Palm Beach R.E. Coming Back To Earth?

The torrid Palm Beach County housing market cooled off in December, according to the Palm Beach Post.

The number of existing-home sales fell, while the county’s median price dropped to $408,200, from $421,500 in November and $416,500 in October, the Florida Association of Realtors said Wednesday. It’s a shift that is more encouraging for home buyers, and frustrating for sellers, but generally considered healthy for the region’s economy.

On the Treasure Coast, the median price (the point at which half the homes sell for more, half for less) was $263,300, up less than 1 percent from November and below the price range for July through October. The gradual slowdown in the once-booming Palm Beach real estate market looks like the soft landing experts have been predicting.

Housing remains solid when compared with the previous year, with the county’s median price up 20 percent from December 2004. The Treasure Coast’s median price rose even more, at 22 percent above last year. Moreover, for all of 2005 Palm Beach County’s median price was $390,100, up 30 percent from 2004, while the Treasure Coast’s median rose 31 percent to $254,000.

Yet the buying frenzy of recent years looks to have ended.

Speculators largely have disappeared, and buyers don’t feel pressured to make a full-price offer as soon as a reasonable home comes on the market. Another telltale sign of the softening market is that the number of homes for sale in Palm Beach County has nearly tripled since the end of 2003. The Regional Multiple Listing Service shows 20,399 homes for sale in the county, up from 7,799 two years ago.

“People are taking a little more of a careful approach to buying real estate. For the past few years it has been completely a seller’s market,” said real estate analyst Bradley Hunter of Metrostudy in Boca Raton. “Now buyers are going to start to feel like they have some bargaining power because there are more choices available to them.”

West Palm Beach broker Steve Hollander said the increase in homes for sale has forced him to order more yard signs.

“I’m running out of signs,” Hollander said. “I’ve got more listings than I’ve ever had.”

Hollander expects single-digit home price increases, but said many sellers are still banking on the 30 percent appreciation the county has seen in late 2004 and early 2005. They’re going to have to lower their expectations if they want a timely sale.

New-home construction also is slowing in Palm Beach County, with 1,415 housing starts in the fourth quarter of last year, down 25 percent from 2004. By contrast, St. Lucie County’s housing starts fell 11 percent, while Martin County’s rose 22 percent. Many real estate experts stress that this slowdown represents a soft landing — in other words, a return to normalcy, not cause for alarm.

“When home prices are so much higher than median incomes, it makes for an unhealthy economy,” Hunter said.

Yet it will take more than a leveling of prices for many of Palm Beach County middle class workers to afford housing. Many teachers, paramedics and police officers have little choice but to make long commutes, County Commission Chairman Tony Masilotti said in a speech to members of the Business Development Board of Palm Beach County on Wednesday.

“Our biggest need is affordable housing,” Masilotti said.

Home sales nationally slowed and prices fell to a six-month low in December of last year, according to the National Association of Realtors. Sales of existing homes dropped to an annual rate of 6.6 million, down 5.7 percent from November and down 3.1 percent from December 2004. The median price of an existing home dipped to $211,000, down 1.9 percent from November — but up 10.5 percent from a year ago.

“This is part of the market adjustment we’ve been discussing, with a soft landing in sight for the housing sector,” David Lereah, the Realtors’ chief economist, said in a statement. “The level of home sales is now at a sustainable level and is likely to pick up in the months ahead.”

The dropoff is a good sign for the county’s economy, as the 20-30 percent annual appreciation was proving unsustainable. But with Florida home loan rates still low, and expected to remain under 7 percent this year, don’t expect any huge housing market bust — particularly in the Sunshine State.