New home construction in Tampa may ramp up. Here’s why.
Call it déjà vu but when Florida Realtors; the association representing the real estate industry in the Sunshine State; reported on sales, closings, listings and prices for January, the report probably sounded very familiar to anyone who worked in real estate last year.
The most significant facts were that sales were down compared to a year ago – but prices were up.
The amount of time a home spent on the market was lower in January 2020 than a year ago, and so was inventory.
So clearly, Realtors know this song. And for many Realtors and their clients, the growing ranks of prospective buyers, 2020 has the feel of 2019 all over again.
But that might not be entirely the case.
How did Tampa Bay and Florida perform in January?
According to the Florida Realtors report, there were 16,564 home sales that closed in January, down 1.3 percent from the 16,779 home sales that closed in January 2019. But as was the case throughout much of 2019, lower sales didn’t translate into lower prices. The exact opposite happened, in fact.
In January, the median sales price for Florida homes that sold was $240,000, up 9 percent from a year ago ($220,000). The average sales price was even higher: $334,350 in January, up 12 percent from the $297,654 average price in January 2019.
In addition, the median time that it took to sell was 89 days in January, compared to 97 days a year earlier.
Inventory was also lower, with 87,196 active listings in this state in January, compared to 94,071 listings in January 2019, a 7.3 percent drop.
The Tampa Bay area provides a strong microcosm for the state. In Pinellas and Hillsborough counties in January, home prices soared to their highest gains in months, as the shortage of homes on the market didn’t let up — a broad trend seen across the entire state.
In the Tampa Bay area, the median price of a house in Pinellas was $245,000, a 14 percent increase. However, the number of closed sales in Pinellas fell by 12.8 percent.
In Hillsborough, prices rose to a median of $234,945, a 12 percent jump.
The good news for buyers here is that Tampa Bay continues to have the lowest housing costs among Florida’s competing metro areas. A Cost of Living Index report by the Tampa Hillsborough Economic Development Corp. showed that in the Tampa Bay area, the cost of housing is only 77 percent of the national average.
But it’s also likely there will be a need for more new homes in Tampa in the coming years.
What is bringing home buyers to Tampa Bay?
Housing affordability is a key factor attracting new residents to the Tampa Bay area, but it’s not the only one. The strong economy is another.
The unemployment rate here is lower than the national average, and Tampa Bay ranks No. 1 in the state when it comes to the availability of high-wage jobs in fields like information technology and financial services.
The combination of strong job opportunities and affordable home prices has helped make Tampa a top destination for newcomers.
It’s no wonder that a new forecast from market researchers at the real estate firm Cushman & Wakefield is projecting that the Tampa Bay area’s population will grow from 3 million in 2019 to 3.1 million by the end of this year, making this the 18th largest metro area in the nation. Over the next five years, the report indicates, the population will keep rising to 3.3 million.
This is a statewide trend. Florida’s population increased by 430,000 new residents in 2019, to nearly 20.5 million. Projections are that the Sunshine State will grow by another 450,000 this year.
However, just as those newcomers will help take some of the pressure off the state’s tight labor markets, the population growth could also spur new home construction.
And it is likely not going to be just new residents putting pressure on builders to ramp up construction. As Florida Realtors recently reported, foreign investors are becoming a growing part of the state’s real estate market and a larger percentage of buyers in some Florida markets.
For the past few years, Chinese buyers made up the biggest portion of international buyers, but the Chinese government has put restrictions on how much capital residents can spend outside the country.
Instead, buyers from other countries are stepping up, including Great Britain, Taiwan, Vietnam, Thailand, Dubai, Kuwait, and Turkey. And while many are looking in the luxury market, not all are. And foreign buyers clearly see a lot of stability in the U.S. housing market, making this seem like a safe investment.
Can the inventory shortage ease up this year?
Realtor.com has already forecast an easing of the inventory shortage this year, which should slow down the rapid acceleration of home prices to more manageable levels, while home sales could start to rise.
In 2019, a very strong year of the housing market, home builders building new home construction in Tampa faced numerous challenges. Some builders have found it’s difficult to hire all the workers they needed, while discovering that in some parts of the country, buildable land is also in limited supply. Another rising expense they dealt with in 2019 was the cost of materials like lumber, drywall and concrete.
Still, new data indicates that in 2020, prospective buyers may have stronger options for a new home than an existing one.
According to the Department of Commerce, new construction got off to a strong start this year, with the number of new construction housing units increasing in January to an annual rate of 1.326 million. That’s up 9.7 percent from a month earlier and represents the third increase in four months.
The number of building permits obtained by builders went up by 7.4 percent, and total new home starts grew 7.3 percent in the 12 months preceding January.
There’s also a higher builder confidence found in the National Association of Home Builders’ Housing Market Index, which asks builders to assess current market conditions for newly built homes. The score came in at a high of 72, indicating strong builder confidence they’ll be adding inventory to the market, and that more supply is coming.
NAHB has projected an increase of 5 percent in single-family home construction in 2020.
For realtors and prospective buyers looking for homes, contracts for homes about to go under construction may prove to be far more appealing in 2020 than the endless search for a suitable existing home, especially one that is not in need of serious repairs. As a matter of fact, new home construction in Tampa is booming.
New Home Construction in Tampa
Will the housing market in 2020 offers a repeat of last year, or will it mark a sea change in activity? That’s not entirely clear yet, but there are indications that builders may be ready to provide the market with more homes this year than in the past few years. That enables realtors and their clients to reach out directly to the builders and introduce those buyers to the homes they recently built or are about to start construction on.
A good example is Domain Homes, which offers new home construction in Tampa. They procure home sites in Tampa Bay’s more desirable and established neighborhoods, knowing how important location is to their buyers. They purchase older, often run-down homes in need of repair, and replace them with brand new ones in these neighborhoods close to top-rated school districts, shopping, and the nightlife in downtown Tampa.
Domain Homes believes buyers should not have to settle for a “used” home when they’re looking for their ideal neighborhood to settle in, which is why they focus on new home construction in Tampa.