Experts speaking during the 2021 Tampa Bay Builders Association virtual Economic Forecast predicted a bright picture of this year’s housing market — both locally and nationally.
“We have a very bullish outlook for 2021,” said Lesley Deutch, managing principal at John Burns Real Estate Consulting.
“Usually, we’re a little bit more on the pessimistic side,” said Deutch, whose company is a combined research and consulting company. But, she added: “The outlook is very, very strong.”
Tampa recovered immediately in the housing market and in relocations, Deutch said.
“Tampa, I have to say, since the beginning of COVID, has been sort of the outlier, in a very positive way. It really outshone almost all of the other markets in the country.”
“Single-family permits are rising,” she said, noting they’re up by 8%.
“Builders are selling out of their current communities and that’s really going to slow the sales pace,” she added.
The real estate expert also noted the Tampa market has a low inventory in both new homes and in resale homes.
For instance, there’s just a 1.2 months of supply in the resale market, she said.
“That’s virtually nothing. That’s driven by demand from people moving to Tampa, moving around Tampa. But, it’s also driven by investor demand,” she said.
Big national companies are coming in and buying all of the resale inventory in Tampa, fixing it up and putting it back on the market as rentals, she said.
“You can guess what that leaves us with — some pretty rapid price appreciation,” she said.
“The resale market is really starting to appreciate because there’s just no supply on the market. In fact, it’s coming pretty close to the new home, which is around $294,000 right now,” Deutch said.
That would seem to create a major crunch in affordability, she said.
But, Tampa remains relatively affordable because the Federal Housing Administration recently raised its loan limits to $356,000 in Tampa, plus mortgage interest rates are low, she said.
Deutch also noted: “There is demand on all levels, not only in Tampa, but across the Southeast.”
Deutch also offered a sunny outlook in the national housing market, and she attributes part of that to an increasing optimism that the vaccines for COVID-19 will allow the country to return to normal by the end of the year.
Her 2021 housing forecast for the United States projects an 8% appreciation in resale home price appreciation — far above the consensus forecast of about 3%.
“We actually believe that resale price appreciation could trend even higher, due mostly to investor activity, as well as homebuyer activity,” she said.
Her company also projects a 9% appreciation in new home prices.
“That’s really driven by that tremendous lack of supply, and the need to drive down sales activity, so construction can catch up,” Deutch said.
On the rental side, the projection is for effective rents to decline 5% on the national level, but she noted this doesn’t apply in the Tampa market.
The national decline in apartment rents, she said, “is primarily driven by the urban markets that are really seeing some serious rent declines at this point.”
On the other hand, single-family rentals are projected to have a 3% increase in rents, and there may even be some upside potential there, she said.
Nationally, the forecast is for 7% new home sales growth, and 9% single-permit family permits and starts, she said. The consensus projection is higher, but she said that’s based more on a supply issue than on demand.
While Deutch focused on the housing market, Brent Schutte, chief investment strategist with Northwestern Mutual Wealth Management Company, talked primarily about the economic outlook for 2021.
Schutte is a frequent expert commentator on national news outlets including CNBC, The Wall Street Journal and Bloomberg.
He told those listening in that “the market is painting a picture that 2021 is going to be much brighter than 2020, economically.
“I think the reason the market has been able to shake off some of this bad news is because it doesn’t believe it’s permanent. It does see a political system that will endure. It sees an economy that has largely adapted to COVID,” he said.
“Most importantly, it does see vaccines that are coming in 2021 and that will get all of those people who are impacted right now, hopefully, back to work in 2021,” he added.
The fiscal stimulus will play an important role, too, he said.
Painting a broad picture, Schutte said, “we do see in 2021 a U.S. and global economy that will be operating on all cylinders of growth, for really the first time since somewhere late 2017, early 2018.”
He projected fast economic growth, somewhere between 5% and 6%, in 2021, early 2022.
“And, the growth is going to be broad, which is important from a market perspective,” he added.
“On a national basis, at least based on the data that I have, housing still remains very affordable,” Schutte said.
He also touched on politics.
“While the Democrats do have control of all three chambers, I think it’s important that it is still pretty much a divided government,” he said.
With the margin of control slim, he said “I’m not thinking there’s going to be a huge progressive tax increase” later this year.
He also advised: “You should never overweigh politics in your investing outlook. It is one variable to look at, but only one.
“Presidents and administrations are pluses or minuses to economic growth in the U.S., not absolute positives or negatives.
“What happens during a president’s term is much more determined by when they take over in the business cycle.
“Do they take over early in the business cycle? Do they take over mid-business cycle, or do they take over late business cycle? As you might expect, the ones who take over early in the business cycle typically preside over the highest market returns,” Schutte said.
Housing forecast Tampa*
- Employment in Tampa: up 1.9%, for a gain of 25,700 jobs
- Median income: $57,000, relatively flat
- Affordability: 9.1, on a scale of 1-10, with 10 being most unaffordable
- Construction: Total permits down 1.5%, driven by the multifamily side of the market; single-family permits up 6.5%.
- New home volume: Up 5% to 7%
- Median new home appreciation: Up 9%
- Resale market: Up 7%
- Apartment rent: Down 4.3%; single-family rent: Up 3.4%
Housing trends, these are here to stay:
- Build-for-rent: 700-square-foot 1-bedroom units and 1,000-square-foot 2-bedroom units
- Work from home: Homes with extra room for work space
- Multi-gen living: From room for a mother-in-law to adult children, the demand for shared living spaces is expected going forward.
- Outdoor living: COVID has raised awareness regarding the competitive advantage of outdoor living spaces, at your home and within communities.
* Tampa projections include Pasco, Hernando, Hillsborough and Pinellas counties.
Source: Lesley Deutch, managing principal John Burns Real Estate Consulting
Published January 27, 2021