Friday, July 5, 2019 / by Tyler Anderson
So far through Q2 of 2019, the market has remained relatively stable and we have seen consistent growth. The great news for buyers, is that interest rates have actually declined. At the current pace, we should end the year at roughly 5% year-over-year growth (YOY). Compared with 2018’s YOY at 7%, 2017’s YOY was at 9.2% and 2016’s YOY was at 14.7%. We are clearly slowing down and possibly leveling off. Typically, some of the strongest growth comes in the second quarter of the year (spring and early summer). Based on the graph shown here, we have seen little growth through March, April, and June--further indicating that we are leveling off. It’s important to understand that this still doesn’t mean we are in a price correction, or about to go into one. Rather, we will probably see what we had been projecting, with slowing growth through 2019, and an even more significant leveling off through 2020. For some people it may feel like we are going backwards, but that’s what happens when you have been driving 100 MPH, and then you slow down to a more reasonable speed of 30 MPH.
With the continued trade wars and uncertainty around how it will affect the overall economy, the Federal Reserve has chosen to reduce rates, which was the opposite of what was expected. While rates are still expected to rise again before the end of 2019, this puts rates closer to 4.4% by the end of the year. That’s down from forecasts earlier in the year that called for rates in the 5.0s. This is great news for many buyers and has caused a spike in the amount of mortgage applications by 26.6% in the month of June!
Another statistic which hasn’t moved in the direction expected by most experts, is the absorption rates. Absorption rates are typically a key indicator of what direction the market is moving (i.e. seller’s market, buyer’s market, or neutral market). Absorption rate is the rate at which homes sell in a given area during a given time period. These rates were expected to stay higher longer and to continue to rise through 2019 as we moved from the seller’s market of the past eight years, into a more level market. This simply hasn’t happened, and it’s due to the continued lack of inventory and affordable homes in Tampa. Homes in the higher price points have seen a rise in these rates, but it hasn’t been enough to change the overall absorption rates for the Tampa Bay market. However, as the year continues, the rates are expected to rise again and home prices should level out even further.
In short, the market is seeing a slow down, which should continue through 2019 and into 2020. We should continue to see a seller’s market, specifically at or below the average median income price point being of $269,000. However, higher price point homes and neighborhoods are expected to see a continued shift towards a buyer’s market with higher days on market and more competitive pricing.
There are still deals out there if you are willing to look hard enough and be patient. While it’s still a great time to sell, higher price point homes will need to be priced more competitively. For more specific information for buying or selling please reach out to us directly, so we can give you more detailed information and reports that pertain to your situation.