Why are Palm Beach County Home Prices So High?
Why are housing prices soaring in the Palm Beach County Housing Market when there are so many indicators that the economy is struggling? Because of two HUGE market pressures, meager inventory, and extremely low-interest rates. Usually, we don’t know when we have hit the top of the market until prices start to decline. The current situation allows us to look at leading economic indicators and liquidate assets before sacrificing equity.
Florida, across the state, has inventory shortages causing spikes in prices from competition
South Florida is experiencing increasing inventory deficiencies driving prices up
Property value has been appreciating rapidly, and home prices are now at a ten-year high. There are very few homes on the market in South Florida. We have been facing a housing shortage for quite some time now. With COVID-19, the inventory has gotten even tighter. Interest rates are at historic lows, and it is pent-up buyer demand. As a result, the homes that we have listed over the past few months have sold within days, at or above the listing price, with multiple offers.
Palm Beach County Housing Market Correction is Coming
However, we expect this to change soon. Given South Florida’s heavy dependence on the hospitality and tourism industry, we are among the hardest-hit areas. The Florida unemployment rate is 14.5% (1.4 million people out of work), and 10.5% of Floridians are behind on their mortgage. While nobody has a crystal ball, it is safe to say that a lot more homes will be on the market once banks start foreclosing on past-due mortgages, and homeowners are forced to sell due to economic hardship.
As the market declines, lenders will assume a greater risk of default when issuing loans. To mitigate this risk, lenders will require higher down payments, higher credit scores, and lower debt to income ratios. This will make it more difficult for prospective buyers to qualify for a mortgage. With a higher supply and lower demand, it will be much more difficult to sell.
Refinancing, which so many are doing right now (The MBA reports that the Refinance Index was 50 percent higher than one year ago), takes advantage of these historically low-interest rates and the very high prices at the same time. However, we expect many of these homeowners to be far underwater when the market changes. If the local job market does not improve, that could be added stress on the housing market adding short sales, loan modifications, and distressed property inventory: good for homebuyers since prices will be much lower but bad for sellers who are going to see giant swaths of equity drop out of their home prices. If you are thinking about selling, the time is now.