Home inventory remains a huge concern
July 1st has dawned. Half of 2018 is already over and what a ride it has been for home prices here in the Northern Palm Beaches. Median single family home prices began the year at $436,000 and six months later they sit at $500,000.On January 1st, the median condo price was $216,000 and today that number has moved up to $245,000.
Big increases, and no doubt the lack of quality inventory is one of the main reasons prices have been pushed so high. And it’s not going to get better, at least for another month, and probably longer. We never see inventory levels climb in July and no reason to think buyers will have better options a month down the road. As of July 1st, home inventory levels in the Northern Palm Beaches are down for the 4th straight month.
Inventory certainly plays a significant role in both sales and prices and we already see what has happened to home prices so far this year. Keep in mind, that over that 6 month period interest rates are up about 15% so not only are buyers paying more initially, over the long term, those with a mortgage, are paying more. A lot more. If you borrowed 80% for thirty years, on the purchase of a median priced single family home in January and paid it off over that 360 month period your total payments would equal $587,956. However, if you bought the median priced today, at today’s interest rates your total payments would be $721,947. Same median priced home just with different timing by six months. I won’t even tell you about the additional $12,800 today’s buyer will have to come up with for that 20% down payment and that it would be worth $73,517 if invested at 6% for the length of the loan.
These are the numbers that today’s homebuyer faces here in the Northern Palm Beaches and are part of the reason we are seeing sales start to slip. Not only are pending home sales down again, for the second straight month, the drop over the past 30 days has been significant. Down 20% over the past month. Certainly some of this is seasonal factors but this year the drop over the same period in 2017 was about 54% higher.
Pending home sales are down to the lowest levels we have seen since January and are most likely to continue falling over the next few months. Interest rates and seasonal factors certainly are responsible to some degree but the fact there just isn’t much good for buyers to select from is the biggest concern for the local real estate market. Homeowners who might want to upgrade are remodeling instead of moving, in large numbers. Recent studies by Houzz show that over half of all home owners plan to renovate their homes this year. That is a huge number and yes, inventory concerns affect the market in many ways.
So 2018 is half over and both home prices and interest rates are significantly higher. Home affordability and inventory levels are concerning. A very favorable economy has been a huge boost for real estate and for that boost to continue the economy needs to keep improving. The effective cost of buying a median priced single family home for someone in Jupiter who stays for 30 years just jumped by $200,000. It’s going to take a smoking hot economy to push these numbers higher.
Each neighborhood is different. Each home is different. There are no easy answers and anybody doing real estate in today’s market needs to be educated. Interview at least three brokers, seek answers and you will reduce your chances of making expensive mistakes. Paradise Sharks love to be interviewed so feel free to contact us anytime at 561.308.0175 or firstname.lastname@example.org. We won’t bite, I promise.