Supply Grows, Demand Wanes; Palm Beach County Sellers Forced Into Waiting Game

John and Mary Porter put their Wellington, Fla., home on the market four months ago and have reduced the price more by than $40,000. They’re still waiting for an offer, according to the Palm Beach Post.

The couple, who moved to Los Angeles in October, figured their three-bedroom ranch-style house would sell quickly. After all, it’s in Palm Beach County, which just a year ago boasted one of the nation’s top housing markets.

But in a case of being in the wrong place at the wrong time, the Porters listed their home for sale just as the inevitable market slowdown arrived. Real estate agents and home sellers throughout the county are seeing a dramatic shift from what only six months ago was considered strong seller’s market.

There’s no crash yet, but there’s plenty of evidence the five-year boom has at last peaked.

The weather is delightful, but the chill came quickly to the Palm Beach County real estate market this winter. The area was the nation’s third-hottest housing market a year ago, according to the National Association of Realtors, with prices leaping 35.9 percent from early 2004 to early 2005. The typical home’s value rose at an absurd rate of $1,900 a week.

Sellers enjoyed bidding wars and above-list-price offers. Today they wait months and watching the “for sale” signs multiply in their neighborhoods as buyers take a breather. The change is an eye-opening one for people like the Porters.

“It’s tough,” John Porter said. “My mortgage there is $2,000, and my rent here is $2,350, so we’re not doing much but working and paying the mortgage.”

The Porters initially asked $409,000 for their house, but have cut the price to $369,000, said real estate agent Randy Bianchi of Paradise Properties in West Palm Beach. The couple paid just $279,000 for the house in 2004. They might have been poised to make a big profit had everyone not decided to sell at once. In a glaring sign that the best days of the South Florida real estate market have past, the number of homes for sale in Palm Beach County has risen from 7,800 two years ago to more than 20,000 at present.

Any economist will tell you that a spike in supply is bad news for sales.

On the flip side, the rising inventory of homes is good for buyers. Robert Trinchet, who moved to Wellington from Cleveland last year, has a contract on a Wellington home for 17 percent below the asking price. The market slowdown has rejuvenated once-beleaguered buyers, who suddenly feel free to drive hard bargains.

“We’re seeing buyers coming in and making very low offers. That’s just evidence of the pendulum swing,” said Mike Dooley, president of the Florida Association of Realtors.

Sellers roll their eyes at low-ball offers, but buyers definitely have more choices nowadays and enjoy the luxury of making discounted bids without the fear of losing out to other buyers. The spread of buyers’ revenge is bad news for sellers such as Brian Williams, who put his Lake Worth, Fla., home on the market in September. He has not lowered his $496,000 asking price since then, even though offers have been scarce.

“I’m disappointed that there isn’t more traffic. I’d consider reducing the price if houses started selling in the area at lower prices, and if people were making offers that were lower. But I haven’t seen any evidence that it’s about prices yet,” Williams said. “There seems to be 5,000 homes for sale on Lakeside, and nothing’s selling, so that’s a little frustrating.”

A couple of blocks away, Sharon Gorman is asking $369,000 for her home — a price that was once guaranteed to attract offers — only to watch it languish on the market for three months.
“The market is full of houses right now,” Gorman said. “It looks like half the county is for sale.”

It should be noted that unlike the Porters, Williams and Gorman are not especially motivated. Both will buy homes elsewhere in Palm Beach County if they sell. Agent Bo Allen of The Pier Group in Lake Worth, said sellers need to accept this new reality and the fact that the days of aggressive pricing and over-eager buyers and investors have passed.

“You’ve got a lot of investors starting to bail out. And you’ve got all these talking heads on TV telling people the market’s going to crash,” Allen said.

HOW LOW WILL PRICES GO?

Some economists warn that the area’s rapid escalation in prices makes the market ripe for a fall. National City Corp., a financial services group, says that Palm Beach County homes are overpriced by 57 percent, while Treasure Coast houses are priced more than 70 percent above value. To calculate those figures, home prices are compared with residents’ incomes.

But most analysts believe that with the area’s perpetual appeal, slowdown will lead to prices leveling off in the next few years, not crashing. The National Association of Realtors predicts that sales nationally will dip slightly in 2006 and that home price appreciation will slow to 1.5 percent — down from last year’s record 12.7 percent. That’s still a steady outlook for the immediate future.

“There are still people who want to live in Palm Beach County,” said Ellen Bitton, owner of Park Avenue Mortgage Group in Palm Beach. “Prices will be propped up by an influx of retirees and new residents drawn by the beaches and a strong job market.”

Crash or no crash, sellers will have to come to grips with the fact that they are not necessarily sitting on gold mines. More expensive Florida home loans and better investment options have scared off some investors, and buyers are taking their time after years of being pushed to the brink. In a year or so, the mercurial ebb and flow of the market will probably give way to normalcy.