Wednesday, May 23, 2018
Business

Tampa Bay home prices in 2016 saw biggest gain in six years but will 2017 be as strong?

In 2012, during the bleakest year of the foreclosure crisis, a three-bedroom, two-bath house in St. Petersburg's Russell Park sold in a distressed sale for $118,000.

Just before Halloween last year, the same house went back on the market. More than 65 people showed up at the first open house, and six put in offers, all higher than what the sellers were asking.

The sale price this time? $222,000 — $22,000 over the asking price.

What a difference a few years can make.

In 2016, Tampa Bay's residential real estate market enjoyed a banner year. Single-family home prices in the four--county area soared nearly 14 percent compared to 2015. That was the biggest year-over-year gain in at least six years and the largest increase of any major metro area in the state, according to newly released figures from Florida Realtors.

Despite concerns that buyers are paying too much in some overheated neighborhoods, this is shaping up as a solid year, too — though the heady days of 2016 likely won't be repeated.

The long-running and somewhat baffling shortage of homes for sale could begin to ease, holding down the rate of price increases. At the same time, rising interest rates will limit what some buyers can afford and keep others out of the market. And while certain areas might do as well or better than they did in 2016 — Largo, Westchase, Tarpon Springs — others, like South Tampa, are approaching what appraisers call "crazy," nearly unsustainable levels.

Nevertheless, Tampa Bay is still poised to be among the nation's most robust housing markets in 2017. That's the view of economist Brad Hunter, former Florida expert for the market intelligence firm Metrostudy, now chief economist for the online marketplace HomeAdvisor.

"The bay area has been extremely strong during this economic recovery,'' Hunter said. "We've had very strong job growth — around 3 percent — and household formation rates also are increasing. What's also been supportive of the Tampa Bay market is higher prices in the Northeast and Midwest. People have been able to sell their homes up there and move down here."

Bay area home prices will increase again this year, Hunter predicts, though at a slower rate than in 2016.

"Part of that has to do with the outlook for interest rates and part of that has to do simply with affordability," he said. "I think prices are going to push excessively on what people can tolerate in terms of their personal finances."

As in 2016, the biggest demand this year will be for what Realtor Rebecca Paone calls the "typical'' home — three-bedroom, two-bath with a garage and a moderate price tag

""The hottest price point is the $150,000 to $200,000 range,'' she said. "Not only do more units sell in that price point but it also has the lowest days on the market, also known as days on the shelf.''

Last year, Paone listed a typical house in Largo, which has become a favorite of young families because of its affordable prices and relatively easy access to the Pinellas beaches. Updated, well-maintained and nicely landscaped, the house hit the market at $199,999. The price was so alluring that Papone had nearly 20 showings in the first 48 hours and took in eight offers.

"There would have been more, but many of the potential buyers couldn't go higher than the asking price based on their budget and gave up trying," she said. Still the house sold for $214,999, $6,000 above the list price.

Trulia, a leading online home-search site, ranks Tampa Bay No. 10 among U.S. metro areas with the biggest mismatch between available listings and what buyers are looking for.

At the end of last year, "starter homes'' — which Trulia defines as those under $137,000 — accounted for 29 percent of searches but less than 17 percent of listings. "Trade-up'' homes — $137,000 to $224,000 — made up 31 percent of searches yet less than 25 percent of listings.

The tight inventory isn't frustrating for just buyers and Realtors.

Fewer homes for sale mean fewer homes get sold — while Tampa Bay prices rose almost 15 percent last year, the number of sales rose less than 5 percent. That's a big problem for appraisers, who rely on recent sales of comparable properties to determine whether that house you just have to have is really worth what the seller is asking.

"Because of the lack of listings, people are listing for more than what is out there (on the market) to support the price," said Fran Oreto, chairperson of the Florida Real Estate Appraisal Board. "As an example, somebody might list a house for $200,000 and somebody might be willing to purchase it for $200,000 because there is nothing else available" to compare it with.

The tight inventory can lead to inflated prices, Oreto said, and also make it harder to get a government-insured loan in neighborhoods with few or no recent sales. Fannie Mae, the mortgage giant, wants appraisers to use comparable sales within 90 days.

"What happens if the most recent sale was in June of last year?'' Oreto says. "The biggest problem I come across is really a lack of listings, which eventually will drive the market.''

Hunter, of HomeAdvisor, thinks more people will start listing their homes if the economy continues to recover and home values increase.

"Fewer people are underwater on their mortgage and of course when you're underwater you can't very well sell because you owe more than the house is worth,'' he said. "That's a big part of the reason we've seen inventories quite low over the last six, seven, eight years. Now, more people can buy with ease because they can sell more easily and pay more for the home they buy.''

Appraiser Joni Herndon already sees signs of that in South Tampa.

"I've been asked to work with a couple that is looking in the $2.2- to $2.7 million price range,'' she said, "and there's a lot on the market in that range compared to a year ago. I'm amazed at some of the prices they are getting. I'm hesitant to say 'bubble' but I don't t see how at $600 a square foot for a home we can support that in the long term."

St. Petersburg's Snell Isle is another area where Herndon finds prices soaring to levels that might be unsustainable. There, as in South Tampa, the rise has been fueled by buyers paying cash for multi-million dollar homes.

"The high-end cash buyer just buys, they don't get an appraisal, they don't care if they don't make money, they just say, 'I want to live here and let's buy,'" Herndon said. "No one is offering data in support of these prices — most agents say the seller was asking $5 million and the buyer felt that was reasonable although there was very little data to support it."

For less affluent buyers, Herndon sees good value in Largo, in St. Petersburg's Historic Kenwood ("It's still pretty hip, a lot of young couple are moving in because they can't afford the Old Northeast," she said) and in suburban areas like Tampa's Westchase and Pasco's Wiregrass that are close to the Suncoast Parkway.

Tarpon Springs, meanwhile, could be one of the sleepers of 2017.

In far northwest Pinellas, it has been shunned by buyers who dreaded dealing with U.S. 19. But since much of 19 was turned into a limited access highway, Tarpon with its sponge docks, lovely older homes and quaint downtown has become more attractive.

"It's getting ready to make a comeback," Herndon said. "Like Dunedin, like Pass-A-Grille, like Gulfport, depending on where you live you can walk a lot of places."

For buyers looking for new homes, rising rates could have a double-edged effect. They might push some buyers out of the market but also force builders to lower prices, especially in south Pasco and south Hillsborough where thousands of news homes are going up.

As for Pinellas, "it is pretty much built out with very little land left for new residential construction so that supports home price escalation even more,'' Hunter of HomeAdvisor said.

While prices in some parts of the bay area are "extremely high'' and still increasing, Hunter doesn't think the market overall is at the point of another bubble. Prices are still 14 percent below the previous peak in 2006, he notes.

"I think it's virtually impossible to have a bubble without exotic financing and we don't have that anymore,'' Hunter said. "What caused the bubble to happen is not just the lack of supply driving up prices fast, which is happening now, but enabling people to buy homes they really had no business buying because of the illusion created by the financial industry that they were able to afford the payments.''

Contact Susan Taylor Martin at [email protected] or (727) 893-8642. Follow @susanskate

   
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