Is The St. Pete Real Estate Market Artificially Inflated?

April 7, 2017 by The727Team

Some folks are concerned that we are experiencing another housing bubble similar to the disaster that was the financial crisis of 2008. Many of these people that are concerned are locals that have lived here their entire lives and are seeing some of the highest prices since 2005.

Are their concerns valid? Is the St. Pete real estate market overly inflated? To find out let’s ask ourselves this – Is the housing market here artificially inflated or will the demand continue to drive appreciation in this area?

I believe the answer to this question is not as black and white as some may think it is. Let’s think about what drives demand and the difference between artificial inflation and appreciation.

Why was the housing market artificially inflated in 2005?

In 2005, the lending standards were extremely irresponsible. Banks were giving out loans to anyone. My sister for example worked as a waitress at a local diner, she was 20 years old at the time and was approved to buy a 260k house.  Many people like her were able to buy homes that the bank knew they would most likely default on.  

All of these people that shouldn’t have been approved for loans in the first place were bidding on homes and artificially inflating the prices. This all tied back in to the irresponsible lending standards and subprime mortgages that were fueling this fire.

What’s stopping the St. Pete housing market from becoming artificially inflated again?

After the financial crisis, the government enacted rules for the banks to provide more strict regulations when approving someone for a loan. Today you need to show steady work history and a good credit score to be qualified.

We are experiencing some of the lowest interest rates in US history, so many people who can obtain a mortgage are getting one because it is many times a better investment than renting long term. This in itself is bringing many buyers into the market. 

On top of that, you will have some extra competition if you are house hunting in a rapidly growing city like St. Pete that’s considered desirable to live in.

What is causing the high demand for housing in St. Pete?

I’ve lived in St. Petersburg for almost 5 years now. In that time I have seen housing prices go up quite a bit. I’ve also seen an amazing amount of development in downtown and surrounding areas that make this city a great place to live.

The fact that this city is becoming a desirable place to live coupled with low interest rates has made this a competitive real estate market for buyers. The St. Pete real estate market is unique because it’s an exciting city to live in and we are currently experiencing an amazing amount of growth.

This growth comes in the form of small business startups, pre-existing businesses moving here and also city spending to make St. Pete an amazing place to live. These growth factors are here for the long term and that’s what causes appreciation rather than artificial inflation.


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The Canopy Downtown St Pete

Is it safe to buy a home in a hot market?

Although there are some that are skeptical about buying now, there are many more that are eager to buy here while this city is on the rise.  If you look at a cost of living index for major metropolis cities throughout the US, Tampa Bay is near the bottom.

Could these rising prices simply be the fact that the St. Pete real estate market is just catching up with the prices of the rest of the country?

Cost of living index

I’m originally from Minnesota near the Twin Cities Minneapolis & St. Paul. The Twin Cities are a major metropolitan area with about 3.3M people residing there. No one moves to Minnesota for the fun of it but it’s a great place to live for many reasons.

There’s enough industry to provide stable jobs, there’s nightlife downtown, MSP is an international airport, there are great education programs both public and private and much more. Tampa Bay is a comparable area but in my opinion it is not quite as developed yet.

With about 2.8M people living here, it’s a great place to live because of the growing amount of industries that are moving here permanently.  There is plenty of nightlife in Tampa Bay, we have a strong tourism industry and pretty amazing weather most of the year.

Minneapolis is rated about 9 points higher than the national average on the cost of living index whereas Tampa is rated 6 points lower with the housing section coming in at 14 points below national average. Is it only a matter of time before the housing prices catch up here?

Cities like Los Angeles, NYC & San Francisco are experiencing the highest prices of all time and some of the highest costs of living in the entire world. What’s going to happen when some of these big tech companies realize that they can save a ton of money by relocating somewhere else like Tampa Bay?

What will happen when Tampa becomes a truly international airport? The point is that Tampa Bay is still in it’s infancy as a major metropolis area and will continue to grow.

Growth in St. Pete

There are already plenty of signs of growth in this area. In less than a 2 mile radius downtown, there are over a dozen new construction housing buildings in the process of being built. ONE St. Petersburg is a luxury condo building is set to be the tallest residential building from Fort Lauderdale all the way up to Atlanta.

It is currently being built, set to finish in the 4th quarter of 2018 and is already 75% sold out. This week we closed on a downtown townhome for one of our clients at The Arlington St Pete, a community that was sold out months before it was completed.

This community was so successful that the developers decided to build another community right down the street called The District on 9th. Here’s an article we wrote about how these communities provide a lot more value than other downtown options.

Looking to get in early on the District on 9th? Reach out to us here.

As I mentioned before, this city is in a growth stage. Pinellas County is a big peninsula, so there is only so much land available and most of it is already built on. What does this mean for you? Any land you own will eventually appreciate as this city grows.

The competition is stiff as a buyer right now however there are still plenty of areas where you can find a deal on any budget. If you’re looking for neighborhoods that will appreciate, here’s a helpful article that we wrote The Top 5 Up & Coming Neighborhoods In St. Pete.

So in conclusion, is St. Pete an over inflated market? I would have to say no – It’s a growing metropolis that is catching up to the other developed cities we see around the rest of the county. Currently there are enough checks and balances in our mortgage system to keep us at a safe level of appreciation.

If I didn’t think it was a safe investment, I wouldn’t have bought my first home here last year. St. Pete is only getting better and this area will continue to go up in value as this city keeps improving upon itself.  

Have any questions about the St. Pete real estate market? Feel free to reach out to us so we can help you figure out which neighborhood fits your lifestyle and budget.


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