Yet luxury single-family home sales upticked in May
South Florida Realtors are reporting this week that Palm Beach County condo sales dove while luxury single-family home sales increased year-over-year as more single-family home inventory arrived in May 2022.
"As luxury single-family Palm Beach County homes rise, it's also welcome news to see more single-family homes on the market," JTHS-MIAMI President Brad Westover said.
Palm Beach County $1-Million-And-Up Luxury Home Sales Rise
Palm Beach County total closed sales in May 2022 outperformed nearly every other May in history despite higher mortgage rates, lower supply, and higher sale prices.
Palm Beach's May 2022 total home sales decreased year-over-year (2,956 in May 2022 vs. 3,777 in May 2021) but performed significantly higher than every May outside of May 2021.
Palm Beach existing condo sales decreased 24.3% year-over-year, from 1,887 in May 2021 to 1,429 in May 2022, due to lack of inventory and rising mortgage rates. Single-family home sales decreased 19.2% year-over-year, from 1,890 in May 2021 to 1,527 in May 2022, due to lack of inventory and rising mortgage rates.
The May 2021 sales total surged so high because it benefited from 3% mortgage rates, higher supply (particularly in condos) and pandemic-driven demand.
Many of the homes that sold in May 2022 had their rates established in March and April when mortgage rates were at 5%. 2018 marked the last time mortgage rates were at this level.
Palm Beach single-family luxury transactions increased 6.6% year-over-year to 337 sales in May 2022. Palm Beach existing condo luxury ($1-million-and-up) sales decreased 32.1% year-over-year in May 2022 to 131 transactions.
Homebuyers leaving tax-burden states to purchase in Florida (no state income tax), new-to-market firms moving here, low interest rates, the appeal of property as an inflation hedge, rising wages and accrued savings in lockdowns, strong equity market performance, a reassessment of housing needs and lifestyles because of the pandemic and expansion of remote work are all factors driving South Florida real estate demand.
Mid-Market $400K-$600K Condo Sales Jump
Palm Beach existing condo sales priced between $400K to $600K increased 5.8% year-over-year to 201 transactions in May 2022. Palm Beach single-family homes priced between $400K to $600K decreased 23.3% year-over-year to 415 transactions in May 2022, due to lack of inventory.
Mid-market condo sales are increasing because that's where the higher inventory is. Global buyers prefer to purchase condos. With global vaccinations rising and unstable political situations around the world, South Florida is seeing an increase in foreign homebuyers.
Vaccinated foreigners were allowed to resume travel to the U.S. back in November 2021 and that is leading to more international investment in South Florida - the No. 1 destination in the U.S. for foreign buyers. Global buyers purchase in Miami because Miami is a world-class global city with better real estate prices than other similar global cities. Foreign buyers feel at home with our incredible diversity and acceptance of all cultures, along with all our amenities.
Rising Mortgage Rates Should Eventually Slow Price Growth Nationally, in Miami
Home prices are determined by supply and demand. Lower supply and higher demand create higher prices. Demand for Palm Beach real estate is at all-time highs. Inventory for Palm Beach single-family homes (1.7 months) and condos (1.3 months) are low.
Locally, the greater share of Palm Beach luxury sales is also part of the reason for the large year-over-year increase in median prices.
To battle national inflation, the Federal Reserve has aggressively raised rates this year and has plans for more hikes. High inflation and the Fed's tightening policy are the main drivers behind rising mortgage rates.
Mortgage rates have risen from 3% in January to 6% in June. On the same $300,000 mortgage, the monthly payment has risen from $1265 in December to $1800 today, according to NAR.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 5.23% in May, up from 4.98% in April. The average commitment rate across all of 2021 was 2.96%.
The mortgage rate is projected to land at 5.3% by 4Q 2022, according to NAR. That is still low compared to an all-time average of about 8% in the U.S.
Long term, the hope is higher rates will lead to more days on the market (gives buyers more choices). Higher rates will eventually lead to a moderation of the growth rate of pricing. With the growth rate of pricing cooling, total inventory could grow later. Historically, inventory expands six months after rates rise, but today's market is unlike any other.
Palm Beach home prices haven't begun to moderate because inventory is low. Also, one of the supports for home prices is rents and rents are rising strongly.
Palm Beach County single-family home median prices increased 29.5% year-over-year in May 2022, increasing from $475,000 to $615,000. Existing condo median prices increased 23% year-over-year, from $250,000 to $307,500.
Single-Family Home Inventory Rises for the First Time Since July 2019
Inventory of single-family homes increased 23.1% year-over-year in May 2022 from 2,138 active listings last year to 2,631 last month. Condominium inventory decreased 20.5% year-over-year to 1,955 from 2,460 listings during the same period in 2021.
New listings of Palm Beach single-family homes increased 7.4% to 2,222 from 2,069. New listings of condominiums decreased 2.1%, from 1,791 to 1,754.
Months' supply of inventory for single-family homes increased by 30.8% to 1.7 months year-over-year, which indicates a seller's market. Inventory for existing condominiums decreased 27.8% to 1.3 months, which also indicates a seller's market. A balanced market between buyers and sellers offers between six- and nine-months supply.
Total active listings at the end of May 2022 decreased 0.3% year-over-year, from 4,598 to 4,586.
Nationally, total housing inventory at the end of May was 1,160,000 units, an increase of 12.6% from April and a 4.1% decline from the previous year (1.21 million). Unsold inventory sits at a 2.6-month supply at the current sales pace, up from 2.2 months in April and 2.5 months in May 2021.
Palm Beach Real Estate Had a $332.6 Million Local Economic Impact Just in May 2022
Every time a home is sold it impacts the economy: income generated from real estate industries (commissions, fees and moving expenses), expenditures related to home purchase (furniture and remodeling expenses), multiplier of housing related expenditures (income earned as a result of a home sale is recirculated into the economy) and new construction (additional home sales induce added home production).
The total economic impact of a typical Florida home sale is $112,500, according to NAR. Palm Beach County sold 2,956 homes in May 2022 and had a local economic impact of $332.6 million.
Palm Beach total dollar volume totaled $2.28 billion in May 2022. Single-family home dollar volume decreased 17.8% year-over-year, from $1.85 billion to $1.5 billion. Condo dollar volume decreased 17.9% year-over-year, from $909 million to $746 million.
Palm Beach Distressed Sales Keep Dropping, Reflecting Healthy Market
Only 0.6% of all closed residential sales in Palm Beach were distressed last month, including REO (bank-owned properties) and short sales, lower than the 0.8% in May 2021.
Total Palm Beach distressed sales decreased 38.7% year-over-year in May 2022, from 31 to 19. Short sales and REOs accounted for 0.2% and 0.4% year-over-year, respectively, of total Palm Beach sales in May 2022. Short sale transactions decreased 14.3% year-over-year while REOs decreased 45.8%.
Palm Beach's percentage of distressed sales are on par with the national figure. Nationally, distressed sales represented less than 1% of sales in May 2022, unchanged from May 2021
Palm Beach's Percentage of Sales Continue to Outpace the Nation, State
In Florida, closed sales of single-family homes statewide totaled 28,861, down 6.9% year-over-year, while existing condo-townhouse sales totaled 13,265 down 14.4% over 15,491 in May 2021. Closed sales may occur from 30- to 90-plus days after sales contracts are written.
Nationally, total existing-home sales transactions completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 3.4% from April to a seasonally adjusted annual rate of 5.41 million in May. Year-over-year, sales receded 8.6% (5.92 million in May 2021).
The statewide median sales price for single-family existing homes was $420,000, up 21.8% from the previous year, according to data from Florida Realtors Research Department in partnership with local Realtor boards/associations. Last month's statewide median price for condo-townhouse units was $322,000, up 28.8% over the year-ago figure. The median is the midpoint; half the homes sold for more, half for less.
Nationally, the median existing-home price of all housing types in May was $407,600, up 14.8% from May 2021 ($355,000), as prices increased in all regions. This marks 123 consecutive months of year-over-year increases, the longest-running streak on record.
Palm Beach Real Estate Attracting Multiple Bids, Buyers Going Over-List Price
The median percent of original list price received for single-family homes was 100% in May 2022, up 0.5% from 99.5% last year. The median percent of original list price received for existing condominiums was 100%, up 3.3% from 96.8% last year.
The median number of days between listing and contract dates for Palm Beach single-family home sales was 11 days, even with last year. The median time to sale for single-family homes was 51 days, a 12.1% decrease from 58 days last year.
The median number of days between the listing date and contract date for condos was 10 days, down 54.5% from 22 days. The median number of days to sell for condos was 50 days, a 25.4% decrease from 67 days.
Palm Beach Cash Sales Double the National Figure in May 2022
Cash sales represented 57.4% of Palm Beach closed sales in May 2022, compared to 53.2% in May 2021. About 25% of U.S. home sales are made in cash, according to the latest NAR statistics.
Cash buyers are not deterred by rising rates.
The high percentage of cash buyers reflects South Florida's top position as the preeminent American real estate market for foreign buyers, who tend to purchase with all cash as well as some moving from more expensive U.S. markets who can buy more with their profits from real estate sales.
Cash sales accounted for 66.3% of all Palm Beach existing condo sales and 49.1% of single-family transactions.