Tuesday, October 22, 2013
The year of 2013 has proven to be quite eventful for the real estate industry, both in the Tampa Bay area and nationwide. Over the last nine months, we have been carefully monitoring the market activity and headliners, and planning accordingly in order to stay abreast of real estate from all angles.
Starting Off Strong
At the beginning of this year, Tampa’s real estate market continued the upward trend that 2012 produced. Home buyers, and the affordability of housing, were finally receiving some serious recognition, and it was a strong way to begin the year. The number of homes that were either in foreclosure, or were seriously delinquent, dropped by over 300,000 units from October 2011 to the end of 2012, and the market quickly transitioned towards becoming a seller’s market, which is in part where we are today.
Home Values Soar
In the first few months of 2013, Tampa experienced an astounding 22% increase in median home sale prices, while the average price per square foot edged up almost 50%. These increases in home values were a direct result of the extremely low levels of housing inventory available for home buyers. This provided homeowners with an immediate increase in home values and equity, and allowed for additional seller leverage in getting the sale price desired. Multiple-offer scenarios and bidding wars resulted from the increasing demand for housing, and new home construction gained noticeable momentum.
Decreasing Inventory brings Increase in Demand
By the time March rolled around, the housing inventory levels in Florida were at the lowest point we had seen in years. Interest in new home construction homes spiked dramatically due to the market conditions and strong demand for attractive interest rates. The owner occupant buyers were choosing to buy new because of low interest rates and incredible buyer incentives that new home builders were able to offer. With the increased activity from buyers, sellers, and new home construction agencies, the future looked bright for the real estate industry.
As the year progressed, home prices continued to climb higher. In fact, sales, pending sales, median prices, and closings all saw increases! Single family homes, townhomes, and condo properties experienced increases in median sales price, which was the 15th consecutive month that we had seen such increases in Florida. All of this real estate activity continued while housing inventory and mortgage rates remained extremely low, at least for the time being.
Investors Play Vital Role in Real Estate Recovery
Florida’s speedy housing recovery in 2013 caught the attention of more than just its own residents. International investors from neighboring and distant countries have significantly contributed to our real estate recovery, both on a local and national level. Individuals from a variety of countries increased U.S. homeownership to around 36% from 2000 to 2010 and by 2020, it is expected that 50% of all home buying will be fueled by international home buyers. If you are questioning the significance of these statistics, just consider that 100 billion worth in mortgage loans is expected to come from international investments.
Monitoring Mortgage Rates
In May of 2013, prices of homes in the U.S. rose by more than 12% since the previous year, which was the highest increase that the real estate market has seen in over seven years! This, as you might imagine, provided homeowners the motivation necessary to finally list their homes for sale. It is prudent, however, to understand the impact home prices and interest rates have in the long run and how they affect the recovery of our real estate market, especially in our Tampa Bay area.
One potential effect of mortgage rate fluctuation could cause for a slight reduction in borrowing power of buyers. A sense of urgency was seen on the part of buyers and sellers as rising rates sparked a new flurry of real estate activity for those who desired the attractive mortgage rates.
Real Estate’s Largest Consumers
Over the summer, we noticed Millenials receiving a surplus of recognition from the real estate industry as the next largest group of potential homeowners. While many people pointed out that student debt and credit standards could keep these potential homebuyers on the sideline, even more held high expectations that the largest demographic in the nation’s history would continue to act as a major player in real estate market for quite some time.
A survey by a national home builder showed that over 65% of renters, ages 18-34, had an income of more than $50K. The same survey showed that 30% of home sales were to first time home buyers who fell into the 18-34 year old age group. Tampa, Florida had seen increased building permits and home starts this year as inventory continued to evaporate and a large portion of our property inventory was being purchased by this younger demographic.
Real Estate Boom: Buy-to-Rent
The “buy-to-rent” market was predicted to be the next big boom in real estate, and has the potential become a $100 billion industry within the next few years. With financial obstacles preventing homeownership for some, others have taken advantage of lower home prices to turn into buy-to-rent properties. Investors can easily expect their return on investment to reach over 10%.
Previously, home owners who experienced a foreclosure or bankruptcy had to wait for three years before they could apply for a new mortgage. The new regulation by the Federal Housing Administration is now making it possible for those who have repaired their credit score, verified their income, and have recovered financially, to be eligible for a new mortgage loan in as little as one year. Moreover, this new rule also applies to former homeowners who made a bank-approved short sale for less than the amount they owned.