Cash is king as real estate recovers
Homes in the town of Palm Beach, which bears that ZIP code, are selling in the millions.
According to figures released by Douglas Elliman, the New York-based real estate firm that has operations up and down the southeastern Florida coast, single-family homes had an average sales price of $6,450,093 in the first quarter this year, up from $4,115,974.
Sotheby’s posted similar numbers, with an average sales price of $6,593,199, also up from $4,115,974.
“Palm Beach is an expensive place to live. When you look at Palm Beach in itself it’s a very high price point, and again the inventory in that market has really begun to move,” said Jay Phillip Parker, the Miami-based CEO of Douglas Elliman’s South Florida brokerage.
“It’s exciting,” Mr. Parker said. “Palm Beach suffered pretty significantly after the crash and I think it’s finally got its feet back.”
Other agents agreed.
“I pretty much focus on Palm Beach, and the high-end, for sure, has started to move,” said Carole Koeppel, an agent with Sotheby’s International Realty in Palm Beach.
She said she has been busy showing and selling to buyers who want new construction, single-family homes.
“The West Palm Beach market has picked up as well, and I’ve done some transactions in the country club communities along PGA (Boulevard),” she said.
It’s not all local residents looking to trade up, either.
“They’re coming from the Northeastern corridor of the United States, but we’re seeing a couple of new things,” said Bill Yahn, The Corcoran Group’s regional senior vice president, South Florida. “One is Californians. They’re moving here because they like our tax laws. We’re also seeing quite a few people involved with hedge funds moving here because of the taxes. It’s an easy commute to New York.”
Mr. Parker agreed.
“It’s New Yorkers.
There’s always going to be a very strong international demographic, but dominating the market, it’s really New Yorkers,” he said. “As income taxes continue to press upward in those areas, many, many more people are relocating.”
There’s another side to the town of Palm Beach’s desirability, Ms. Koeppel said.
The real estate bubble burst in 2008, taking with it much of the South Florida market.
Sales stagnated and properties sat empty, destined for foreclosure.
Now that the economic recovery appears to be in full swing, all that has changed.
Property inventories that once showed a surplus have shrunken over the past year.
According to Douglas Elliman, luxury inventory in Palm Beach is down 18.8 percent over a year ago.
“Listing inventory is continuing to expand everywhere but Palm Beach, because I hear brokers ay they’re not going to have inventory to sell,” Mr. Parker said.
Mr. Yahn and Ms. Koeppel agreed that inventory is much tighter now.
“I worked with buyers who wanted three-bedroom, direct-ocean homes, and I really didn’t have much inventory,” Ms. Koeppel said. “People are beginning to realize that they may miss out if they don’t act sooner.”
“The nondistressed sales continue to overpower distressed sales,” Mr. Parker said. “We’re seeing a more stable market. The only market that started to slow was Boca with fewer sales over a million dollars. That was probably low-hanging fruit in that market that was absorbed last year, that was for Northeastern buyers looking for something to retire into who don’t necessarily have millions of dollars to spend.”
“Cash is dominating the market,” said Mr. Parker, estimating that 63 percent of the major transactions are cash. “There is some more financing going on, but at the same time, cash is still king.”
Buyers may well finance the home after completing a cash transaction, each of the agents said.
“I don’t think that is because of the lack of ability of lenders to complete transactions, but the psychology has not changed regarding cash transactions,” Mr. Parker said.
It shows just how global the South Florida market has become.
“People are really using real estate as an international commodity, particularly in South Florida,” Mr. Parker said. “There’s a fallacy that Florida is affected only from Latin American markets, but we have huge transactions coming in from Canada, from Russia, from Asia.”
Why? The answer is simple.
“People look to the United States as a stable market and a stable government,” Mr. Parker said.
And it doesn’t snow in Florida — at least not often.
“If you’re from Italy or Spain, it’s a hell of a place to have a second home, as opposed to Chicago or New York,” he said. “The infrastructure and cultural development we have here in South Florida makes it all so much more appealing.”
Never underestimate the ease of travel.
“With the changes in the Fort Lauderdale airport, where they’re getting more international flights, we’re starting to see more international buyers, Latin American specifically,” said Corcoran’s Mr. Yahn.
Palm Beach is not necessarily a retirement home anymore.
“”I’ve seen the town change and it’s growing younger,” Sotheby’s Ms. Koeppel said. “It’s very nice. We really have it all.” ¦