January 6, 2025
lmorgan_lauren@tbba.net
Builder confidence stands as steady with an optimistic view on the national level, but the forecast for Tampa Bay is more mixed as the region continues to emerge from the wake of Hurricanes Helene and Milton.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) sits at 46 for newly built family homes. The end of uncertainty over the U.S. presidential election contributes to the steady number, as well as the optimistic view as builders look for less government regulation in 2025. Future sales expectations have risen to a nearly three-year high.
However, that confidence is dented by ongoing high interest rates, elevated construction costs and a lack of buildable lots. The Builders Daily, a data-driven media company, believes these headwinds will have a more adverse impact on small private builders.
Importantly, the Federal Reserve reduced interest rates by another quarter point on Dec. 18, bringing the decreased rate to a full percentage point this year. Fed Reserve chair Jerome Powell expressed confidence about the current state of the economy. Yet declining inflation rates cooled in November, and Powell signaled there may be only two interest rate cuts in 2025.
In Tampa Bay, the indicators yielded more mixed signals. Zillow released a report on Dec. 16 forecasting a 2 percent decline in Tampa Bay home prices in 2025.
“We are once again expecting mortgage rates to get better gradually, and opportunities for buyers should follow, but be prepared for plenty of bumps on that path,” Zillow Chief Economist Skylar Olsen said in a prepared statement.
A U.S. News and World Report forecast also cited uncertainty, pointing to the hurricanes as a source of “hiccups” for the region. The median home price was $370,000 in September 2024, down 2.6% year over year, and the housing supply was finally increasing to more balanced levels. And, look for post-hurricane assessments to impact those numbers. Helene and Milton have amplified worry about property insurance, according to the U.S. News report and that will factor into the 2025 confidence.
You also can expect the storms to bring on added construction costs because of the demand for repairs. Writing in The Builders Daily, John McManus stated that all these factors, as well as inventory, could create specific challenges for smaller private builders. He sees buyers gaining leverage in Florida’s once-hot markets like Tampa, Orlando, and South Florida, potentially forcing builders to offer deeper discounts.
“For large public builders … price cuts are manageable,” McManus wrote. “They can reduce margins temporarily to keep sales pace steady and move unsold inventory off their books. For smaller private builders, though, price wars are untenable.”
Other observers, however, remain hopeful. Sunny Alexander, a broker and owner of Red Sash Realty, will take a, well, sunny outlook into 2025. “All the numbers that I’m seeing are showing a healthy, balanced market and that you’re looking at about three to five percent appreciation per year,” Alexander said in a Spectrum Bay News 9 report.