2022 has been a particularly hot year for the U.S. housing market overall, but in sunny Tampa, Florida, that market is scorching. The city was rated as the hottest market of 2022 by Zillow, outranking other hot markets like Austin, Texas, and Phoenix, Arizona.
Overseas buyers likely know Florida for its excellent weather and as a mecca for retirees, but this is not the primary impetus for its home value growth. Rather, the city is experiencing growth at the same time the average 30-year fixed U.S. mortgage rate has jumped above 5%. Furthermore, Fannie Mae has recently predicted that home prices will increase by 10.8% this year and another 3% in 2023.
In short, the city of the sun is experiencing a perfect storm for home prices to break even more records in 2022.
Price Growth
Throughout the fiscal year of 2021, home values experienced record-breaking growth across the United States. This was due, in part, to limited inventory. Additionally, many millennials began reaching prime home-buying age while boomers were downsizing for retirement. This demographic shuffle, exaggerated further by the pandemic, created the perfect environment for increased valuations.
This course is likely to continue into 2022 as the housing supply is still limited and prices are already high. Some markets are expected to slow as they reach a ceiling of valuation, however,
Tampa is a unique case, leaping from the fourth-fastest home value growth in 2021 to the fastest this year.
Supply and Demand
Anyone who has sat through an Econ 101 class could understand the variables fuelling the meteoric gains in value taking place in the Tampa housing market. They are:
● High demand
● Restricted supply
● Fewer willing sellers
● Fewer homes are being built.
The demand is not only due to people looking to buy a home right now, but because they have been looking for a new home since 2021. Many Americans found themselves touring home after home last year, only to find crowds of competitors putting in higher and higher offers to snatch up their dream home. This put the ball in the seller’s court, allowing them to set higher and higher prices.
In a state like Florida, where many boomers retire, and many millennials are moving for business opportunities, this phenomena has been even more pronounced.
Former Hot Spots Cooling Down
Formerly hot markets like New York, San Francisco, and Chicago are expected to be the coolest of 2022. These cities offer fewer jobs and unfavourable demographic trends compared to a market like Tampa.
Many individuals who lived in or would have moved to these megacities in the past have been untethered by remote work and want to take advantage of lower taxes, competitive business conditions, year-round sunshine, and miles of white-sand beaches.
Risks
No investment is without risk, and the Tampa housing market is no exception. Home loans will likely become more expensive as U.S. and Florida mortgage interest rates are expected to rise in 2022. The result would be restricted inventory access in expensive markets like Tampa and could increase competition for cheaper homes.
Sellers already invested in this market may benefit, but those looking to leap into this hot market would be wise to start looking sooner rather than later.
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