Recent forecasts of an emerging U.S. housing bubble and its imminent burst are scaring many real estate investors in Tampa and elsewhere these days. What scares them most is the skyrocketing home prices which recall the 2005 peak levels that preceded the last housing bust and left plenty of property investors losing money.
In one industry estimate, the median sale price of a US single-family home has already risen by more than 40 percent since the last housing-market collapse that triggered the Great Recession.
For a smart property investor, however, it would be a mistake just to assume that the sharp home price uptick we’re seeing now outright means there’s a bubble about to burst as in 2005. The point here is that there are many other economic variables to weigh.
Safety Valves vs. Mortgage Failures
What has become constant though across the U.S. are the stricter lending requirements now imposed on home loan borrowers. With these safety valves in place, the subprime lending that triggered the last housing crisis is now effectively in check.
Hence, an avalanche of loan defaults similar to those that occurred onwards 2005 is now quite unlikely. More so now that there has been a significant increase in American wages and purchasing power since the last housing debacle.
What’s obvious too is that real estate markets aren’t the same everywhere. The economic factors at play, such as business growth and job creation, could vary significantly from market to market.
Price as an Upside
Taking its economic environment into account, the real estate market of the Tampa metro area should come out a winner even for those investors wary of the escalating home prices. The price levels and rate of increases in this metro covering the cities of Tampa, St. Petersburg, and Clearwater emerged as the most moderate in 2018 (see table below) among the five most populous metropolitan statistical areas (MSA) of Florida.
2018 Price Comparisons: Statewide & Top Metros in Population
|Single Family Homes||Townhouses/Condos|
|Median Sale Price||% Change y-o-y||Median Sale Price||% Change y-o-y|
Notably, Tampa came out as more investor-friendly, price-wise last year both for single family homes and multifamily units. This favorable trend for both housing types appears continuing into 2019, with the median sale price for single family homes in the metro rising by just 2.8 percent to $230,000 during January and February. Condominium and townhouses in the same two-month period posted a heftier median sale price gain of 12.9 percent to $171,000, but still relatively attractive for an aspiring rental property investor.
More Choices for Buyers
A steady rise in new market listings has helped temper acceleration in prices of single-family homes in the Tampa metro. As of December 2018, months’ supply of inventory in the region stood at 2.9 months, a 16.9 percent gain from a year earlier. New listings of single-family homes in December totaled 11,556 detached houses, up 16.4 percent to sustain the double-digit percentage gains during the 2018 fourth quarter.
This uptick of in new buying opportunities continued in January‒February which brought in an additional 9,911 listings of single-family homes in the market, up 2.3 percent from a year ago. Months’ supply, consequently further improved to a 3-month stock, a 15.4 percent gain from the same period last year.
The inventory build-up for condominium units and townhouses are as encouraging for prospective buyers eying the Tampa metro’s market. It ended 2018 with 1,347 units of new listings, up 11.9 percent from December 2017. Another 3,866 units were added in January‒February for a 4.1 year-on-year increase. Months’ supply remains steady at 3.3 months for multifamily residences in Tampa as of February.
This prevailing hospitable real estate market environment in the Tampa metro for property investors is complemented by the region’s solid economic fundamentals—robust population growth and strong job creation—discussed in a previous article. Probing deeper, a recent study further identified more strengths which make the region a magnet not only for new residents but also for new business locators and new talents for its workforce.
Adding more reasons for real estate investors to be bullish on market opportunities in Tampa, a February analysis conducted by the non-profit Tampa-Hillsborough Economic Development Corp. showed that cost of living is the lowest in the Tampa Bay area as compared with other Florida metros. This study likewise found out that the Tampa area is the cheapest region to live in as compared with several same-sized U.S. metros.
2018 Annual Cost of Living Comparison by Market
The graph above shows the Tampa metro with an average annual cost of living index of 89.1, one of the most affordable in the U.S. in 2018. This is almost 11 points below the national average and nearly a six-point drop from the metro’s cost of living index in 2017.
To calculate the index, six criteria were used: housing, utilities, groceries, transportation, health care and miscellaneous goods and services. The average of all prices in the study areas were calculated using 100 as the baseline.
Notably, Tampa’s score was lowest in housing at 71.6, which is 28.6 percent lower than the U.S. average. Thus this gave the Tampa metro a decisive advantage over other major urban areas across the country. Tampa also scored second lowest in utilities with 87.6, which was bettered only by Atlanta’s 87.0.
In a separate industry reading, meanwhile, the city of Tampa likewise stood out as being family-friendly, surely another characteristic that real estate investors would typically include in their checklist for candidates to pour their resources in.
Tampa was ranked No. 4 for 2019 by Homes.com among the top most family friendly cities in the U.S., an improvement from the city’s No.6 ranking in 2018. There are only three other Florida cities in this listing: Orlando (No. 7), Jacksonville (30), and Miami (31).
The criteria for this ranking include school quality, park availability, cost of living, safety, childcare availability, and commute length.
Some Concerns to Consider
Investing in the Tampa metro’s real estate is certainly a promising proposition, but engaging in its property market would still surely require the due diligence on the part of an investor. Below are some of the critical factors to consider besides picking out which properties to buy.
First, choosing a quality neighborhood or community can be a challenge, especially for those investing in rental properties. Like any urban metropolis, Tampa too has a number of rough areas that an investor would want to avoid. Consulting with a seasoned local realtor should help solve this issue of choice.
Flood-prone areas in Florida too are common, especially in low-lying localities like Tampa. Given this situation, insurance costs would be more expensive in this metro area. Damage to property is always a threat not only in the Tampa metro but also in most other coastal areas of Florida. On the long-term, climate change can adversely affect property values along Florida’s Atlantic and Gulf Coasts including the Tampa Bay area.
Similar natural threats include sinkholes, which are most common in the Tampa region known for its “sinkhole alley”. Real estate investors would be well advised to refer to sinkhole maps so they can avoid critical areas prone to this natural phenomenon.
The recent surge in the population of the Tampa metro and the rapid expansion of its economy is a double-edged sword. While these developments brought progress and opportunities for investing, they are also straining local infrastructures, such as the region’s roadways. Traffic congestion and the sparse local public transport are considerations that have to be factored in by those who want to seek investment opportunities in the Tampa region’s real estate market.
As in any major investor destination, the Tampa metro has its upside and downside to consider. By the looks of it, though the pros far outweigh the cons in this market. With a smart, professional approach, some lucrative rewards could be had in investing in this vibrant region.
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