Is a slowdown underway for real estate in paradise
June is the month we almost always see the largest number of single family home sales in the Northern Palm Beaches. In Jupiter, we have to go back to 2011 to find a year where that didn’t happen, and there is no reason to believe that this year will be any different. We still have half a month to watch, but even after the final count is made, things appear to be slowing down for real estate here in the Northern Palm Beaches region.
Let’s take a look at pending home sales, they are down over the first half of June by about 11%. Sure, some of this is seasonal and somewhat expected. But last year, over the same period, they were down by 3%. Over the past month, pending home sales in the Jupiter area are down by 15%. Last year its was 9%. There are fewer buyers writing contracts and at this moment the total number of pending contracts is a full 9% behind 2017 numbers. There is no doubt that home buying activity in the Jupiter area has slowed significantly, but why?
Fingers are pointed at inventory levels that are down for the 4th straight month. There are 3% fewer homes for buyers to select from than 1 year ago. Not only are there fewer homes to buy, but there are fewer quality homes to select from. I know we have been telling you this forever, but a large number of available properties need work. Work that many buyers do not want to tackle, or can’t afford to.
As prices rise, and home prices in the area are up rather dramatically since December, more and more buyers are stretching financially to get offers accepted. Buyers stretched on purchase price don’t have the ready cash to take a fix-it to do list and tackle it. The good news is we are starting to see prices level out and buyers can hope that continues for a while.
Interest rates are also playing a role in any slow down and will continue to do so. The Fed, on Wednesday, raised their benchmark interest rate by a quarter of a point, the second increase of the year. Even more telling, is they are planning more and faster increases coming our way. Interest rates on conforming 30 year fixed loans were up again this week to 4.49%. Starting to look like, at least for now, that 4.5% is about the lowest we can expect to see and 5% is a very good bet before too long. Higher interest rates put a damper on real estate sales, especially when affordability is already a big concern.
Another key metric we watch closely here at Paradise Sharks is the number of properties that close each month with prices above a million dollars. Last year was a record breaking one in this category and so far this year, sales are 12% above last year’s record pace. During the month of May, the total sales of these homes slowed and was down about 9% from last year. Watch these numbers closely as if they start to falter significantly, so will the overall market.
However, the economy remains on solid footing and appears to be getting even stronger. Unemployment is down to levels nobody would have believed a year ago. Inflation remains low, but picking up a bit of steam, climbing in May by 2.2%. So far in 2018, the real estate market has been great for price appreciation but a bit lackluster for the number of sales. Things change by the minute and buyers and sellers have much to keep track of. If Paradise Sharks can ever help simplify a process that really should not be difficult please feel free to contact us. We are super easy to reach at firstname.lastname@example.org or 561.308.0175.