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First Quarter 2023 Market Report
Report Written By: Elliot F. Eisenberg, Ph.D.Source: Stellar MLS
background.Economic Overview Nationally
By: Elliot F. Eisenberg, Ph.D.Economic Overview
The first quarter of 2023 started off strong, with good job growth and declining inflation, but as growth slowed toward the end of the quarter, the preliminary forecast for 23Q1 slipped into the 1-2% range. In the largest economic news of the quarter, mid-March brought the failure of Silicon Valley Bank (SVB) and several other U.S. banks, followed by the Credit Suisse collapse. These bank failures presented a new wrinkle in the Fed’s ongoing battle with inflation, as they now must simultaneously address inflation by raising interest rates while bearing in mind the impacts of duration risk to the banking system. As the markets watched to see what the Fed would do, in late March, they raised the Fed funds rate 25 basis points, but in a nod to current conditions, they removed the expected “ongoing increases in the target rate” in their normal presser and replaced it with the phrase “some additional policy firming may be necessary,” which is the strongest indication so far that this rate-raising cycle may be nearing the end. However, this should not be construed as a pivot, and based on Fed announcements, we are likely to be into 2024 before we see rate cuts. The Fed will instead use other tools to help shore up the banking industry instead of lowering interest rates, since lowering rates could breathe new life into inflation, which would be much more detrimental in the long run.
Importantly, the stressors on the banking system make it more probable that credit standards will tighten, and bank financing will be harder to obtain. In fact, in the immediate aftermath of the SVB crisis, financial conditions and lending standards quickly tightened by as much as 150 basis points but have loosened since. Fortunately, there are other sources of financing, such as capital markets and private funding. That said, if banks are more reluctant to lend, this will undoubtedly slow the economy. The key question now is how likely is the Fed to raise rates at their May and June meetings? Based on the evidence and conditions in early April, a May increase seems quite possible, but one in June highly unlikely.
Overall, the economy remains hobbled by the overpowering fear of inflation, and with all the other factors at play, the odds of a mild recession are quite high. We are facing a significant number of headwinds currently. Manufacturing is in a recession and capital expenditures are down. Consumer sentiment is low and consumer spending is starting to slow as interest rates take their toll. The tech and financial sectors have taken a beating over the last several months. The yield curve is inverted, and most leading economic indicators are at levels traditionally associated with recessions. The key strength of the economy right now is in the labor market as job creation remains double trend growth. In the most recent jobs report, the labor force participation rate rose, and wage growth continues to decline.
National Housing Market Overview
In the national housing market, while high interest rates continue to quell activity, prices remain relatively solid in most areas of the country, although nationwide year-over-year prices declined in February 2023 for the first time in more than ten years. The strongest housing markets are in the south and the weakest are in the west. In what is unambiguously good news for housing, the recent bank failures and increasing fears of recession have led to a “flight to quality” for investors, and as a result, bond prices are up, and yields are down. Mortgage rates have eased slightly, leading to a mild uptick in new mortgage applications and hopes for some improvements in the re-fi market.
Nationwide, February sales picked up slightly on a seasonally adjusted basis as buyers took advantage of slightly lower rates and more inventory to choose from. New pending sales improved dramatically in February, which promises a stronger start to the spring selling season. While inventories continue to rebuild, they remain at historically low levels, keeping something of a floor under prices. Builder confidence remains low, but has improved slightly, and builders have generally been able to offer incentives and upgrades to move inventory rather than making drastic price cuts as was the case in the Housing Bust. Given the headwinds that the national housing market is facing, including high interest rates, mortgage lock-in, low inventory, high prices, and a weakening economy, it remains relatively strong, and after the frenetic past several years, what we are seeing is a return to a more normal pace.
Statewide and Local
By: Elliot F. Eisenberg, Ph.D.Florida Overview
In Florida, the statewide unemployment rate was 2.6% as of February 2023, which is an all-time low and a full percentage point below the national average of 3.6%. For comparison, the pandemic peak was 14.1% in May 2020. In Hillsborough County, the February 2023 unemployment rate was 2.5%, just slightly above the February 2006 low of 2.4%. The all-time high unemployment rate in Hillsborough County was 12.9% in May 2020. In Pinellas County, the unemployment rate was just 2.4%, compared to 2.8% last year and to the all-time high of 13.9% in April 2020. This marked the lowest February rate in Pinellas County, the prior low had been 2.5% in February 2006. Inflation-adjusted real GDP for the state in 22Q4 was an estimated $1.084 trillion, a new record, and meaningfully higher than the pre-Covid peak of $976 billion in 19Q4.
Across the state of Florida, the median sale price of a single-family home in February (the latest data available) rose 3.5% year-over-year to $395,000, while the townhome/condo median sale price rose by 8.6% to $315,000. Compared to last year, closed sales of single-family homes were down about 21% and sales of townhomes and condos were down 30%. Dollar volume declined by about 22%. Inventories continue to rebound although the rate of growth is slowing. There were 62,242 active single-family listings at the end of February, a 2.7 month’s supply of inventory, triple the level from February last year. Inventories of townhomes and condos rose to 31,847 active listings, about double from last February and representing a 3.2 month’s supply of inventory. Median percent of list price received at sale is 95.3% for single-family homes and 96.0% for townhomes and condos, and median time to contract for single-family homes is 43 days (up from 12 days last year) and 34 days (compared to 14 days last year) for townhomes and condos.
In Hillsborough and Pinellas counties (combined data) 23Q1 median prices continue to show growth, but the rate of appreciation has slowed dramatically. On the single-family side, the median price rose 3% over the same period last year to $412,000 while the average price rose 5% to $531,299. Year-over-year price appreciation in the condo and townhome market was higher, with the median price rising 9% to $284,000 while the average price rose 11% to $391,698. Year-over-year closed sales are down by about 22% for both types of properties, while pending sales continue to be down compared to the prior year, although not nearly as much as in recent quarters. With slowing sales, the overall dollar volume of both types of properties declined by 17%. New listings of single-family homes are down 12% from last year while new condo and townhome listings are down just 2%. Active listings are about three times higher than they were at the end of March last year but have declined from last quarter. There is a 1.5 month’s supply of single-family homes and 2.0 months of condos and townhomes across the region. While the ratio of sales price to original list price continues to decline slightly, it remains at a relatively strong 97% for both types of properties. Days on market for single-family homes rose to 52, up from 34 days at the end of December and from 19 days last year. Days on market for condos and townhomes increased to 46, up from 36 last quarter and 18 last year.
As the housing market cools around the country, the south has the highest price appreciation of the nine regions of the country, well above the other eight. Further, the January 2023 S&P CoreLogic Case-Shiller 20-city home price index shows Tampa to have the second highest year-over-year price appreciation at 10.5%, with only Miami, at 13.8%, higher. Population growth remains solid, and as evidenced by how quickly new, high-end multi-family developments sell out, buyers are still interested in purchasing in the Tampa area. Dr. Eisenberg comments: “While other parts of the country are beginning to see year-over-year price declines, I think the Tampa area is less likely to see meaningful reductions in prices than other areas, with the two key factors being high demand as Tampa continues to show high net in-migration and a low supply of available homes. Importantly, we need to remember that after the frenzy of the last several years, it is tempting to look at the current market and see bad things, but what we are really observing is a return to a more normal marketplace.”
About the Author: Elliot Eisenberg, Ph.D. is the Chief Economist of GraphsandLaughs, LLC, a Miami-based firm specializing in national and international macroeconomic consulting and speaking. Dr. Eisenberg earned his Ph.D. from Syracuse University and was formerly a senior economist with the National Association of Home Builders. He is a regularly featured guest on cable news programs, talk and public radio, and authors a daily 70-word commentary on the economy that is available at www.econ70.com.
Pinellas County Single-Family Homes
In Pinellas County, the median sale price of a single-family home of $425,000 was nearly the same as 22Q1 and was down from 22Q4’s $435,000. The average price of $571,567 rose just 3% over last year and was almost flat compared to last quarter. Closed sales during the quarter declined 23% to 2,331, and as a result year-over-year sales volume declined to about $1.3 billion, a 20% decline.
New listings of 2,920 fell by 14% compared to last year and there was a 1.3 month’s supply of inventory, compared to just a half month at the same point last year. Active inventories of single-family homes declined meaningfully from December to just 1,361 active listings and are at their lowest point since the end of March last year when there were 579 units available.
The most expensive single-family home sold in Pinellas County during 23Q1 was for $5.9 million.
Days on market for single-family homes in Pinellas County rose to 48 days, compared to 18 days last year and 33 days last quarter. The percentage of sold price to original list price was 97% during 23Q1, up just slightly from last quarter but well down from 101% in 22Q1.
The average price of $571,567 rose just 3% over last year and was almost flat compared to last quarter.
1102 Beach Trail
Indian Rocks Beach, Florida
Pinellas County
Condos and Townhomes
The Pinellas County median condo and townhome price dipped from the records of the last several quarters to $283,000, still a gain of 9% over the 22Q1 price. The average price of $404,983 was 8% more than last year and was at an all-time high.
Year-over-year closed sales declined 27% to 1,729 and dollar volume of townhome and condo sales during the quarter was down 21% to just over $700 million.
New listings were almost flat at 2,722, while active listings rose to 1,694, a 256% gain over the same point last year. Active inventories are at the highest level in recent memory. There is a 2.2 month’s supply of inventory, well above the half month at this point last year but down from 2.9 months at the end of December.
The most expensive condo/townhome sale in Pinellas County in 23Q1 was $6.5 million.
Days on market for condos and townhomes in Pinellas County increased to 46 days during 23Q1, compared to 41 days during 22Q4 and 21 days during 22Q1. The percent of sold price to original listing price ratio held steady at 97% compared to 22Q4 but is well down from 100% in 22Q1.
The average price of $404,983 was 8% more than last year and was at an all-time high.
Clearwater Beach, Florida
Hillsborough County
Single-Family Homes
Price appreciation in the single-family market continues to slow, as median and average prices for single-family homes in Hillsborough County gained only slightly from last year. The median price of $404,990 was up 3% compared to 22Q1 and the average sale price of $505,604 gained 6% over last year.
Closed sales of 3,653 were down 19% compared to last year and 23Q1 overall sales volume of $1.8 billion was down 14% over last year.
New listings declined 11% compared to last year to 4,510, which was still an improvement over last quarter’s record low. There were 2,373 single-family homes available for sale at the end of March, nearly three times as many as a year ago. While this represents a 1.6 month’s supply of inventory, well above the 0.5 month at the same point last year, it declined from 2.6 months at the end of the last quarter.
The most expensive single-family home sale during the first quarter of 2023 was for $7.5 million.
Compared to the same period last year, days on market nearly tripled from 20 to 54 and are well above 35 days last quarter. The percentage of sold price to original listing price dipped to 97%, compared to 101% last year and 98% last quarter.
There were 2,373 single-family homes available for sale at the end of March, nearly three times as many as a year ago.
Percent Sold Price to Original List Price
Hillsborough County
Condos and Townhomes
The median price of $285,000 for townhomes and condos in Hillsborough County dipped below last quarter’s record high but still gained 9% over last year. The average price of $371,135, while well below last quarter’s record high, was up 18% from last year.
There were 1,117 sales of townhomes and condos this quarter, down 23% from last year and overall sales volume dipped 9% to about $415 million.
There were 1,535 new listings in 23Q1, down 6% compared to last year. There were nearly three and a half times more units on the market than in the same period last year, although active inventories declined by nearly 200 units compared to the last quarter. There is a 1.6 month’s supply of inventory, which is well up from 0.4 months at the end of last year but down from 2.6 months at the end of December.
In the condo/townhome market, the most expensive home sold during 23Q1 in Hillsborough County was $8.3 million.
Days on market for condos/townhomes rose to 45 days, up from 14 days in 22Q1 and from 29 days last quarter. Units generally sold for 97% of their original listing price, which was down just slightly from 98% at the end of 2022 and 101% during 22Q1.
In the condo/ townhome market, the most expensive home sold during 23Q1 in Hillsborough County was $8.3 million.