Experts: No Single Reason For South Florida Housing Market Tailspin

Palm Beach County housing prices floated on top of the pack in South Florida for most of the past three years until September when the median dropped from first place to third behind Miami-Dade and Broward counties.

No one can point to any single reason for Palm Beach County’s drastic downturn in home prices and the decline in Florida mortgage loan demand that has invariably followed, but real estate players identify a slew of contributing factors, according to the Miami Daily Business Review.

“It’s the combination of the oversupply and the overheating of the market,” said Howard Bregman, managing shareholder of the West Palm Beach and Boca Raton offices of Greenberg Traurig, which represents numerous clients in the real estate industry. “At the very high end, prices have come down. But it’s the middle that is the problem.”

Based on year-end prices from the Florida Association of Realtors, PBC has had the highest median of the three counties since 2003. In September, the Palm Beach median resale price for a single-family home stood at $365,500, down from $386,000 in August and $34,500 less than a year earlier. That’s compared to $371,700 in Miami-Dade and $370,300 in Broward County.

Susie Van Pelt, an agent with Coldwell Banker in North Palm Beach, sees basic economics at work.

“This is very simple. [The median] was high last year because we had a very low inventory,” she said. “Now inventory is rising. It’s a very simple supply and demand thing.”

She has a listing for a waterfront condo at Flagler Pointe in West Palm Beach priced $5,000 less than the year-old purchase price. The unit isn’t selling even though the price is $80,000 less than a comparable three-bedroom water-view listing in the same building. That makes for a significant difference in Florida home mortgage payments and gives prospective buyers an opening - but is, at the same time, a headache for sellers.

With the huge supply of homes on the market, some sellers are in a panic. The people who are forced to sell are the ones dragging down the median price, said Kim Stevens of Exit Realty in Boynton Beach. New single-family home listings were way up in several Palm Beach County communities in the first nine months of this year from the same period last year.

New listings were up:

• 115 percent in Lake Worth
• 92 percent in Royal Palm Beach
• 86 percent in Boynton Beach
• 84 percent in Boca Raton
• 67 percent in Wellington
• 59 percent in West Palm Beach

Stevens recently sold a Lake Worth property that was given a home appraisal for $380,000 but sold for $318,000. Two years ago, she said the home would have sold for more than $400,000. Based on the current market index, the county has a 47-month inventory backlog in a region where affordability has gone out the door.

About 90 percent of Palm Beach County residents cannot even consider the median home price, making affordable housing a serious concern, real estate analyst Jack McCabe said.

The ratio of the county’s median price to the median household income is 7- or 8-to-1. The ratios in Miami-Dade and Broward are similar but slightly lower. A market is considered healthy when the ratio is 3 or 4-to-1, and under current conditions, a Florida mortgage is out of the question (or at least very hard to come by) for many residents.

Housing prices basically doubled in five years throughout most of the South Florida housing market, and much of the appreciation came in the last two to three years. In September 2004, the median single-family home price in Palm Beach County was $332,700. A year later it was $400,000. Now it has settled between the two.

“Whenever there is an excess of inventory, which there is now, then you have a drop in prices,” said John Mike, chairman-elect of the Realtors Association of the Palm Beaches.

It’s not just residents that are impacted, but businesses as well. The high cost of commercial real estate is probably the biggest factor in business decisions to either leave the area or to stay out, McCabe said.

The Orlando-based consulting firm Fishkind and Associates projected a stunning 63 percent fewer jobs would be created in Palm Beach County this year than last year, by far the biggest decline in the region.

Palm Beach’s public school enrollment also dropped by 3,246 students this year, indicating the departure of families with school-age children.

The high foreclosure rate also is adding to the flooded market. In September, Florida ranked fourth nationally and had a 41 percent increase in foreclosures over a year.