Many are wondering how long home prices can continue to climb by double digits in year-over-year percentage and whether we are reaching a bubble like in 2006. Here are some important facts for consideration:
Demand for homes continues to outpace supply
Home inventory is at historic lows
Home sales remain at historic highs
Homes for sale are on the market for less than 20 days
New home construction remains below levels necessary to balance supply with demand
Partially offsetting the upward pressure on pricing is interest rates, which have climbed from 4 percent or less in 2017 to 4.5 percent in the second quarter of 2018. This increase will raise the payment on the average mortgage of $200,000 by 6.5 percent.
So, what does this mean for home prices? A 2018 summer study by The Housing and Mortgage Market Review (HaMMR) indicates “below-normal levels of construction coupled with a strong job market suggest that home prices in Florida have a 92 percent chance of rising over the next two years. The increases are likely to occur more rapidly in the entry-level housing segment.”
If interest rates rise more rapidly than anticipated, that has the potential to slow home price increases. Higher interest rates will eventually make new homes unaffordable to first-time homebuyers. That said, we expect continued price escalation in the near future until supply and demand for housing start to reach equilibrium.
Putting pricing in perspective, if you compare the home prices of today to the home prices of 2006 (during “The Bubble”) adjusted for historical price rise (3 percent), today’s prices are still 26.7 percent below adjusted 2006 levels.
For help navigating Tampa’s dynamic real estate market, don’t hesitate to contact a member of our team. We look forward to helping you make the most out of your Tampa real estate transaction!
John Tomlin, CEO John is a graduate of the Wharton School, past CEO of AAA Auto Club South and an active community leader. He spent the past 26 years developing a rapidly growing sales force at AAA. Starting with the belief of total transparency and an agent-centric culture, the sales force grew from 35 agents to over 350. This growth was the result of careful hiring, solid training, ongoing mentoring and technology that simplified the process for agents. He then separated selling from servicing clients. This allowed sales agents to do what they do best while the team provided outstanding service for clients. John brings a similar innovation to TSC to enable each agent to achieve their potential.