Tampa Bay Demand for Homes Outstripping Supply with Predictable Result

Across the United States, new construction homes and existing home sales are strengthening and prices are rising, stoking confidence among observers like the National Association of Realtors that a housing recovery is finally underway.  Nationwide, sales of existing homes jumped 10.4% compared with July last year.  In step with the nationwide market, in the Hillsborough and Pasco County areas of Tampa Bay, home sales which normally drop off during the summer months, remained strong in July with 2,275 closings, 10.7% higher than the level a year ago.

Home to championship golf courses, close to the gulf beaches, and with phenomenal weather, Tampa Bay is a magnet for families considering moving to Florida.  The Hillsborough River, stretching 56 miles, offers endless family activities including canoeing, fishing, camping and hiking.  The Florida Aquarium, Busch Gardens Tampa Bay and Lowry Park Zoo entertain thousands of families every day.  For sports enthusiasts, there are professional baseball, hockey, football and arena football teams, including the SuperBowl winning Tampa Bay Buccaneers.

Those seeking art, music, dance and theater find a wealth of galleries and museums such as the Tampa Museum of Art, Museum of Science & Industry and USF's Contemporary Art Museum.  Music lovers can hear everything from blues to reggae nightly.  Plays, Broadway musicals, operas and dance excite thousands at the Straz Center for the Performing Arts.

Beneath all this good news, however, lies a dilemma rapidly developing in the Tampa real estate market.  There are simply not enough homes available here to meet the demand.  This is information you need to know if you’re still “sitting on the fence” about buying a home here in Tampa Bay.  A skeptical reader might ask, “but where is all this demand for homes coming from when the overall economy still isn’t doing all that well ?”

First, its coming from first time buyers.  Rents nationwide and locally in Tampa Bay are rising leading many young families to decide that it will be cheaper to own than rent for the foreseeable future.  They also see that the decreasing number of homes on the market is beginning to drive prices up.  First time buyers who can qualify for a mortgage are recognizing that if they are going to buy, they need to do it now before the price of the home they want gets beyond their means.  That fear, plus the fact that 30-year mortgage rates are at historic lows of about 3.5%, have made owning a home a more affordable and more desirable option for young families than it has been in a decade. When those buyers go looking, they find fewer and fewer homes available to choose from.

The second source of demand is coming from the other end of the income strata.  Even though mortgages are harder to get than at any time in 6 or 8 years, people in the upper income brackets can qualify for attractive-rate mortgages because they have the resources to meet the 20% down payment criteria, and even more frequently, they can and do, pay cash. These families can afford to buy a home wherever and whenever they wish and they’ve decided Tampa Bay is the place and this the time to do it.

At the same time demand for Tampa properties is high, the available inventory on the market dropped in July to a new low of 2,267, a full 66% below the level a year ago.  In Hillsborough County, where the supply of homes for sale on the market exceeded a 24 month supply  just two years ago, the number of for-sale homes has plunged to just a 3-month supply, half  the supply that should be available in a healthy market, according to the Tampa Bay Times.

So, if demand is high and existing home inventories are low, why aren’t builders providing a higher supply of new-construction homes to meet the demand?  

Builders have a problem of their own.  A few years ago, banks would lend money to builders to build “spec” homes – homes for which there was not already a sales contract in place.  That is seldom the case today.  After being burned by so many bad mortgages in the recent past, many banks refuse to provide construction loans to builders unless there is already a firm sales contract already in place. As a result few spec homes are being built further constraining the supply of available homes.

What does this all mean to you?  Growing demand for homes in all price ranges coupled with a diminishing supply is causing what always happens when demand outstrips supply – prices are rising.  On attractive homes, and even on most average homes, Tampa Bay Realtors are now seeing multiple, competing offers  –  offers above the asking price in more and more cases.

If you are considering buying a home or condo here in Tampa Bay as your primary home, a second home or as a retirement home any time in the next few years, and if you can qualify for a mortgage, or don’t need a mortgage, contact an experienced Tampa Bay Realtor like Cheryl Stimac today and get started picking out your home here in Tampa, the “heart of Tampa Bay.”