2011 Brought Us More Sales and Lower Prices; What About 2012?
Before January completely sneaks away I had to sit down and review where we have been and what my thoughts are moving ahead to another year in the south Florida real estate market. No doubt 2011 was a great step towards recovering to what one would consider a normal market but we certainly have a ways to go and a few bumps in the road ahead. For the purposes of this review I will be using the single family home market in Jupiter but if anyone needs the numbers for other municipalities or product types please let me know and I will be happy to send you that information.
Sales were good last year, very good. In fact, during 2011 a total of 897 single family homes closed escrow through the real estate community in Jupiter. This was our third straight annual increase and the best showing we have seen since 2005 when 944 homes sold. This number reflects an increase of 18.33% which is huge. March and April were by far our two biggest months with good strength also in the 6 months from May to October. Sales dipped the last two months of the year which is attributed both to seasonal factors and a dip in inventory levels.
Inventory levels cannot be ignored and they are a bullish sign moving forward. In fact as of January 1st there was a total inventory of available properties in Jupiter totaling 1,055 units including town homes and condominiums. Compare this number to the 1,264 units we had available on January 1st of 2012 and the 16.5% reduction cannot be ignored. Normal laws of supply an demand would tell us with less inventory (supply) and higher sales (demand) would put upward pricing on pressure. But then again what we have been going through is far from normal.
But while we are striving for a normal market there are still many influences that will effect us in the coming year. First, is the inventory of foreclosures still hiding out there in the shadows. Foreclosures in Palm Beach County were down significantly in 2011; in fact we saw about a 12% reduction from the numbers we saw in 2010. Experts are everywhere you look but most feel these numbers were down mainly due to the robo-signing debacle we experienced last year which caused everything to slow down and I would concur. Starting off in 2012 no doubt the numbers are starting out higher so we must continue to monitor these numbers closely.
So for the good news of 2011 sales were strong as buyers reacted favorably to lower prices, amazing interest rates, inventory levels shrunk considerably while foreclosure numbers decreased so where is the bad news. If you are a homeowner or someone contemplating a sale or purchase your main concern is the value of your property and 2011 was not a good year for prices. In fact, the median price of single family home sales in Jupiter eroded once again for the sixth straight year and while we certainly have seen prices stabilize over the past two years we are still seeing reductions.
But one must really look at a significant slowdown in these reductions as a very bullish sign. Last year we saw the median price in Jupiter drop to $307,500 from $320,000 for a 4% reduction in value after a smaller 1% drop in 2010. Those performances follow of the heels of much larger decreases in 2009 (down 10%), 2008 (down 16%) and 2007 (down 10%). As we move further away from the incredible 38% one year increase we experienced in 2005 sellers are getting more and more used to the new price structure and in fact today’s prices closely mirror those back in 2003.
So where do we go from here and what should one expect as we face a new year. I wish I had a crystal ball but since I don’t I must rely on the information we have and put my neck on the line a bit to say what I see ahead for 2012;
The market is still segmented with some areas and product types very hot and these include the single family home market under $400,000 where there is a lack of quality inventory in most areas and lower priced condominiums and town homes being snapped up by investors in record numbers. Prices in these segments should be continue to stabilize and the highest quality properties should see value increases in the coming year. Nothing earth shattering but the value is there and current prices remain well below replacement cost. As we work our way through inventory at some point prices will return to these levels and it is then when we will once again see the home builders doing well.
Other segments of the market like many private club communities and higher end condominiums still have excess inventory levels and many will see further pricing pressure. All real estate is very localized so these are generalizations as some clubs are still doing well as are the best condominium projects but buyers and sellers must closely look at the metrics surrounding each property prior to making any decisions.
Interest rates have been every buyers friend over the past year and we sit this morning at record all time lows. Last year at this time we were sitting with rates for a 30 year fixed mortgage right about 5% while today we sit at 3.91% which is a rather amazing 22% decrease which allows buyers to qualify for more expensive properties or reduce their total housing expenditures. No doubt the Fed is doing everything they can to keep rates low and will continue to do so until we either see a significant increase in inflation or a pick up in the overall strength of the economic recovery. As it is an election year don’t expect any drastic changes out of Washington.
Initial foreclosure filings should go down during the upcoming year which is a good thing but I think the backlog created last year will keep the court system busy here in Palm Beach County. Banks continue to let a much higher percentage of these properties go to third party bidders at the auctions and I think that trend will also continue. It is still a great time to invest in Florida real estate if the numbers work and smart money with an eye to the future are locking in some great value.
So here I go putting my neck on the line with my projections for what I will be telling you next year at this time;
Sales will put in a good showing but I think they will be flat. I project they will be down slightly in 2012. If I have to pick a number let’s go with 775 single family home sales in Jupiter during the coming year.
Inventory levels will stabilize and perhaps increase a bit. Again very localized in nature but overall I am betting on not much change in the overall inventory level. Picking a number for January 1, 2013 in Jupiter I am going with something in the 1,100 neighborhood.
Prices will continue to stabilize and I think we should see a price increase. Yes I said it I think prices in 2012 are finally going to give us our first year over year median price increase since 2005. Again, nothing earth shattering but up so my projection for the median price single family home sale in Jupiter to be in the $325,000 neighborhood for this year.
Foreclosures will increase. I think the back log from last year is going to catch up and we will see more properties foreclosed on during the year in Palm Beach County. This is a necessary evil and in my opinion there are not enough of the type of properties the market needs at this time but the overall numbers will be higher. During 2011 we had to deal with 12,075 foreclosures and I am going to jump that number up to a projection of 12,750 in 2012.
Interest rates will stay low but not this low. I think we may have some lower rates ahead but these values will be short lived and by the end of the year rates should be heading north. Not sure I see us back up to 5% but that certainly could happen; I am going to go with a projection of 4.75% a year from now.
So there you have it my story and I am sticking to it. So much can change with the overall economic turmoil facing us both nationally and internationally but I see 2012 as being a good solid year towards further return to more normal conditions and I look forward to the challenges and bringing you my regular updates from the front line. I am 100% dedicated to ensuring my clients have the most accurate information to make decisions surrounding their real estate holdings whether they are buying or selling. If I can ever do anything from answering a question to providing you a valuation on your home and anything in between just pick up the phone and call me at 561 308-0175 or send me an e-mail to firstname.lastname@example.org and I will be most happy to help.
Tom Priester e-PRO
“Results Driven Real Estate”
Keller Williams Realty