask for adjustments to the appraisal, or they calculate the rate at which values are declining for a reduction in the appraisal.
So, I think it is just us getting lumped in with some of the areas that saw such rapidly escalating values 2-4 years ago, because they are not local and don't know the market personally. They are just trying to cover themselves for future losses.
Tallahassee couldn't sustain the debt-driven price bubble and has predictably imploded, and is continuing the process of price pressures. To begin with there's a 5-year supply-to-population overhang: see: http://manausa.com/market-report
The state government has also refused COLA salary adjustments for the past 5 years (during the bubble and bust), leading to an approx. -30% income loss (yearly compounded) for for Tally's 33,000 state workers. This alone is the economic equivalent of a loss of 10,000 jobs in a city workforce of 120,000 workers, or -8%. Suffice it to say, any equivalent to a hidden, immutable 8% unemployment baseline (loss of income earners) has only furthered price pressures in the housing market.
As of March 2011, there was a 1-year overhang *IN* the market, and another year's worth of "shadow inventory" being deliberately kept *OFF* the market by the banks to prevent a complete RE implosion. That's 2 year's inventory alone of homes for sale, many of which are forced sales (short sales or foreclosure) and absentee owners (arm's length), reflective in the plethora of vacant homes throughout the city.
As of March 2011, Tally's unemployment rate was already 8.9% and is looking to worsen. How much worse? It appears the state gov't will furlough anywhere between 1,000 - 2,000 personnel. The state is also looking at increasing the employee health care contribution by 1000% (up to $5,000 for a family of 4) as well as a 2 - 4% pension contribution. The economic impact of these varies, but its equivalence in $30,000/year jobs could be in the thousands -- 2,000 - 4,000. The best case equivalent economic impact is 2.5% job loss, the mid-case is 3.75%, the worst-case: 5% (6,000 mid-paying jobs equivalent loss of $30k/year income earners). This is nothing short of a drastic impact that'll hit in 2011, on par with rust belt market declines due to decimation of the workforces.
By 4Q 2011, the functional workforce erosion of the past few years may well come to the equivalent of a 10% unemployment rate, but as a hidden, immutable, baseline of loss of expendable income (that's excluding the coming furloughs and the vacant positions slated to be eliminated).
And the question was, what portents do we see for the Tallahassee Real Estate market? Buying a house is now almost consistently cheaper than renting one, provided you can scrape together the closing costs. The bargains are still coming if you have the stomach for taking that kind of ride.
Investment? Only if you can get foreclosure prices and don't mind all the repairs that'll most certainly be needed. You will almost surely need to hold your breath and be willing to cut into your margin if the market erodes around you. Bargain investors have turned homes over in a few months, but only with price or closing cost concessions.