Tampa Bay Housing Market October 2022

Mortgage rates hit a 20-year high in the past weeks, so what’s next for the Tampa Bay area Real Estate market? Historically, low-interest rates drove buyer demand through the roof over the past few years transforming Tampabay from a hidden gem into a national hotspot. It’s understandable, what’s not to like with more than 250 days of sunshine, white sandy beaches and the list goes on. All that aside, buyers are hitting the brakes and that makes sense with the rapid spike in interest rates over the past few months.  

So, why is this happening? 

  The Fed’s goal is to Curtail demand in an effort to tame inflation, and when it comes to the housing market, the fed’s actions are working. Home sales, both new and existing, are falling.  Builders are cutting back production in response to the rapidly declining affordability reallocating funds and supplies to core communities in and around the Trinity and Wesley Chapel area before breaking ground on new projects is one example. 

Here’s what Mark Fleming, Chief Economist for First American had this to say about mortgage rates. 

What’s ahead for home prices? 

  The root issue of what drives home prices is almost always supply and demand. According to ShowingTime, showings are down 12% and active listings are up 26.9% nationally. Now, you may have read some of the same articles I have stating that local showings are down 27% the crash is here! It’s true, showings are down 27% compared to last year at this time. We need to take into consideration that showings and sales during the pandemic were at a historical high, it’s only logical they would decrease, particularly given that the interest rates have risen so dramatically in such a short period of time. 

Let’s look at the showing index pre-pandemic, compared to what it is today. You’ll see in the graph that the 2019 showing index was 113.4,  and today the showing index is 134.9 for the same month.  

Meaning, while showings are down 27% compared to last year, showings are still well above the pre-pandemic levels here locally. And before the pandemic, it was considered to be a great housing market. We have to take into context, when and where the data comes from, not simply compare this year to last year. Especially since the last two years were unprecedented times, we have to look at the entire picture and how it fits with your individual situation.

What are the experts saying right now?

Ivy Zellman projects US house prices will fall 4% in 2023 and then another 5% decline in 2024 and had this to say.

“ While the markets considered “overvalued,” may need to adjust to the not so new reality of higher mortgage rates, housing market fundamentals still support a moderation of annualized house price appreciation rather than a sharp decline. We are not at risk of a collapse today in the financial system like we were before. Its true housing may be a little, frothy. So, housing prices may come down or they may plateau, but not to the extent it happened before.” Said John Paulson Billionaire Hedge Fund Manager who called the 2008 crash. 

  Let’s look at this mathematically. If your home is valued at $400,000.00 and you lose 4%, or $16,000.00 dollars in value, depending on when you purchased the home you are still up with the equity gain you had from the previous years. Unless you’re an investor you’re probably in it for the run and a slight equity decrease is not that detrimental. Month-to-month fluctuations are normal, it’s the year-over-year that counts.  

According to CoreLogic’s 2022 2nd quarter home equity report, the average equity gain for US homeowners with mortgages was $60,200 dollars with a 27.8 percent increase in equity this past year alone. You can see why a slight, decrease in home prices does not equal a housing crash.

According to a 2019 Bloomberg analysis of the US, Census Bureau, 150 people moved to the Tampa Bay area every day and that’s before the start of the pandemic! People have to have a place to live so there either going to buy or rent. As long as we continue to have people moving to the places like Dunedin, Safety Harbor, Clearwater and the ever expanding Wesley Chapel home values will most likely not decline dramatically like we saw before. Will they come down slightly for a short period of time? probably, but that’s a good thing. The market is unbalanced right now, inflation is out of control and we need a slight correction. Remember, headlines typically do more to terrify than they do to clarify. If you have any questions about your situation or the current market and what the future holds for the Tampa Bay area, feel free to reach out. Myself or remember my team would be happy to answer whatever questions you may have.