In January 2022, The Real Deal spoke with several agents from Sotheby’s International Realty who specialize in the sizzling hot Palm Beach, Florida, market. At that time, housing prices were continuing to soar unabated, with no clouds marring the sky. Certainly no one could have predicted the headwinds that materialized of rising interest rates, surging inflation and a potential recession.
Recently we sat down with a cadre of Sotheby’s International Realty agents to find out what they are seeing now in Palm Beach and what they are anticipating for 2023. To be sure, demand for this appealing market has stayed strong, but there are some differences that may bode well for buyers and sellers in 2023.
Inventory Remains Tight
If you’re considering selling, it’s a fantastic time to put your house on the market, says Sotheby’s International Realty agent Patricia Mahaney. She estimates there has been a 60% contraction in availability since 2020, and of course, prices reflect this scarcity. The current median price for a single-family home is $14.5 million, which is substantially higher than two years ago, and she expects prices will remain high given the tightened inventory.
Buyers are looking for a wide variety of types of homes, finds Sotheby’s International Realty agent Casey Flannery. “From a pied-à-terre to a larger single-family home, there’s no one specific type of property they all want. That means there’s a range of opportunities for sellers looking to capitalize on rising prices.” Mahaney has also seen a recent swell in ultra-high-end homes, in the $50 to 60 million range.
Flannery believes prices have plateaued, rather than returning to where they were before the pandemic.
“Sellers are intelligent and realistic,” she says. “While they may have missed out on the astronomical numbers we saw during the pandemic, prices won’t decrease significantly so sellers will still do well.”
Agent Lisa Mastronardi has had many clients taking advantage of selling in this lucrative market and heading to more affordable areas, like Tennessee and North Carolina.
Other sellers who want to stay locally might be fretting about enduring higher rates if they want to purchase close by. “I see many sellers who have qualms because they are sensitive to interest rates, but all markets are cyclical, including interest rates,” says Debra Reece, who heads Sotheby’s International Realty – Palm Beach Brokerage. Her advice? “Marry the house and date the rate. You can refinance when the right interest rate comes along, which it will.”
And, Mastronardi reminds those who are overwhelmed by rising interest rates to remember that historically they have been far higher. In addition, she notes that rents in the area rank among some of the highest in the United States so purchasing a home is likely more advantageous from a long-term perspective than renting.
Palm Beach Housing Market Undeterred by Economic Conditions
Certainly the host of factors that make Palm Beach desirable—from the weather to the amenities—haven’t changed. In fact, residents continue to converge there, drawn to the incomparable lifestyle. “The area has always been strong, particularly among people looking to retire, but demand has ratcheted up tremendously by people relocating here,” says Mastronardi. “We’ve become known as the ‘Wall Street of the south’ as investment firms increasingly create a presence here.”
And if a major firm has yet to relocate, they surely have south Florida in their sights, says Sotheby’s International Realty agent Kevin Condon. Currently, there are numerous Class A office buildings under construction, which are either fully leased or close to. “As we see more offices come to completion, we expect a second buying wave,” he says.
Migration from the Northeast—and New York in particular—continues as residents escape cold weather and high taxes. “People are seeking the Palm Beach lifestyle and friendly tax environment Florida offers, and we need to find them a home,” Reece says.
While buyers from the Northeast flock to Florida, Mahaney has also had multiple large transactions from California transplants. “Young families appreciate the quality of life they can find here,” she says.
Yet despite the increasingly limited supply, Sotheby’s International Realty agents see less of a frenzied environment. “2022 was crazy across the country, but particularly here as people were buying properties sight unseen and waiving contingencies and inspections,” says Mastronardi. The sense of urgency has tapered off a bit, and while it’s still more of a seller’s market, it’s less extreme, which makes it vital to price a home right. “Don’t price it in the stratosphere,” Reece cautions. “A great agent will help a seller interpret current comps and arrive at a price that will resonate with the buyer who wants to be here.”
The 2022 Palm Beach market reverted to a more traditional pace, with intense activity during the first two quarters of the year, followed by a relatively quiet summer. “This is more typical as a seasonal market compared to the prior two years,” says Reece.
Condon agrees that the height of the season has predominantly been November to May, but since the pandemic, changing demographics have led to a small enduring shift. “With more families moving in, our calendar reflects more of the traditional school year,” he says.
The Right Area for Every Demographic
Given the slim availability, Condon urges buyers to create a wish list of priorities. “When working with a broker, articulate those desires as we may be able to find properties that aren’t on the market,” he says, adding that a large percentage of homes never hit the open market at all. Relationships such as those Sotheby’s International Realty agents have with other brokers are crucial as they can become aware of properties before them being publicly listed.
“Off-market listings are super valuable, which is why I work with my clients to identify what they are looking for so they are ready to pull the trigger when it becomes available,” Condon says.
While many would-be residents seek the easy access to amenities, restaurants and shopping they’ll find downtown, the north end caters more to young families who appreciate the bike trails and slower pace with less traffic.
Mastronardi works with many relocating families who are drawn to the Old Northwood Historic District, which boasts properties that tend to have greater square footage. “These families are often coming from an urban environment, and they love hearing the history of these landmarked homes,” she says.
For example, she captivated buyers with the story of a recent listing in Northwood that was built in 1928, just before one of the worst hurricanes in history. The owner nearly lost his family, and when he rebuilt the home in 1930, he took extra caution, adding steel beams on the second floor. She notes that she herself lives in a 1926 property she took down to the studs and restored. “With a historic home, you are caretaking for the future. Its integrity and charm will remain, and there will always be demand from those who appreciate the unique craftsmanship they offer.”
While Flannery sells across Palm Beach, she has a specialty in Wellington, a village that’s a mecca for equestrians. It hosts multiple horse shows, including a popular event that takes place for 12 weeks in the winter and draws participants from across the world who love to engage in competitions, from dressage to polo. “We see many people rent homes here for the show and then evolve into buyers because they love the area,” she says.
2023 Real Estate Forecast? Continued Sunny and Pleasant
Mahaney is optimistic about the market dynamic, which she characterizes as “interesting while challenging.” She advises buyers not to be discouraged as she anticipates there will be more inventory coming online as the year progresses.
However, Flannery recommends buyers who see a property they love should move on it. “Inventory has not rebounded to the point that you can easily find something else,” she cautions.