New Home Sales Up Sharply as Inventory Tightens and Interest Rates Drop
Hello Everyone and thank you for watching. This is Gia with Palm Beach Premier Real Estate here in Boca Raton Florida with your 2-minutelocal market report for AUGUST 2019.
So here’s a quick take on the numbers that came out from the Realtors Association of the Palm Beaches
The message from your team here at Palm Beach Premier Real Estate this month is: New Home Sales Surge as Inventory Tightens and Interest Rates drop.
So let’s take a closer look at the local internal real estate market numbers…. What we’re seeing is the following:
- The median sales price of a single family home in Palm Beach County was $355,000 …..identical to last month….and slightly higher than a year ago.
- The number of RESALE housing units sold experienced a DECLINE from last month as NEW HOME SALES SURGED Higher.
- The inventory of homes for sale in Palm Beach County has tightened once again with a large 6% drop in the number of active listings and overall supply of homes.
- Trends were a little different in the condo and townhouse market. The typical Palm Beach County condo that sold in August fetched $182,500 down slightly from last month and a year ago
- Luxury homes are continuing to take significantly longer to sell.
- The amount of time it took to get a contract jumped again versus last year for single family homes with properties now taking closer to 50 days to get a contract…and a whopping 26% longer than last year for condos and townhomes
- Interest Rates for a 30-year fixed rate mortgage are now under 4% again which is really helping to maintain buyer demand despite elevated prices and limited inventory.
So what does that mean for Sellers? – Great question – it highlights JUST HOW IMPORTANT it is to price your properties competitively – and by that what I mean is very close to what has sold most recently. In this marketplace that we are in right now, it really is a beauty contest and a price war along with having great marketing as well.
So clearly (and as we mentioned last month) the housing market is facing some headwinds and some significant downward pressure in the marketplace:
Once again we want you to consider these 3 important factors:
- We have definitely Reached the Top of Real Estate Cycle - 2008-2018; - NOTE: Each RE Cycle is 7-10 years … so it makes sense that we are starting our downward leg
- We’ve reached the Top of Debt Cycle - 4 interest rate increases in 2018 (9 in all by the FEDERAL RESERVE) have now created headwinds with consumers highly leveraged – with the Federal Reserve now in a rate cutting cycle; NOTE: Every 1% increase to the mortgage rate impacts buying power by 10% - less qualified people equals less buyers
- Buyers have Price Fatigue .... Property Values have increased more than 40%+ since 2008 and yet Wages have simply not kept pace, perhaps 10% - so something has to give [NOT SUSTAINABLE] .... Either people get paid more or prices have to come down....which do you think is more likely?
Looking ahead for the rest of 2019 as it relates to housing:
We can certainly extrapolate some themes here:
First - The average household’s cost to service debt has reached a point at which it will become more difficult and challenging to find buyers who can qualify for a conventional mortgage (FNM, FRE, FHA) –
Second - Housing affordability issues will continue to be a theme going forward
Third – Inventory concerns will continue to act as an overhang on the market, prices will soften and properties will likely sit on the market for extended periods of time
Fourth–The effects of the worldwide economic slowdown will be felt here in the USA throughout 2019 and into 2020 and will have a knock-on impact for the housing market.
And Finally - The inversion of the yield curve is flashing recessionary signals with a number of Companies also expressing earnings worries and job layoffs.
Furthermore, the Federal Reserve continues to cut the Fed Funds Rate as tariffs and global economic slowdown concerns continue to place downward pressure on markets – will they continue to cut interest rates or will the divided committee hold at current levels?
Going forward we will definitely be keeping a continued close watch on prices, interest rates, inventory levels and the number of closed sales.
If you’ve been considering buying or selling - Please give us a call for a confidential consultation at 561.395.8418 or email us at Info@PBPrealestate.com - we’re here to help!
As always we look forward to speaking with you. Thank you again for watching. We’ll see you next time…. J