If you follow the financial markets, you are aware of what a “herd mentality” is and what it means to those markets. For those of you who don’t know what a herd mentality is, it is when a rumor or piece of news causes a panic in the financial community, and they all start selling off stock or other financial devices, not unlike a herd of cattle stampeding over a loud noise. This phenomenon is not limited to the financial realm, but it can happen in the real estate world as well.
The harbinger of doom that has sent a shudder through the real estate community was a report in November of 2018 by Black Knight where (gasp) home values fell 0.2%, which was the third consecutive month in a row. It was the first time in six years that home values had dropped in that many months. Not surprisingly there are some who saw this as a sign that the financial crash of 2008 was about to spawn a child.
The chill in the real estate community was compounded when, in December CoreLogic stated that home values had only increased a measly 0.1%, which showed home price appreciation was at the slowest rate in six years. But according to Zillow, home prices are up in Tampa 9.8% from this time last year. So, is this wringing of hands over the real estate market in the near future warranted? In a word, no.
Why is there Reason for Optimism in the Tampa Bay Area Real Estate Market?
Like every other state in the union, Florida home prices continue their steady climb upward from year to year. In fact, this is not only a trend in Central Florida but also in the top 99 real estate markets in the United States. Each time there is an in-depth breakdown of weekly changes in interest rates or mortgage loan application data, the seasoned real estate professional knows not to panic or become excessively exuberant over the numbers.
At times it can be a roller coaster ride, and you need the stomach and discipline to make good decisions on long term data. One week there can be a sharp drop one week only to see a recovery the following week; it all has to be squared against historical data. It is important not to look at the analytical trees and miss the trend forest.
So, is there a reason for optimism? There is an excellent reason to see positive trends in the Tampa Bay Area continuing. Zillow predicts home prices in Tampa will be up 5.3% alone over the next twelve months.
Believe the Hype
As students of the Hype Cycle know, when an idea gets legs, eager investment is not far behind, this, in turn, creates innovation and brings profitability. In the subsequent stages of the cycle, the effect is less exciting; the hype is almost always the culprit. But without the hype in the first place, the concepts and ideas that translate into accomplishments would not have happened to begin with; so, we can see hype as a double-edged sword.
Hype brings investment to ideas, but then even when that idea is successful if it does not meet expectations some see it as a failure. So, it goes with the real estate market. If a trend is not as wildly successful as projected, there can be a sense of failure, even impending doom.
So, the lesson to be learned is that while there can be downtrends in the Central Florida real estate market, it has been and will continue to be a wise investment for the foreseeable future.
If you have any questions about mortgages and real estate markets in the greater Tampa Bay Area, call me at 863-220-6333 or email at [email protected].
