2021 Real Estate Projections
Despite the onset of the COVID-19 pandemic and the uncertainty that came with it, the real estate industry has remained strong, especially in the Tampa Bay market. In 2021, markets across the Sunshine State are forecasted to continue that upward trend, with Tampa leading the way. With demand steadily increasing, low-interest rates motivating buyers, and rapidly rising home sale prices, be prepared for another scorching year.
As of December 2020, Tampa’s average home was priced at $385,966, a 17.5% increase year-over-year from 2019 at $328,378. The Tampa Bay housing market is forecasted to be one of the most active real estate markets in 2021. According to the Tampa Bay Business Journal, home sales in Tampa are expected to jump by 8.7%, while prices should grow 7.5% year-over-year. Personally, I wouldn’t be surprised if we see year-over-year growth at 10%- plus.
The primary factor that will continue to drive prices up is inventory. As of December 2020, Tampa’s inventory was down to 1.5 months of supply, that’s a decrease of 56.2% year over year, from December 2019 at 3.5 months! We’re looking at basic supply and demand economics. Until we see inventory move closer to five or six months of inventory, we will stay in a Seller’s market, and home prices will continue to increase.
Over the next six months, we expect inventory to rise slightly, softening price growth. However, we don’t expect the pent-up inventory from sellers who have postponed their listing because of Covid or owners who have entered into forbearance to bring enough properties to market to offset the current demand. As of this month, 5.2% of mortgages, or 2.7 million, are in forbearance, according to Black Knight, a mortgage data and technology company. However, we only expect to see about 24% or 648,000 properties come onto the market over the next 12 to 24 months. The majority of these properties will enter the market in lower-income areas where the job growth hasn’t recovered from the pandemic, and Tampa would NOT be one of those areas.
Another factor that will continue to drive Buyer demand is the number of transplants relocating to the Tampa Bay area. Tampa is still relatively cheap compared to some of the US larger markets. According to data collected by LinkedIn, we are currently ranked 4th in the country for transplants as people adjust to their new work-from-home model.
Additionally, interest rates will be another factor that continues to drive Buyer demand. This month, the average rate for a 30-year fixed mortgage is 2.89%, which is historically low. Bankrate.com expects mortgage rates to fall even further in the early months of 2021 before beginning to climb. Greg McBride, Bankrate.com’s chief financial analyst, expects rates to end 2021 at 3.1%— but he says there could be dramatic swings throughout the year. Regardless, the Federal Reserve has promised not to raise rates through 2023 to support the economic recovery, which provides increased buying power to Buyers and fuels the fire.
That’s all to say; we expect the beginning of 2021 to launch at the same speed we were moving in 2020, but slow slightly toward the end of the summer coming into Q3 when pent-up inventory offsets some of the Buyer demand. At that point, we should see relaxed price growth, which will then gain steam and continue to rise through the rest of 2021, finishing off another hot year in real estate. Buckle up, buttercup; it should be another wild ride in 2021!