Why Are Home Prices Rising if Sales are Slowing?

The 2023 Florida housing market has been a confusing one for many buyers and homeowners since the start of the year. Home sales have noticeably slowed, but the big price drops in Pinellas County that homeowners feared haven’t materialized…yet.

So What's Really Going On in the Pinellas County Housing Market?

Basically, the short answer is inventory. There simply isn’t enough housing inventory in places like Pinellas County and around the Tampa Bay beaches to support existing buyer demand. While it’s true that the number of sales year-to-date are down, home prices have held steady because buyers are still willing to pay top dollar for move-in ready homes in great neighborhoods. The best homes, priced right, are still selling in a week or less in our area.

It’s also important to remember that 1 out of 3 (about 33%)of single-family home sales in Pinellas County are still paid for in cash. For condos and townhouses, this number is even higher, with about 50% of all sales paid for in cash. These cash buyers aren’t affected by rising interest rates. Many are moving to Florida from other states with higher housing costs and a state income tax. A move to Florida, where home prices are still a good amount lower than prices in major metro areas, is still very desirable. For buyers moving from states with a state income tax, they’re also seeing their income increase almost automatically with a move to the Sunshine State.

A recent article by the Tampa Bay Business Journal found that the Tampa Bay area “remains one of the most popular destinations for people looking to relocate,” labeling Tampa Bay as “one of the top 5 areas for relocation,” in the United States. New York was the #1 place people were moving from to Florida, the same as the year before.

Home Equity is at All Time Highs

Another factor driving increasing home prices is that many homeowners have more equity in their homes than ever before. Additionally, many took advantage of low mortgage interest rates over the past 3 years and refinanced their homes into historically low rates. Lending requirements were much more robust than they were during the 2008 real estate bubble as well, with many lenders requiring buyers follow strict income verification guidelines and debt-to-income ratios. Gone are the days of subprime lending, meaning even if the market does slow or eventually decline in price, many homeowners won’t be forced to sell. For now, sellers are remaining firm on their asking prices, only accepting offers that make it worth their while to move.

What about the Condo Market?

After the Surfside condo collapse in 2021, Senate Bill 4D was passed, which requires Milestone Inspections and Reserve Reviews for condo communities that are 3 stories or higher after 30 years and every 10 years after, or after 25 years if the building is within 3 miles of the coast. Theses inspections are not only costly for condo associations and owners, but may also expose deferred maintenance that must be addressed and paid for as well.

With the new law on the books, many Florida residents predicted the collapse of the condo market. However, as of January 2023, condo prices in Pinellas County have done the exact opposite, with the median condo/townhouse sale price increasing by +10% year over year. The average sale price increased by +13.7% year over year.

Summary

Some are describing the 2023 housing market as “nobody’s market,” based on slowed sales and year over year price increases shrinking each month in many Florida markets. However, while some economists do think we’ll eventually see some home price declines in 2023, they don’t think it will be by very much. They also think any decreases will be short-lived. Buyers will continue to want to move to Florida from out of state and many of them are coming with cash. Sellers will most likely remain firm on their asking prices as well in 2023.

Our advice? If you’re searching for a home in 2023 and find the right one, buy it. Don’t wait for an extreme drop in the market in Pinellas County and miss out on the right home. Follow the price guidance of an experienced local Realtor if you’re thinking of selling and remember that the majority of homes sitting on the market today are the overpriced ones.

For more information on buying or selling a home in today’s real estate market, call us at (727) 400-3315 to speak to our team of experienced Realtors. You can also send us a message by clicking HERE.