In 2013, the Tampa Bay housing market showed definitive signs of rebounding with historically low inventory and bidding wars over real estate, but will this progress continue in the new year? Economists and industry experts base their market predictions for the future on several key trends and patterns.
The Road to Recovery
- Tampa Bay housing sales and prices climbed to post-recession highs in 2013. According to a Tampa Bay Times article published in early January, more than 35,000 homes were sold last year and the median selling price was $155,000, the highest rate since 2008.
- The upsurge in home values contributed to the significant decline in the number of “underwater” homes, which plummeted from 45 to 30 percent.
- Non-distressed homes made up 67 percent of realtors’ sales last year, a significant improvement from 2011 when short sales and foreclosures accounted for half.
- Tampa Bay recently landed on the Forbes’s list of “20 Best Metros to Invest in Single-Family Real Estate,” citing undervalued housing market, improving job market, and growing population as contributing factors.
- The Forbes list is based around the “Equilibrium Home Price,” a measure that tracks the average housing prices for each market without factoring in uncharacteristic events like the 2008 housing collapse. The measure assumes that prices will eventually return to their previous level, so when homes fall below the equilibrium price, buyers are making a smart investment and can expect a good return. Since Tampa Bay homes are 13 percent below the Equilibrium Home Price, the Forbes list predicts 32 percent growth in our area over the next three years.
- Tampa Bay is the second most popular destination in the country for people relocating to a new area according to a new study released by the rental truck company Penske and both Tampa and St. Petersburg were included among Livabilty.com’s Top 100 Most Liveable Cities in America (Tampa made the top 20 and St. Petersburg was ranked No. 59).
- The National Association of Realtors named Tampa one of the 10 housing markets anticipated to make turnaround.
- Interest rates are expected to climb as high as 5.4% in 2014. On the bright side, the Federal Reserve has indicated that the interest rate increase will be put into effect gradually.
- The upcoming expiration of several tax breaks could put a bit of damper on the 2014 upswing. The following tax breaks are scheduled to be terminated this year:
- Premium deductions for mortgage insurance (PMI) provided by private mortgage insurance companies as well as several federal organizations like the Federal Housing Administration and the Department of Veterans Affairs.
- Exclusion of up to $2 million in taxable income on principal residences because of debt forgiven in a foreclosure or forgiven by a lender in a short sale or mortgage restructuring.
- Maximum lifetime tax credit of up to $500 for energy efficiency improvements in primary residence.
Overall, the forecast here in this area of the Sunshine State looks bright. While the interest rate hike may affect the volume of homes sales slightly, many economists believe that any impact will be balanced out by heightened buyer confidence resulting from less rigid mortgage qualification standards and improved job growth. Cumulatively, these healthy trends should help stabilize the Tampa Bay real estate market in 2014.