Tampa Bay home values are starting to level

After skyrocketing to unprecedented levels in recent years, home values are leveling out in Tampa Bay — but it may take time for buyers to reap any benefit.

The average home value for the region has dropped 1.79% since last year, a Tampa Bay Times analysis of Zillow data found. This change is significantly lower than during the pandemic — when the prices appreciated 28% in a year — or any time in the last decade.

Experts say the change is largely due to a peak in prices, which escalated dramatically during the pandemic. The prices, along with increases to mortgage and insurance rates, have put financing home purchases out of reach for many buyers. Sales are more infrequent, and homes are staying on the market longer, dragging down their value.

“It’s really an affordability situation,” said Orphe Divounguy, a senior economist at Zillow. “In some markets, prices were basically growing almost exponentially … Tampa being one of them. Affordability just got out of hand, disqualifying many potential prospective homebuyers.”

The average home in the metro area is now valued at $376,031, compared to $382,874 last year.

Many parts of Tampa Bay that experienced sharp appreciation during the pandemic are now seeing the steepest declines — though home values are still higher than pre-pandemic levels.

For example, in ZIP code 33579, which includes parts of Riverview, home values climbed 24% from 2020 to 2021, and another 34% the following year. But in the last year, values went down almost 7% — more than any other local ZIP code.

“Those markets that were the least expensive really appreciated the most,” said Kristine Smale, a senior vice president for the real estate analytics firm Zonda. “That’s where the land was available and builders were pushing prices.”

Meanwhile, ZIP codes near the coast also rose exponentially in value. But with rising insurance and other costs, Smale said, it’s not surprising they are now depreciating.

Tampa Bay is not alone: Home values are now dropping in roughly half of U.S. metro areas, Divounguy said — especially those that developed more housing in recent years. In addition to the values simply peaking, he said, the addition of new units has moderated growing prices.

“Tampa is rebalancing faster than some other metros, which I think is a good thing,” Divounguy said. “In most places in the country, inventory is still down. Inventory is climbing a little bit faster in Tampa, and to some extent, that’s good. It’s a healing process. We have to get back to pre-pandemic inventory levels.”

But experts are hesitant to say Tampa Bay is becoming a buyer’s market. With the mortgage rates around 7%, there is little incentive for homeowners to sell. This keeps existing homes off the market, meaning there are still limited options for prospective buyers.

Those that are selling may have to work harder to attract offers, including deals like covering part of closing costs, rate buydowns or other incentives, Divounguy said.

Home sales in Tampa, St. Petersburg and Clearwater fell 9.1% year over year, according to August data from Greater Tampa Realtors. Homes are also staying on the market longer, with the median time to sale increasing by 17.6%, to an average of 60 days.

As prices decrease, the bargaining power could shift toward buyers, but it will take time in a region still struggling with adequate housing supply. With fewer homes being placed on the market, Divounguy said new development will be key to providing more options for buyers.

“Builders will play a huge role in healing the housing market,” he said.

The Tampa Bay Times has a team of reporters focusing on rising costs in our region. If you have an idea, question or story to tell, please email us at costofliving@tampabay.com.

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