2021 QTR 2 - MARKET UPDATE
JASON’S “REAL TALK”
The market story is largely unchanged from the last six months or so. The basic story is still low inventory and strong demand, which is being fueled by low interest rates and a rebounding economy. The absorption rate jumped up in December and has stayed at historic highs through May. Absorption rates for single family homes were 171%!!!, and 151% for condos and townhomes in May. These are historic numbers to be seeing, but it is down from it’s peak in March where it hit 213% for single family homes. We are watching this closely as the market seems to be slowly cooling since that March peak. Reminder, Absorption Rate “is used to evaluate the rate at which available homes are sold in a specific market during a given time period. It is calculated by dividing the number of homes sold in the allotted time period by the total number of available homes.” We continue to see multiple offers and bidding wars on many move in ready properties that hit the market. The slowdown is likely due to buyers withdrawing from the market due to affordability and fatigue from the intensely competitive market. We have heard that some buyers want to wait for a return to a normalized market. There is some evidence that we may be headed to a more normal market, but we still have a way to go before that happens. Despite the cooling this is still a very strong sellers market.
Commercial real estate’s rebound has picked up pace, albeit somewhat unevenly among the sectors. Industrial, Vacant Land, and Multi-Family continue to lead the market with softer conditions for large office space and hotels. Retail has made quite the comeback over the last quarter. Food and Beverage businesses are rushing back into the market with new restaurants and additional locations opening or being planned. Office space is the biggest question mark for the industry. There is a lot of movement in the office space sector with companies starting to come back into the office, but often with a new “hybrid” model. Office leasing remains challenging and we expect that to be the case into 2022 and possibly 2023. We believe it is too early to determine the future of office space. We believe that one way or another, it will look different than it did in 2019. New development has rushed back from its pandemic pause, but is still being hampered by the cost of land, labor, and materials. We expect these costs to come down as the pandemic continues to ease and supply chains normalize. We have seen a significant increase in traffic on our commercial listings over the last quarter. We continue to remain bullish on the long-term prospects of St. Pete, and Tampa Bay more broadly.
We continue to watch the broader economic activity and the pandemic. We remain hopeful on both fronts. Vaccinations are going out in larger and larger quantities. We are close to 70% of the US population having at least one shot. Florida is wide open, but other parts of the country are just starting to open back up. This last quarter showed us that people were ready to get out and spend. Now that summer is here, we expect to see a slowdown, which is typical for our market as this is the off-season for most local businesses. We do believe that this summer will be better than the last two, but it will be slower than this past spring or the coming fall/winter season.
On the economic front we see a few different stories unfolding. Congress is working on two large infrastructure bills that combined could be worth $4 to $5 trillion in spending over the next 5-10 years. That is a significant amount of investment into the economy. That infusion of capital would elevate and accelerate some of our economic predictions on the pace and scale of the recovery. The Federal Reserve has indicated that they will maintain their soft monetary position for as long as they can. They are currently indicating that the first rate increase may be mid to late 2022. We will continue to watch if that guidance changes as inflation climbs. The stock market continues to climb to record highs helping fuel the luxury housing market. Overall we expect the economy and real estate market to continue their current trajectories for the next 12-18 months.
We’re always happy to chat one-on-one with you about the market, and provide free valuations of any property.
