As mortgage rates hit 20 year high, Tampa Bay housing market braces for a cool down

A home-buying frenzy triggered by historically low mortgage rates helped elevate Tampa Bay from a hidden gem to a real estate hot spot over the past two years. But now that rates have shot back up, experts say buyers are finally hitting the brakes.

“Consumer confidence is down,” said Kristine Smale, senior vice president for the real estate analytics company Zonda. “People are afraid to buy at the top of the market.”

The average 30-year fixed mortgage rate crossed 7% last week, the highest it’s been in two decades, according to mortgage buyer Freddie Mac. The Federal Reserve is expected to announce its sixth interest rate hike this week, which could cause mortgage rates to climb even higher.

This means buyers are getting less bang for their buck.

Last year, when rates hovered around 3.1%, new homeowners in Tampa could expect to pay around $1,100 a month, said Smale. Now the average mortgage payment is around $2,100.

September data from Greater Tampa Realtors shows that the number of closed sales in Tampa, St. Petersburg and Clearwater decreased 36.2% year over year. The number of active listings increased by 96.9%.

“People are being more cautious now,” said Lei Wedge, a professor of finance at the University of South Florida Muma College of Business. Rather than diving in head-first, “everyone wants to wait and see what will happen, if rates might decrease over time.”

Marian Yon Maguire, a realtor with YES-Homes in St. Petersburg, said first-time homebuyers face the greatest burden. Meanwhile, the luxury market has continued to thrive, she said, with wealthy buyers seeking out the Tampa Bay area for its warm weather and relative affordability.

Now may be a good time to find a deal, especially if you’re able to buy in cash, said Rachel Sartain Tenpenny from YES-Homes. Now that there’s less competition, buyers have more room to negotiate.

“We’re starting to see the list prices come down but we’re not seeing the home values come down,” she said.

For average buyers who still want to move, Wedge said their best bet is to look for new construction.

“Builders are desperate to sell right now, so many of them are subsidizing mortgages and dropping their prices,” she said.

Smale said sellers will continue to cut prices through the end of the year to adjust for rising interest rates. Still, she noted that anyone hoping to see housing prices return to pre-pandemic levels in Tampa Bay shouldn’t hold their breath.

While the next six to 12 months may be tough for the local real estate market, “I am bullish on Tampa in the long term,” she said. “It’s going to keep growing.”