How the Election Results Might Affect Tampa Real Estate | 2017 Real Estate Forecast
Thank you to my good friends at Trulia for asking me to post this exclusive article on my blog, and to Jennifer Riner for writing it.
Americans are presently reflecting on the unforeseen presidential election results, discussing a variety of subjects about the future of our nation. Many questions regarding the housing market have surfaced following the November 8 announcement. Will placing one of the most prominent real estate moguls into the Oval Office encourage housing market activity? Are the Fed’s anticipated interest rate increases still on the horizon? Is the promise of economic prosperity for the middle class enough to grow dwindling homeownership rates?
In a recent survey, Trulia found Republicans expressed real estate confidence following Trump’s win. A survey conducted just prior to the election from October 26-28 found Republicans respondents more cynical of the housing market – perhaps anticipating the projected Clinton victory or skeptical of the current administration’s policies. Either way, the percentage of optimistic conservatives increased a staggering 26 points after the election.
Meanwhile, Democrats’ positivity pendulum swung in the opposite direction. The percentage of liberal-leaning respondents are hopeful about buying in a home in 2017 dropped 23 points in the second week of November. And, while 80 percent of Millennials held homeownership aspirations in 2015, a lesser 76 percent shared the same sentiments prior to the election, which dipped again to 72 percent trailing Trump’s success. A high 83 percent of young people still plan to buy eventually, with the overwhelming majority projecting to wait until the end of 2018.
Tampa, Real Estate and the Election
Ranked as no. 5 among the top 10 markets to watch in 2017, the Tampa-St. Petersburg metro scores high in annual job growth, affordability, low vacancy rates and increased inbound searches. And, as was revealed in Florida’s electoral results last month, Tampa holds a high share of conservative-minded voters who could contribute to market optimism and subsequent real estate acquisitions over the next four years.
Per the New York Times vote totals, 51.5 percent of voters in Hillsborough County casted their ballots for Clinton. Nearby Pinellas County turned marginally red with 48.6 percent of the local population voting Trump. In the northern part of the metro, Trump secured a larger 62.9 percent and 58.9 percent of residents in Hernando County and Pasco County, respectively.
Real estate is a consumer-driven market, where demand largely dictates factors such as property prices. Thus, the influence of economic confidence on the housing market is sizable. While homebuyers leaning left seem to be more hesitant, Trump voters – who make up substantial portions of the Tampa-St. Petersburg metro – are far more likely to capitalize, provided they have the funds.
The Effects of Supply, Demand and Interest Rates
While a projected uptick in homeownership down South is possible, rising interest rates could curtail some buyers. Interest rates boosted 50 basis points to almost 4 percent during the week of Nov. 28.
The good news: rates would have to more than double to erase the benefits of home buying compared to the costs of renting. Per the rent vs. buy report from October, it is 50 percent cheaper to own homes in Tampa-St. Petersburg than to rent them. The median home price is an affordable $172,392 while the median rent is $1,350 per month. For the scale to shift in favor of renter’s wallets, interest rates must increase by an unlikely 238.8 percent to 12.4 percent. Home prices are the bigger threat in Tampa (and beyond), requiring a softer 117 percent jump to make buying a bad deal. At that point, the median home price in Tampa would be a much higher $374,091.
Data shows that most aspiring homeowners understand mortgage rate increase are not their biggest feat. Just 18 percent of current renters say interest rates are an obstruction. The more pressing factors restricting would-be homeowners include inability to save for a down payment, poor credit and rising home prices.
Given Republicans are more optimistic about real estate, and therefore more likely to act, red counties like those in Tampa-St. Petersburg could see an uptick in demand and accelerating home prices. Fortunately, more buyers are trading up, leading to a surge in entry-level home supply. Plus, home building activity is on the rise.
While inventory increases would help curtail escalating property values, that’s only half the battle. Demand is also influenced heavily by already rising income levels and lower unemployment rates. Should these factors continue to move positively through a Trump presidency, the housing market in Tampa will benefit. In addition, Trump’s hints at a Dodd-Frank reform could loosen lending policies and put homeownership in closer reach for many Americans, helping would-be Tampa buyers and local home sellers alike.
Looking to buy or sell a home in Tampa? Please contact us here!