August 2022- Easy Does It..
What's happening in the Tampa Bay real estate market?
there are shifts and changes in this Tampa Bay real estate market update, August 2022– and this update is a deeper dive into some of the incoming trends that are affecting both Tampa Bay home buyers- and Sellers. We are here to help keep you up to date as things continue to change in the Tampa Florida real estate market. Enjoy this Tampa Bay market update- it’s some detail here so settle in!!
There are definitely changes in the market, yet we're nowhere near a balanced market
Three things that we are talking about today:
- what’s happening in the current market.
- why the market isn’t likely to crash.
And the big one that everyone is asking us about-
3. what’s ahead, what’s the forecast for the rest of the year.
So stay tuned. Let’s jump right in.
Mortgage rates in 2022-2023
Okay. Let’s get started with what’s happening in the current market. Now I think we can probably all agree that this year is really defined by rising mortgage rates. And what you’re looking at here is the Freddie Mac 30 year fixed rate from January all the way through to the latest data that we have. And what we can see over time is that mortgage rates really ticked up week after week.
June mortgage rates
Rates started to potentially peak right around mid-June to the end of June time and now we’re seeing quite a bit of volatility still. Now a lot has to do with the moves that the federal reserve is making to ease inflation.
Inflation and mortgage rates
Inflation is the enemy of long term interest rates. And that’s exactly what the fed is trying to do, they’re trying to ease that inflation. And as that starts to happen, as we saw in the last federal reserve meeting, they raised a federal funds rate by 75 basis points. Now it could have been a hundred, they went to 75. Now, when that happens, that doesn’t exactly dictate where mortgage rates go, but it started to signal that maybe the fed is getting inflation under control.
Another change we are seeing is less need for sellers to stay in the house they sell after closing, but it IS still relevant and might need to be considered for strategic and practical reasons.
What happens to rates in recessionary times?
A lot of the time, what we’ve seen, and history shows us, is that mortgage rates actually typically fall during a recession. Now, the technical definition of a recession, what we know, is the widely held belief that a recession is two consecutive quarters of negative growth or negative GDP. We talked about this in the last video, while in four of the last six recessions home prices have actually appreciated in value. We talked about this on our last video too, and it’s going to stay relevant.
It’s not 2008
You know, we do all remember 2008, when home values lost nearly 20%. In Tampa bay it was definitely more, but we’re in a fundamentally different place then than where we are at today.
A recession also means falling mortgage rates. As we look at the data about what happened with mortgage rates over the past six recessions, those have also declined
Wait- what about a massive housing crash?
It might be a great time for people that got out of the housing market to jump back in. So with that in mind, let’s talk about another big question. That’s on everyone’s mind and it’s about a housing crash.
What I’m gonna break down for you is why the housing market won’t crash. I think the heart of that is inventory. Now we know that there are three places where inventory comes from. It comes from:
1. Existing homeowners or current homeowners listing their homes and putting them up for sale.
2. The second major source is it comes from new construction. So newly built homes coming into the market.
3. And the third source of inventory is that it comes from potentially distressed properties. So short sales and foreclosures.
Now, if you think back to the last time when the housing market crashed in 2008, we had an oversupply of homes on the market, and today we’ve got an undersupply. Locally, what we are seeing is very, very few distressed properties on the market.
Tampa Bay home Inventory
No Tampa Bay real estate market update would be complete without information on inventory.
Any time there’s an oversupply of homes, more homes available than buyers who want to buy them, that’s what causes prices to fall. We are just not seeing that as you’ll see here in the local counties, it certainly isn’t the case. And that likely starts with the fact that we just don’t have enough homes for sale on the market locally, still.
Still not enough homes available
If we look at existing inventory and today, the total housing inventory registered at the end of June, the latest data that we have nationally was 1.25 million units. Now, if we look at that from a month’s supply of unsold inventory today, nationally is it to three months supply, but looking at where we’re at locally. It’s way below that still. Now you’d have to build a case that a flood of homeowners are getting ready to sell the homes, but we’re just not even close to being there.
The typical neutral market is six or seven month supply of inventory and we don’t even have half of that nationally at that at this point, and locally, we’re not even close.
New Construction Inventory
Now, the other place where inventory comes from is new construction. This is a look at monthly new residential construction, and there’s four stages of construction:
1. building permits
2. housing starts. They’re the leading indicators that tell us where the market’s headed.
3. Those that are under construction (Many are being built with a Homeowners Association)
4. housing units completed.
Those last two are the lagging indicators. Builders are saying, Well, hold on. We’re seeing those mortgage rates rise, we’re seeing a softening of buyer demand. We’ve not got everybody bidding on lots anymore. We’re not going to overbuild. We’re not gonna start more homes than we know we can complete. And that’s okay.
New homes- still not enough
So we’re definitely seeing more new construction. They’re on pace nationally to build 1.3 million homes in this country. We haven’t seen that in over 14 years– it’s huge. It’s a wonderful addition to the inventory, but it’s not anything that would take us to an oversupply like we had when the housing market crashed. And part of that is all of the young people wanting to get started in the housing market.
Foreclosures and Short Sales in Tampa Bay
Now, the third place where inventory comes from, we’ve talked about this over the last couple of years or so is foreclosures short sales, or in other words, those distressed properties. The reason we’re not gonna be seeing a flood of those foreclosures, a big part of it is, honestly, because lending standards are now under control.
Foreclosures- the old pain from 2008 still hurts?
Back when the bubble burst in 2008 in the Tampa Bay real estate market, we had much looser lending standards. They’ve tightened up significantly, significantly. And that’s what you can see on here. This is the mortgage credit availability index, and it shows the higher that green line is the easier it was to get a loan.
In 2006, seven, it really peaked. It was much easier for someone to secure a home loan and that created that inflated demand. Now, as you can see, that green line really drops off after that. That’s when lending standards really tightened. And that’s when we were required to have a more qualified buyer.
Today’s buyers
Those who are securing home loans today, you can see that green line really hovering along the bottom. They’re much, much more qualified buyers, much more likely to repay their loans and not go into foreclosure.
Locally, we are just not seeing many foreclosures. Now you can take 2020 and 2021 out for a second, because we know there was a moratorium on foreclosures in that time period. But those, some of those people managed to make good. And some of them will still end up in foreclosure, but not very many in Tampa Bay.
We are seeing very, very few distressed property sales. It’s incredibly rare when we’re only getting five or six in the market for the whole county. We’re just not seeing that being anything like what we’ve seen historically.
What’s Ahead for Tampa Bay Real Estate Market in 2022-2023?
I think one of the other big questions on everybody’s mind is what is ahead for the rest of 2022 for the Tampa Bay real estate market? Well, we started this conversation today with a lot about how mortgage rates have been rising since the beginning of the year. And I think one of the big things everyone wants to know is where are they projected to go?
Mortgage rate projections
This chart is a look at mortgage rate projections that were just released in July from Freddie Mac, Fannie Mae MBA and NAR. If we look at these across the board, we can average them all out over each quarter. That’s the right column shows that the average of all four.
So what is it telling us? That the mortgage rates are projected to kind of hang in this steady space, right about where we are right now.
What’s ahead for Home Prices in Tampa Bay?
Another question on everyone’s mind is what’s projected to happen with home prices. They want to know where are prices headed.
If you look at what the experts are saying, this is the home price forecast of 2022. We, we follow seven key industry leaders on home pricing and these get updated. Some monthly, some are quarterly, but if you look at them and average them all together, the average of all seven is showing about a 10.3% home price appreciation through the end of the year.
Price Appreciation?- Deceleration Ahead
As we look at this year, we’re certainly seeing a slowing, or more of a deceleration, in price appreciation. Last year, we were seeing an average of about 15% across the nation locally. It was much higher than that, and we’re not necessarily looking at that much appreciation, but nationwide in most markets experts are looking at 10.3% appreciation going forwards.
Are we Overpriced?
Are there some pockets of the country that are overpriced and overheated? There are. We aren’t seeing that in Tampa bay though.
What we’re seeing here is properties that are still priced, right, are going under contract in a good amount of time. It’s those that massively overpriced.- and I can point some out to you- that are hanging on the market a little bit longer.
Multiple offers? Over Asking? Not so fast!
What we’re seeing locally is about fewer multiple offer scenarios in April nationally, it was about five and a half offers, ticked down to about 4.2 in may 3.4 in June.
That’s a trend that we’re gonna continue to see going forward. I think it’s healthy for buyers though. If you see that percentage just tick down, as well as people paying more than list price going from 61% down to 51%. We’re seeing that normalizing in the market too.
In Summary
This could be a great time if you’re a buyer to jump in, if you’re ready to find a home, there is now actually some inventory for us to take you out and look at, we are here to help you reach out. If you’ve got questions, comments, or thoughts, we’d love to hear from you.
Tampa Bay real estate market update ,August 2022– includes data from multiple sources including NAR and Pinellas Assn of Realtors, Stellar MLS.
