There’s no shortage of uncertainty when it comes to the news on the housing market the past few weeks and months. Mortgage interest rates climbed higher than they have been the past two decades, sellers are reported to be reducing their sale prices and entry level buyers are feeling squeezed out. While this may serve as a dose of reality for buyers, sellers and real estate agents, John Barkett, our Broker/Owner, sees the silver lining and shares his decades of experience and wisdom as to what lies ahead for the residential real estate market in Tampa Bay, FL.
Tampa Bay Will Continue to Be a Strong Real Estate Market
It’s a reality that home sales have slowed recently, even in this high demand market of Tampa Bay. The number of closed sales decreased nearly 35% in Sept 2022 versus 2021 according to Pinellas Realtor Organization and 36% according to Greater Tampa Realtors.
While the median sale price for single-family homes in Pinellas is pacing behind the YTD average, it’s still up 13.8% over last year. Even more noticeable is the fact that inventory is beginning to improve for interested buyers, with active listings increasing by 56.8% YOY. To John, these latter statistics provide a positive outlook for him and his team, especially in his area of expertise in St. Petersburg and the Gulf Beaches.
St. Petersburg is booming with a 9.5% increase in population since the 2010 census. “Combine this with the fact that we already had a deficit of housing for more than 20 years in St. Pete, and you can understand why sellers were getting 20 percent or more above asking price,” John said. While other parts of the country are experiencing home prices falling, experts, including John, do not predict a devaluation in the Tampa Bay area. “The demand for housing remains incredibly strong and there is no shortage of buyers, especially in the luxury market,” he added.
Tampa is still viewed nationally as being in line with the rest of the country from a housing and cost of living perspective when looking at various cost indices including Marshall & Swift. In fact according to Salary.com the cost of living in Tampa, FL is -5.6% lower than the National Average.
John is quick to point out that this market trend is a vastly different scenario from the housing crisis beginning in 2006, which was plagued with the “ticking time bombs” of expiring Adjustable Rate Mortgages and people losing their jobs. And, it’s the statistic of increased listings in the market that some may see as the proverbial glass half empty, whereas John sees it as the glass practically full. “The buyers we are working with want choices, and now they have the luxury of being more selective in finding their perfect home,” he added.
Tampa Bay’s Location Is Still a Big Advantage for Sellers
Tampa and St. Pete continue to be the hottest real estate markets in the US right now, according to the Emerging Trends in Real Estate report, an annual report from Urban Land Institute and PricewaterhouseCoopers. Categorized as the “Super Sun Belt”, these cities are large, diverse and still affordable.
Barkett Realty’s Beachside office in St. Pete Beach, which specializes in luxury residential real estate, opened this past year to cater to both locals and tourists in a unique and relaxed way. Situated on the #1 beach in the U.S., his brokerage is commingled with Sea Grapes Wine and Charcuterie Lounge, where patrons can enjoy a glass of wine and gourmet bites, while visualizing themselves living there and then activating on the purchase of their next home along the Gulf Beaches.
This experiential retail concept allows John’s team of talented professionals to engage with potential buyers on a daily basis who are considering relocating to the area and are ready to pair them with local sellers. Their clients’ listings also gain tremendous exposure as they are positioned in high traffic areas in both their beach and downtown St. Pete locations.
“Buyers are still flocking to this area because it’s such a great place to live, work, and play. The luxury market will continue to be strong as the raised mortgage rates don’t affect as many of these home seekers which are primarily cash buyers,” John explained. “We’re excited to introduce them to our clients who are considering selling.”
Connected Real Estate Agents Are Essential to Buyers
The significant rise in mortgage rates will most likely affect entry and mid-level buyers the most—making them cautious to take on the additional home payment burden versus a year ago. “It’s also leaving home owners locked in to their current situation—even though they may have equity and the income to purchase a more expensive home—the interest rate today makes the potential mortgage cost incredibly unattractive,” John said.
But with the rental market also soaring in the Tampa Bay area due to a continued deficit in inventory with no end in sight, these buyers still have home buying opportunities.
John advises, “Work with an agent that is well connected in this market—from having knowledge of inventory before it hits the market to relationships with new home builders who may offer finance options better than a traditional bank.” He added, “Do your research and work with a qualified agent—like a member of our team—who knows this market intimately.”
There is also a large percentage of the population that is flocking to the Tampa Bay region right now that are self-financing their next home purchase—especially among the Baby Boomer generation and those with a large amount of equity in their current homes. An increase of supply on the market can be considered an opportune time.
With that said, however, John adds, “Knowledge is power and buyers still need to move quickly when the opportunity presents itself. Having an experienced real estate agent who has their finger on the pulse in this market as well as having access to off-market deals, will benefit a buyer greatly.”
Agents Also Have Options in a Shifting Market
A market slowdown will most certainly affect real estate agents the most. There are more than 225,000 currently in the State of Florida, according to the Florida Realtors Association, many of which had cut their teeth during a long upward climb in population/household growth fueled by in-migration and low mortgage rates. .
“This is a time where great agents shine, and part-time agents may not renew their license. We have a history of acquiring highly talented people during the tougher times as we operate on a different model,” John said about his boutique culture. As a full service boutique real estate firm with long standing ties to the community, the team is comprised of local influencers who know how to think outside the box and accomplish their client’s goals.
The Crystal Ball
When asked how long this trend for home sales will face downward, John optimistically predicts, “Tampa Bay is extremely well poised to be last in and first out of whatever this correction is.” This is again due to strong demand along with an inventory deficit which leads to the discussion of new construction in the area.
Construction costs—led by concrete and steel as well as anything connected to petroleum like roofing materials—have not come back in line since the runup in 2021 and 2022 that we are still witnessing today. CBRE's new Construction Cost Index forecasts a 14.1% year-over-year increase in construction costs by year-end 2022 as labor and material costs continue to rise. Escalation should stabilize to the 2%-4% range in 2023 and 2024, on par with historical averages. Combine that with the increased cost of oil, which affects all aspects of construction, and these are the levels that control the speed and economics of new development.
“I believe six months from now, construction costs will start to come back in line which will increase building production and, therefore, reduce the inventory deficit in housing,” John said. “We’re in one of the best markets in the country and it is a place where everyone wants to live for great reasons!”
Knowledge is Power and Relationships Over Transactions
John’s advice to buyers, sellers and agents is to align yourself with the right brokerage and agent. “Knowledge is power as it allows all parties to move quickly and confidently,” he said.
“I’m not surprised by the amount of people that are continuing to relocate here as it’s an incredible place to live, work and play,” John said. He adds, “It’s my experience in this area’s real estate market over the past two decades that allows me to remain bullish on the Tampa Bay economy, housing and job market.”
Going into 2023, John offers one last piece of wisdom for his Team, “We will continue to focus on three key areas where we excel ahead of the market, regardless of the conditions: meet and exceed our clients’ needs by leveraging our long-standing professional relationships, utilize our unique approaches and expertise to add value and, lastly, attract and hire excellent Team members that fit our unique culture.”