Home prices are coming down to earth in Palm Beach County, after soaring by double-digits from 2011 to 2014. And experts anticipate only moderate price appreciation over the next couple of years.
“Things are definitely flattening out,” David Cobb, South Florida regional director for research firm Metrostudy, told The Real Deal.
The county’s median home price stood at $279,000 in March, down 2.8 percent from a year earlier, according to the Realtors Association of the Palm Beaches. That represents the third consecutive monthly decline.
So what has caused the slide? Part of it is falling demand from hedge funds and other investors, Jack McCabe, CEO of McCabe Research & Consulting in Deerfield Beach, told TRD. Investors have accounted for 40 to 50 percent of sales in recent years.
“In the last six months, they have slowed down their acquisitions, so that even though sales volume has increased, prices have dropped,” he said. Single-family home sales volume surged 38 percent in March.
After peaking in 2006 at $421,500, Palm Beach County home prices fell to $125,000 in 2011 before rebounding. Even after the 100 percent rebound of the past four years, “Palm Beach County could be considered very reasonable compared to the height of the real estate boom,” McCabe said.
But affordability is a problem. “About 90 percent of new construction is unaffordable for 90 percent of the population,” he said.
The average price of a new home is more than $650,000 in Palm Beach County, according to Metrostudy. So town homes priced at $250,000-$300,000 are becoming more popular among new homes, Cobb said.
It’s difficult for builders to put up more affordable houses in Palm Beach County because land and construction costs are so high. But in the county’s favor, it “still has developable land available, unlike Broward and Miami-Dade,” McCabe said.
The increase in labor costs could delay completion of condominium buildings that are being built or have been announced, he said. Developers are leery of building new condos in any case, given the continuing excess inventory from last decade’s boom.
But Cobb thinks things are looking up overall for the county’s housing market. Strong job growth, rising household formation and rising wages should make the next couple years “pretty good,” he said.
“There aren’t enough lots being developed for a huge takeoff, but the resale market should continue to thrive.”