Writer: Joshua Andino
2 min read November 2022 — While housing prices reached astronomical heights over the last two years, fuelled by a combination of low interest rates, lack of supply and skyrocketing demand, prices seem to finally be falling back down to earth.
Although interest rates have risen to their highest levels of the last few decades, for a moment it seemed that housing prices, particularly in Florida, would be insulated from potential declines. Across Tampa Bay, a population influx fueled by high-earning remote workers and investors looking to flip or rent out property quickly burned through available inventory, resulting in prices remaining high even in the wake of rate hikes and a national decline in home sales and prices. Now, that no longer remains the case, as home prices in the region have declined for multiple months.
Prices began to decline in August as interest rates rose and mortgage payments increased. While a lack of inventory and a growing population means that the price decline is not as dramatic as in other markets, such as Seattle, these price drops happening in a market as hot as Tampa signify that a shift in the real estate cycle seems to be underway. Last week, the average 30-year mortgage rate topped out at 7%, the highest since 2002. According to Tampa Bay Realtor’s data, home prices have dropped. Between July and September, Hillsborough County median sale price declined from $260,000 to $243,000, a 6.5% decline. Despite the shift, however, prices remain above their 2021 levels by 14.1%
The data revealed that closed sales across the Tampa Bay MSA – including Clearwater, St. Petersburg and Tampa proper, decreased 36.2% year-over-year, while active listings increased by 96.9%.
Distinguishing the current downturn however is the pace of change. While home prices are usually sticky, with sellers trying to hold on to prices for as long as possible, current conditions are a result of investors looking to prevent losses and get out of the market as quickly and profitably as they still can. In a conversation with Fortune, Redfin CEO Greg Keman explained, “As soon as demand weakened, we were marking properties down, and that drives prices down. Every other home for sale in a neighborhood where we marked the listing down now has a comparable sale that every buyer is going to know about and talk about,” Kelman said.
Kristine Smale, senior vice president for real estate analytics company Zonda, told the Tampa Bay Times that overall, consumer confidence was down in response to current market conditions, saying, “People are afraid to buy at the top of the market.”
It seems likely that the current cooldown will continue for as long as the Federal Reserve continues to hike rates – and while there are some signs that inflation may have peaked, whether in tangible goods such as housing or the more abstract like the CPI hovering around 8% year-over-year for the last few months now, economists believe that Fed Chair Jerome Powell will likely to increase rates by another 75 basis points at the Fed’s next meeting in the hopes of finally breaking the back of inflation. While it may crater demand, it means prices will follow suit.
The correction is in full swing.
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