South Tampa, Florida, is the perfect place to own real estate. As one of the most desirable areas of Tampa, it is surrounded by water, has a great climate, and offers many perks to attract newcomers. However, given the increasingly unstable condition of the economy, investors have begun to wonder if the South Tampa real estate market is about to slow down. Here are some factors that impact this critical question.
Overall real estate market trends
Real estate markets vary widely in different regions. Unlike the markets for bonds or equities, real estate is highly localized. In other words, the real estate market in one area could be trending one way while the market in another area is experiencing very different conditions. However, it is still worth looking at macro-level data because many of the conditions that affect local markets originate upstream with government or central bank policies that have a nationwide effect. National and local trends will influence actual conditions within the South Tampa real estate market, and the overall condition of the market will be a combination of the two. National policy changes and economic trends will affect the South Tampa real estate market. At the same time, South Tampa has its own momentum, which has been strong in recent years.
In 2022, the Federal Reserve, or more specifically the
Federal Open Market Committee, has raised interest rates. The Fed will likely continue raising rates as the year progresses due to widespread price inflation. When you hear about the Fed raising rates, this usually refers to the
federal funds rate. This rate determines what banks pay for short-term loans and provides a floor for what banks charge lenders. As with other interest rates, mortgage rates have increased rapidly in 2022, from a low under 3% to a high around 6%, thanks in part to an increased federal funds rate. Higher mortgage rates mean that buyers have to pay more interest throughout the life of their home loans. As a result, buyers generally cannot afford a loan's principal amount to be as high. This means they cannot afford the same home values at a 5 or 6% mortgage rate that they could afford at 3%. It is worth considering that mortgage rates today are still relatively low in historical terms. Check out the Fed’s
30-year mortgage rate chart for a better idea of where the market is today.
Local conditions for South Tampa
Because South Tampa is a highly sought-after real estate market, it has driven the growth of the Tampa Bay Area. The area is buzzing with restaurants, shops and fun things to do. Therefore, the South Tampa market does not depend solely on the health of the economy or the current state of interest rates. If you own a home in South Tampa, its U.S. dollar value is likely to increase generally over time, regardless of the short-term ups and downs that come and go in the real estate market.
In recent years, the South Tampa real estate market has been relatively hot and competitive. Houses have not spent long on the market, and many have sold well above their list price. Therefore, there is room for the market to slow down to a more normal level. If anything, slightly lower prices and slower sales would greatly benefit the many buyers out there who are still looking for a home. During a hot, competitive, upward-trending real estate market, many buyers find themselves priced out of the market or left without a lot of available inventory. These buyers wait for the market to cool down to acquire real estate. Even if the South Tampa real estate market slows down in the coming months, there is still plenty of demand to bolster home values.
Expect a moderate rebalancing of the market in South Tampa
South Tampa real estate is highly regarded by real estate investors. At the same time, it is not immune to fluctuations in interest rates and other economic factors. There is a reasonable probability that there will be a general cooling of the U.S. real estate market in the coming months, which will be reflected in local real estate markets. However, today’s South Tampa real estate market is still strong, so investors should not expect too great a dip. In addition, mortgage rates are not that high in historical terms. In recent years, the hot real estate market has been driven in part by unusually low mortgage rates in 2020-2021. As the national economy slows, inflation stresses household spending, and interest rates leave borrowers with slightly lower budgets, some degree of a dip in real estate is expected.
Overall, the South Tampa real estate market will likely slow down slightly in 2022-2023, but don’t expect a real estate apocalypse. Instead, be on the lookout for deals as buyers pull back and home prices experience a dip. There is room for home prices to come down to a more comfortable level that will attract new buyers.
Contact a South Tampa realtor for more information
While it is always valuable to look at data and consider current conditions, you cannot predict the market with certainty. It is also important to keep in mind that market conditions should not necessarily be the only determinant of when you buy or sell real estate. If you are considering buying or selling a home in South Tampa, a local real estate agent can help you to make sense of the market and provide additional context.
Dan Kempka thoroughly understands the South Tampa real estate market in the context of the purchase or sale of your home. With decades of experience in real estate investment, Dan has seen all kinds of market conditions. If you are contemplating buying or selling in the South Tampa area, contact Dan Kempka for further insight and guidance.
