Letter From Gary
“Is the market softening?”
This is a question I get on a weekly basis from clients and prospective clients. If only I had a crystal ball and could predict real estate market cycles! Although I cannot provide a definitive answer to that question, I thought it would be helpful to share some of the data and reports that I look at as leading indicators to spot trends in global and local real estate markets.
In this quarter’s report, as with all of our reports, I share actuals from the past quarter. But Q2 2022 actuals do not answer the broader market question that so many of you are eager to uncover. This is because Q2 is a lagging indicator of the market, reflecting transactions that closed in Q2 but actually moved to contract in Q4 2021, Q1 2022, and Q2 2022. We won’t know for certain how the Palm Beach market is being impacted by macro trends such as rising interest rates, stock market upheaval, and other economic shifts until Q4 of this year or even Q1 of next year, because real estate players need time to react to how their pricing and their pocketbooks fit into the big picture. But I think you will find the data and trends I watch helpful in painting a picture of how real estate is being impacted by the rise in interest rates and Federal Reserve balance sheet tightening.
There is a lot to unpack in this quarter’s report, and the most interesting thing I found is that although some leading indicators show softening in real estate globally, Florida — specifically Palm Beach — is holding its ground and impacted to a lesser extent.
I hope you enjoy the read and as always, please don’t hesitate to reach out with any questions.
Transaction volume was down -44% year-over-year (YOY)* in Q2, largely driven by the decrease in non-waterfront sales. Waterfront sales YOY held strong with 13 sales in Q2 2022, compared to 14 in Q2 2021.
Total sales value* was down -10% YOY, driven by a -34% decrease in non-waterfront sales. Waterfront sales value was up +28% YOY with nearly $560M in sales value traded in Q2 2022.
Price per square foot (PPSF)* across both home size* and lot size* continues to grow YOY, and was up significantly from the same period last year: +74% (PPSF home size) and +76% (PPSF lot size).
TRANS AC TIONS
WATERFRON T
NON- WATERFRON T
TOT AL SALES VA LU E WATERFRON T
NON- WATERFRON T
A VER AG E SALE PRICE WATERFRON T
NON- WATERFRON T
A VER AG E PPSF HOME WATERFRON T
NON- WATERFRON T
A VER AG E PPSF LO T WATERFRON T
NON- WATERFRON T $1, 000 ,2 40 , 155 $559 ,45 7, 000 $440 ,7 83, 15 5 $2 0, 004,803 $43 ,0 35, 15 4 $11,913 ,05 8 $4,4 77 14 89 75
$1, 108,895,302 $436,590 ,500 $6 7 2,304,802 $12,459 ,498 $31, 185 ,03 6 $8,964, 064 $2, 575 $4,3 79 $2 ,03 2 $698 $1 ,03 6 $5 76
JAN-17 17Y-JULAPR-17 OCT-17 18JAN- 18Y-JUL18APR- 18OCT- 19JAN- 19Y-JUL19APR- 19OCT- JAN-20 -20YJULAPR-20 -20OCT JAN-21 JAN-22-21YJUL -21OCTAPR-21 APR-22
Days On Market
112 DAYS
Single family homes stayed on the market for an average of 112 days during Q2 2022. This was down -24% from last quarter, and a YOY improvement of -34% compared to Q2 2021, when homes took an average of 169 days to sell.
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Sale to List Ratio
In Q2 2022, single family homes sold on average -7% below the asking price, quite similar to the trends seen in the previous quarter. Homes continued to sell very close to the asking price listed on the market.
One thing to note is that starting in June 2022, sale to list ratio dropped to 91%. It will be interesting to see if this downward trend continues throughout the summer of 2022.
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FOOTER: Year-over-yearGlossary(YOY
): A method of evaluating two or more measured events, comparing the results of one period with those of a comparable period on an annualized basis.
Total sales value : The sum of all sales during a period of time.
Price per square foot (PPSF): A calculation of the value of each square foot of area of a house, condo or any building. It is calculated by dividing the price by the square footage.
PPSF: Home Size: Home size is based on the current under air square footage.
PPSF: Lot Size: This is based on the PPSF of the total lot.
Sale to List Ratio: The ratio of the final sale price of a home to its list, or asking, price expressed as a percentage. If the sale to list ratio is above 100%, the home sold for more than the list price. If it’s less than 100%, the home sold for less than the list price.
ENDNORTH
SINGLE FAMILY HOMES
Palm Beach’s North End, located north of Wells Road, is celebrated for quiet seclusion. Thanks to zoning laws that prohibit condos and commercial properties in this area, many residents enjoy private beachfront views.
Transaction volume was down -32% YOY for the second quarter of 2022. This is largely driven by non-waterfront home sales declining on the North End, which were down -38%. Waterfront transactions are up slightly, at +20% YOY.
Total sales value* was up +25%, driven by large transaction volume on several waterfront properties. Non-waterfront total sales value was down -16% YOY.
PPSF: Home was up +102% in Q2 YOY. Additionally, PPSF: Home increased quarter-over-quarter (QOQ)* +30%. We do not see weakening in what people are willing to pay for homes on the North End.
WATERFRON T
NON- WATERFRON T
TOT AL SALES VA LU E
WATERFRON T
NON- WATERFRON T
A AG
WATERFRON T NON- WATERFRON T
A VER AG E PPSF HOME WATERFRON T
NON- WATERFRON T
A VER AG E
WATERFRON T
NON- WATERFRON T
$559 , 275 , 030 $281, 777, 000 $2 77,498 ,03 0 $18,642,501 $6,9 $44 7, 930,54 7 $118, 115, 000 $329 ,815,54 7 $10 , 180 ,2 40 $23,623, $8,456,809000 $2, 275 Single North End
Most Recent North End Sales
S ALE PRICE
$85,9 77, 000 $56, 00 0, 000 $44,3 75 , 000 $39 ,90 0, 000 $32,525, 000 $23, 00 0, 000 $20 ,826, 140 $1 9, 00 0, 000 $18,45 0, 000 $16,225, 000 $16, 10 0, 000 $15,50 0, 000 $14,50 0, 000 $13,55 0, 000 $12,50 0, 000 $11,825,
$6,20$6,50$6,65$6$7$7$7$8,$8,3$9$10$10$11,50$11,632,2000400,000,890,000,350,000,450,00076,000000,000,773,650,750,000,200,000,750,0000,0000,0000,000
ADDRES S
901 N OCEAN BOULEV ARD
325 VIA LIND A 1320 N LAKE WAY 1020 N LAKE WAY 1494 N LAKE WAY 1265 N LAKE WAY 134 CA SA BENDITA 9 VIA LO S INC AS
225 SANDPIPER DRIVE 301 POLMER P ARK 300 INDIAN RO AD 215 INDIAN RO AD 225 PLANT ATION RO AD 268 JAMAICA LANE 308 ARABIAN RO AD 1198 N OCEAN WAY 269 QUEENS LANE
255 RIDGEVIEW DRIVE 134 SE AGATE RO AD 22 4 LA PUERTA WAY 232 MOCKINGBIRD TRAIL 265 LA PUERTA WAY 274 MONTEREY RO AD 515 N LAKE WAY 269 JAMAICA LANE 216 SOUTHLAND RO AD 220 ARABIAN RO AD 1171 N OCEAN WAY 223 MONTEREY RO AD 250 BAHAMA LANE
WATERFRONT?
YESYESYESYESYESYESNONONONONONONONONONONONONONONONONONONONONONONONO
SF HOME SIZE
10 ,655 7, 73 1,9841,9041,32,4612,8252,6283,2,82,2,4202,2883,4983,5233,1,6914,4,3,8124,54,8556,3654,4365,5,8412,76,5486,2661,231190088730650980861817702375
FOOTER: Glossary
Total sales value : The sum of all sales during a period of time.
PPSF ($) HOME SIZE 49 108,9999,7211,21712,11,29912,13,49912,4912,64512,491011,50091913,26411,1012,98114,237191718,1934,22028,41,44,3197057,32143,319069,498,201,88048,999186,937,400,589730927207,171
SF LO T APPROSIZEX.
$8, 069 $7,2 44 $7, $3,$3,414$4,836$2,$2,549$2,949$2,5$2,$3,840$3,905$4,52$3,$3,264$3,$6,99$3,$3,333$3,804$3,389$3,316$2,549$4,$3,$3,566$10$4,498$6,082093,5027341590503769113478172743125
$1, 74 $610$7$684$602$566$686$643$59$6$7$828$1,$1,$1,23$59$942$1,211$1,318$1,$1,$428$961$1,$1,$1,$950$1,964$1,582$1,3513191153086130194370000284770322
IN-TOWN
Nestled between Worth Avenue and Wells Road lies the energetic center of Palm Beach Island, In-Town. Packed with shops, secluded beaches, and five-star restaurants, this hub of culture and leisure lures residents with a flair for cosmopolitan life.
In-Town transaction volume was down -50% YOY in Q2 2022, the fourth consecutive quarter that saw a decline in transaction volume.
Sales value was also down -6% YOY at $112M in Q2 2022, compared to $119M in Q2 2021.
In-Town PPSF: Home was up +70% YOY, whereas PPSF: Lot was up +80%. Note, we saw a decline in PPSF QOQ for In-Town properties. PPSF: Home was down -4% QOQ and PPSF: Lot was down -20% QOQ. We will continue to watch this metric as we enter into the second half of the year as a possible indicator of softening prices due to the macroeconomic climate.
Most Recent In-Town Sales
NOTE: Reporting in this section does not break out waterfront versus non-waterfront properties, as there are limited waterfront sales in this area. In most years, zero waterfront homes sold.
FOOTER: Quarter-over-quarterGlossary (QOQ) The measure of an investment or a company’s growth from one quarter to the next.
SECTIONESTATE
SINGLE FAMILY HOMES
The Estate Section comprises all residences south of Worth Avenue to Sloans Curve. It is renowned for its opulent residencies and exclusive social clubs including The Everglades Club, Bath and Tennis Club, and Mar-a-Lago.
Activity in the Estate Section continues to trend down significantly YOY. In Q2 of 2022, transaction volume was down -58% and total sales value was down -37%. This is the second consecutive quarter we saw YOY decline in total sales value. Although sales activity was down, we still saw significant growth across average sale price and PPSF. PPSF: Home was up +57% YOY and PPSF: Lot was up +109% YOY. These metrics were also up significantly QOQ (+46% and +133% respectively), which shows the market remains strong in regards to the prices people are willing to pay to own in the Estate section.
Most
$7 2,85 0, 000 $48,50 0, 000 $46, 00 0, 000 $31,25 0, 000 $2 7,75 0, 000 $25 ,75 0, 000 $25,58 0, 000 $23,85 0, 000 $17, 00 0, 000 $9 ,50 0, 000
TRANS TIONS
WATERFRON T
NON- WATERFRON T
TOT AL SALES VA LU E
WATERFRON T
NON- WATERFRON T
A VER AG E SALE PRICE
WATERFRON T NON- WATERFRON T
A VER AG E PPSF HOME
WATERFRON T NON- WATERFRON T
A VER AG E PPSF LO T
WATERFRON T NON- WATERFRON T 7% % 37 $328, 03 0, 000 $2 77,68 0, 000 $50 ,35 0, 000 $32,803, 000 $39 ,668,5 71 $16, 7 83,333 $5, 010 $5, $4,442129 $1, 74 7 $2,$968045 24 16 $52 0,0 57,800 $29 7, 47 $222,582,3005,500 $21,66 9,0 75 $3 7, $13,911,394184,438 $3, 196 $4,609$2,267 $83 7 $1, 08 $6407
Q2 Summary: Condominiums and Townhomes
Transaction volume in Q2 was down -49% YOY. We are finally starting to see transactions on the South End of the island slow, similarly to what we’ve seen on In-Town transactions for the past few quarters.
Total sales value was down -15% YOY largely driven by a decline in sales value on South End transactions. In-Town sales value was nearly flat YOY.
As with single family homes, PPSF for In-Town condos and townhomes continued to rise with +81% YOY growth, hitting a record $2,427 PPSF.
TRANS AC
IN- TO WN SOUTH END
TOT AL SALES VA LU E
IN- TO WN SOUTH END
A VER AG E SALE PRICE
A VER AG E PPSF IN- TO WN SOUTH ENDN $406, 7 22,4 70 189 ,2 47 $1,834,690$955,242 $169 ,356,90 $177,586,959 $1,982,536 $3,60 3,338 $1,38 7,398 $1,225 $2,42 Q2 inventory2022,was YOY; Q2 2021 averaged 89 active whereas Q2 2022 averaged 61 active listings per month. listings were up ever so slightly QOQ in Q2 2022, rising to 61 from 56 in Q1 2022 . We will continue to watch beginningandmarketofasinventoryQOQbehavioranindicationwhethertheissofteninginventoryistobuild.
IN- TO WN SOUTH END
The number of days on market continued to decline in Q2 2022, reaching an average of 104 days. This is a -41% decrease from the same period last year, when properties stayed on the market for an average of 177 days.
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Sale to
The sale to list ratio for condos and townhomes hovered right around 95% for Q2 2022, largely due to limited inventory and little room to negotiate on list prices. This has been consistent the past few quarters.
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Most Recent Sales
S ALE PRICE
$18,60 0,0 07 $15, 00 0, 000 $12,25 0, 000 $10 ,625, 000 $ 9, 02 0, 000 $8,50 0, 000 $6,85 0, 000 $6,50 0, 000 $6,464, 000 $6, 15 0, 000 $6, 005, 000 $5,65 0, 000 $5, 145, 000 $4, 10 0, 000 $3,96 9, 000 $3,90 0, 000 $3,
$80$1,$1,$1,25$1,30$1,30$1,40$1,925,$2,23$2,35$2,40$2,50$2,50$2,85$3,60780,0000,0000,0000,0000,0000,0000,0000,0000000,0000,0000,0000,000126,000125,0000,000
ADDRES S
219 BRAZILIAN A VENUE
101 W ORTH A VENUE, 0031
2 N BREAKERS RO W N, 32
110 SUNSET A VENUE E, 3 A
400 S OCEAN BOULEV ARD , PH D
360 S OCEAN BOULEV ARD , 0032
200 BRADLEY PLA CE, 206
150 BRADLEY PLA CE, 0906
130 SUNRISE A VENUE, PH 4
100 W ORTH A VENUE, 315
330 CO CO ANUT RO W, 0041
330 S OCEAN BOULEV ARD , 0054
100 SUNRISE A VENUE, 413
330 S OCEAN BOULEV ARD , 0015
330 S OCEAN BOULEV ARD , 0012
100 W ORTH A VENUE, PH 15
100 W ORTH A VENUE, 404
300 S OCEAN BOULEV ARD , 1B
22 7 AUST R ALIAN A VENUE, 0052
17 0 CHILEAN A VENUE, 6A
44 CO CO ANUT RO W, 510A
201 EVERGLADE A VENUE, 206
22 7 AUST R ALIAN A VENUE, 0032
354 CHILEAN A VENUE, 0041
146 SUNSET A VENUE, C
354 CHILEAN A VENUE, 0045
223 AT L ANTIC A VENUE, B4
223 AT L ANTIC A VENUE, A3
220 AT L ANTIC A VENUE, 0030
44 CO CO ANUT RO W, 101A
220 AT L ANTIC A VENUE, 0050
44 CO CO ANUT RO W, 30 7A
SF UNIT SIZE
5, 098 4, 130 3, 9006461,20064695804781,1,1,281,4401,1,2011,282,3461,5391,5901,9961,9961,2,4063,2,2,4342,2,6482,2,4,6090207497001441370807807748719304723
PPSF ($) UNIT SIZE
$889$1,$938$1,935$1,364$1,617$1,$1,839$1,869$1,826$1,66$1,430$2,$2,214$1,535$2,456$2,453$1,988$2,$2,890$2,348$1,950$2,8$2,656$3,$2,58$3,$3,281$2,305$4,$3,632$3,6480561487032780540827790741
Average Mortgage Rate
The average 30-Year fixed mortgage rate has made a massive move up, increasing more than 100% in the last 12 months. However, it still remains on the lower end when looking at it in comparison to the last 40+ years.
Share of Listings with a Price Cut
Price cuts have really begun to trend upward on listings in the last three months in South Florida and across the United States, from below 10% to above 20%. While we don’t have data specific to Palm Beach Island, we believe these broader numbers are an interesting early indicator, as price cuts suggest properties are not moving as quickly and sellers are lowering prices and price expectations.
For many months, South Florida was consistently trailing below the national average for share of listings with a price cut. In recent months, this has shifted and it’s now trending on par with the national average.
Source: https://fred.stlouisfed.org/series/MORTGAGE30US
Source: Zillow Data Center.
The share of listings with a price cut refers to the number of unique properties with a list price at the end of the month that’s less than the list price at the beginning of the month, divided by the number of unique properties with an active listing at some point during the month.
United States Home Sales
A sale of the new house occurs with the signing of a sales contract or the acceptance of a deposit. The house can be in any stage of construction: not yet started, under construction, or already completed. New home sales account for about 10 percent of the US housing market.
100 DAYS
Construction Spending refers to monthly estimates of the total dollar value of construction work done on new structures or improvements to existing structures for private and public sectors each month in the United
Sales of new single family houses in the U.S. plunged -12.6% month-over-month to a seasonally adjusted annualized rate of 511K in July of 2022. This was the lowest reading since January of 2016 and well below forecasts of 575K, amid rising borrowing costs, prices and a fall in demand. Sales fell in the Midwest (-20.6%), the West (-13.3%), and the South (-12.1%) but rose in the Northeast (13.3%). Note: the South is showing the slowest decline, which might suggest why we’re not quite feeling the impact yet in Palm Beach.
US Census Date.
June 2022 represented the first month in the last 12 months where we saw a month-over-month decrease in construction spending in the United States. It fell by -1.1% from the previous month to a seasonally adjusted annual rate of $1.76 trillion (USD).
Housing Starts
Housing starts in the United States tumbled -9.6% month-over-month to an annualized rate of 1.446 million units in July of 2022, the lowest since February of 2021 and well below market expectations of 1.54 million. The housing sector has been cooling down amid soaring prices of materials and rising mortgage rates. Single family housing starts sank -10.1% to 916,000, the lowest level since June 2020. Starts for units in buildings with five units or more slipped -10% to 514,000. Starts were lower in the Midwest (down -33.8% to 139,000), the South (down -18.7% to 710,000), and in the West (down -2.7% to 367,000) but rose in the Northeast (+65.5% to 230,000). Note, it has not dropped to the levels we saw during the early Covid uncertain period of 2020.
In Closing
We appreciate you taking the time to read our report, and hope you found our insights on the Palm Beach Island market helpful. Based on the actual real estate transaction data for Palm Beach, the market still appears to be strong, with the exception of the low inventory challenges we’ve experienced for the last several quarters.
Additionally, we hope you find the new insights and macro trends on the overall housing market interesting. The national outlook they provide has us cautiously optimistic about Palm Beach real estate. The indicators suggest a slowdown in the overall real estate market. That being said, we’re not quite feeling it yet in Palm Beach.
Demand remains strong and the prices people are willing to pay to own a piece of the Island continues to inch up. I don’t want to say Palm Beach is immune, but it does have unique traits in its favor that help it withstand some of the economic storms we’ve endured over the last 40+ years. Our inventory is finite, the town and culture of Palm Beach is one of the best warm weather destinations in Florida, and people are moving here for flexible work setups, major corporate expansions, and no state income tax.
Thank you again for reading our report. If you have any feedback for us, we’d love to have it, as we are always looking for new ways to break down the data in more interesting or accessible ways.
Warmest wishes,
Gary ExecutivePohrerDirector of Luxury Sales
Douglas Elliman
340 Royal Poinciana Way M302 Palm Beach, FL 33480 O: 561.655.8600
M: www.garypohrer.comgary.pohrer@elliman.com561.262.0856
Source: Above data is pulled from Palm Beach MLS, The Beaches MLS and the Palm Beach Property Appraisers (PAPA). Specifically, we are only looking at transactions located in the 33480 zip code.
340 ROYAL POINCIANA WAY, M302, PALM BEACH, FL 33480. 561.655.8600 © 2022 DOUGLAS ELLIMAN REAL ESTATE. ALL MATERIAL PRESENTED HEREIN IS INTENDED FOR INFORMATION PURPOSES ONLY. WHILE, THIS INFORMATION IS BELIEVED TO BE CORRECT, IT IS REPRESENTED SUBJECT TO ERRORS, OMISSIONS, CHANGES OR WITHDRAWAL WITHOUT NOTICE. ALL PROPERTY INFORMATION, INCLUDING, BUT NOT LIMITED TO SQUARE FOOTAGE, ROOM COUNT, NUMBER OF BEDROOMS AND THE SCHOOL DISTRICT IN PROPERTY LISTINGS SHOULD BE VERIFIED BY YOUR OWN ATTORNEY, ARCHITECT OR ZONING EXPERT. EQUAL HOUSING OPPORTUNITY.