Palm Beach County’s Real-Estate Reality Check | 1290 WJNO
Palm Beach County’s Real-Estate Reality Check
Bottom Line: This week’s South Florida real-estate report from the Miami Realtors Assocation took many by surprise. What’s your current view of our local real estate market? If it’s one that’s in a steady decline, as many news stories have been suggesting, you’d likely be surprised by what actual transactions have been saying. Is the local real estate market where it was a year ago? Nope. Is it even close to that type of frenzied market? Nope. Are prices higher than a year ago? Yep. Is it still a seller’s market? Yep. There’s no doubt that wading through the data from what most recently happened to close 2022 was a mixed bag. For starters, just how much less money was transacted in South Florida real estate. In South Florida’s TriCounty (Broward, Miami-Dade and Palm Beach), the total dollars in transacted real estate declined by 51%, from $7 billion in December of 2021, to $3.4 billion last month. If you knew nothing else regarding what happened in the local real estate market, but you heard those numbers you’d likely suspect the bottom was falling out of our local real estate market. But there’s so much more to the story.
First, all real estate is local, right? So, what happened in Miami doesn’t matter to you unless you own property in Miami. And to that end, while South Florida’s transactions as measured in dollars dropped by greater than half, that wasn’t the case in the Palm Beaches where sales fell by a much lower 40% rate. Meaning that as far as weakness in South Florida goes, Palm Beach County’s market is outperforming. But perspective is important. There’s nothing about last year’s post-lockdown frenzy buying that’s sustainable over the long run, so the context as to what prices, inventory and demand are doing matters most. For most people, the most important question of all when it comes to the health of the real-estate market isn’t the volume of homes selling, but what prices are doing. And the answer is they’ve still been rising. In Palm Beach County single-family home prices rose by 4% over a year ago – now totaling $545,000 on average, while condos prices have performed best rising by a stout 14% to $300,000. For perspective, the historic average rate of real-estate appreciation is 4%. So single-family homes locally have appreciated at a normal rate over the past year, while condos have continued to experience a boom in prices – likely driven by buyers seeking more affordable options. And then there’s the tell about where this all is going.
In the end real-estate is no different than anything else. It comes down to supply and demand. In a neutral real estate market, one that’s at parity between sellers and buyers, there’s six months’ worth of listed inventory on the market. Meaning that based upon sales activity it’d take six months to sell all of the available homes. The current market has just 3.2 months’ worth of inventory. Yes, that’s a lot more than a year ago when we were under a months’ worth, however we’re a long way from even being in a neutral market, let alone a buyers’ market which would indicate the local real-estate market being in decline. Additionally, with mortgage rates having backed off by 1% from last fall’s highs – there are additional buyers which have recently stepped back into the hunt for property fearing rates might rise to previous highs or worse before long.
None of this is a guarantee as to where we’ll go from here, but what we’ve seen isn’t a declining local real-estate market, but instead one that’s in the process of normalizing but with much higher prices than before.
