The Tampa housing market in Florida has been on an upward trajectory, much like the rest of the country. However, recent developments have signaled a potential shift in the market. With rising interest rates and a drop in mortgage applications, the Tampa housing market is experiencing a slowdown in activity. But despite this, home prices continue to rise significantly year-over-year. This raises the question: Is Tampa still a lucrative destination for real estate investment? Let's delve into the market indicators to find out.
Tampa Real Estate Market Overview 2022
- Median Home Value: $415,484
- Median List Price: $450,633 (+16.4% YoY)
- 1-Year Appreciation Rate: +34.8%
- Median Home Value (1-Year Forecast): +12.5%
- Weeks Of Supply: 8.0 (+3.3 YoY)
- New Listings: 1,867.1 (+12.9% YoY)
- Active Listings: 9,680 (+34.1% YoY)
- Homes Sold: 1,314.2 (-18.4% YoY)
- Median Days On Market: 7.5 (+1.5 YoY)
- Median Rent: $1,702 (+14.2% YoY)
- Price-To-Rent Ratio: 20.34
- Unemployment Rate: 2.4% (latest estimate by the Bureau Of Labor Statistics)
- Population: 387,050 (latest estimate by the U.S. Census Bureau)
- Median Household Income: $55,634 (latest estimate by the U.S. Census Bureau)
- Total Active Foreclosures: 707
Tampa Housing Market Trends 2022
The Tampa real estate market has been shaped by macroeconomic factors influenced by the pandemic and the Federal Reserve's efforts to curb inflation. The Fed's decision to lower interest rates in early 2020 ignited housing activity, leading to a surge in demand. However, the limited inventory failed to keep up with this demand. Consequently, certain trends have emerged in the Tampa housing market:
Supply Trends:
The Tampa housing market currently has around two months of available inventory, with approximately 9,680 active listings and an average of 7.5 days on the market. While supply has increased by 3.3 weeks YoY due to higher interest rates and reduced mortgage applications, it is still far from meeting demand. Although the market is moving towards balance, there is still a long way to go.
Home Price Trends:
Over the past ten years, the median home value in Tampa has experienced continuous growth, particularly in the last two years. The pandemic-induced conditions, including low interest rates, pent-up demand, and limited inventory, have fueled a historic surge in home prices. Bidding wars have become more common, leading to a staggering 34.8% increase in home prices in just one year. Looking ahead, home prices are expected to continue rising, albeit at a slower pace. The factors that previously contributed to price hikes are still present, suggesting an increase of up to 12.5% in the next 12 months.
Interest Rate Trends:
Interest rates are on the rise as part of the Federal Reserve's strategy to combat inflation. The current average commitment rate on a 30-year fixed-rate mortgage stands at 5.51%, the highest in nearly 15 years. The Fed's focus on curbing inflation, which recently hit its highest level in almost 40 years, indicates that further rate hikes are likely in the future.
Investor Trends:
With relatively low interest rates and high home prices, real estate investors in Tampa have shifted their focus towards rental properties. Flipping homes no longer offers the same profit margins as before. Although flipping is still happening in the market, long-term rentals with traditional mortgages have become more appealing for investors.
Tampa Foreclosure Statistics
According to ATTOM Data Solutions' Midyear 2022 U.S. Foreclosure Market Report, the number of foreclosed properties in the United States has increased by 153.0% compared to the previous year. Tampa, being the second city with the highest number of foreclosure starts in the first half of the year, has also experienced a rise in foreclosures. As government moratoriums expire and the economy cools down, Tampa foreclosures continue to climb. Currently, there are 707 foreclosures in Tampa, with the majority being pre-foreclosures. Investors interested in acquiring foreclosures below market value should focus on distressed homeowners who need assistance with their mortgage obligations.
Tampa Median Home Prices 2022
The median home price in the Tampa housing market has soared to around $415,484. Over the past ten years, home values in Tampa have experienced a remarkable appreciation rate of 246%. The most significant rate of appreciation has occurred in the last two and a half years, with a 64.9% increase since the start of the pandemic. This significant growth outpaces the national average, with Tampa's home prices rising by 34.8% in the last year alone, compared to the national average of 19.8%. The driving force behind Tampa's price surge is the increasing demand from individuals relocating to warmer climates, coupled with limited inventory. Despite a slight decrease in mortgage applications, demand remains high enough to sustain home value growth, albeit at a slower pace.
Tampa Real Estate Market Forecast 2022-2023
Recent changes in the Tampa housing market, including rising interest rates and a drop in mortgage applications, have altered the market landscape influenced by historically low rates and intense competition. However, the Tampa market still faces a supply shortage. Considering these factors, what does the Tampa real estate market forecast look like for the rest of 2022 and beyond?
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Home Values Will Rise: The cost of buying a home in Tampa will continue to increase over the next 12 months. Although competition is expected to subside, the limited supply will enable sellers to raise prices, albeit at a slower pace than in recent years.
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Rents Will Rise: With limited affordable homeownership options, more people will turn to rental units. Rents have already increased by 14.2% over the last year, and this upward trend is projected to continue.
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Interest Rates Will Rise: The Federal Reserve's efforts to control inflation will inevitably lead to an increase in interest rates. While the exact extent of these rate hikes is uncertain, it is only a matter of time before they occur. Consequently, owning a home in the Tampa market will become more expensive.
Should You Invest In The Tampa Housing Market?
The Tampa housing market has been one of the most active markets in recent years. An influx of buyers during the pandemic, coupled with limited inventory, has driven appreciation rates and acquisition costs. So, is Tampa a good place to invest in real estate? The answer is yes, as long as investors pay attention to market signals. Flipping homes can still be profitable, but it is crucial to keep acquisition costs in check. The market conditions currently favor long-term rental property investors.
Passive income investors, particularly landlords, stand to benefit from several positive market indicators in Tampa:
- Relatively low mortgage rates despite inflation concerns
- Increased monthly cash flow from operations due to lower borrowing costs
- Long-term cash flow that justifies current high acquisition costs
- A price-to-rent ratio of 20.34, making renting more affordable than owning
Building a rental property portfolio in Tampa has never been more appealing. In addition to mitigating high acquisition costs, low mortgage rates and the price-to-rent ratio indicate a market that favors rental investments. The combination of a slowing economy, increased rental demand, and limited housing supply offers a viable and profitable investment opportunity.
Summary
The Tampa housing market has emerged as a trendsetter in the national real estate industry. The market's demand, appreciation rates, and other metrics have surpassed the national average. Although there may be a slight cooling off in activity, with a decrease in mortgage applications and tempered price appreciation, this presents an opportune moment for investors. The current real estate landscape in Tampa offers the potential for lucrative returns.
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Sources:
- Zillow - Tampa, FL Home Values
- Freddie Mac - Primary Mortgage Market Survey
- Bureau of Labor Statistics - Tampa MSA Unemployment Rate
- U.S. Census Bureau - QuickFacts Tampa City, Florida
- ATTOM Data Solutions - U.S. Foreclosure Market Report
- RealtyTrac - Real Estate Data