Absorption rate in Palm Beach Gardens drops 12%
Year after year, for almost seven years, we have had to report news of sliding prices as we continue to pay the price for the big real estate bubble that popped in late 2005. But as Bob Dylan says “the times they are a changin’”. With each month that passes us by the eventual recovery has to draw closer and with the trend we have seen in local markets one might say that recover has been here and the bottom has finally been set.
Each month around this time we bring you updated numbers for the absorption rate in the Northern Palm Beach County area. These numbers, and especially the trend we see in these numbers, are critical when understanding how inventory and demand interact and what role they will have in future price movements. As interest rates entice buyers demand remains very high as inventory levels continue to drop month after month. The interaction of buyers and inventory determine the absorption rate which gives us the number of months it will take to absorb all of the current inventory at the current rate of closings in each local market.
This month we actually saw the absorption rate increase in one municipality while the other four showed continuing improvement. And this improvement has been drastic as we are seeing absorption rates that approach half of where they stood just a few short months ago. No metric provides us a better view of prices moving higher and unless something changes significantly with either demand or inventory levels your home will be worth more tomorrow than it is today. So let’s take a closer look what happened to these absorption rates for the period ending on June 15th.
Hobe Sound –
Palm Beach Gardens – 7.55 months down from 8.62
Tequesta – 8.08 months down from 10.71
Juno Beach – 20.67 months up from 7.94
Palm Beach Gardens weighs in this month as our 3rd place finisher with it’s 4th straight monthly decrease. A big jump in sales coupled with a significant decrease in inventory brought the Palm Beach Gardens absorption rate to 7.55 months a 12% decrease from the 8.62 reported the previous month. We fell to a new annual low and were far below our 12-month average which currently sits at 11.13 months and also much lower than our year ago numbers when we reported 10.86 months. A more positive sign of prices on the rise is hard to find.
As prices have dropped, buyers are finally seeing the value in Florida real estate and as new construction has been at a virtual standstill very few new units have hit the market and we are finally seeing the benefits. The investor market, which started the resurgence, continues unabated with new offerings snapped up immediately with multiple offers. The “shadow inventory” we keep hearing about is mainly in the investor grade market and the lack of new foreclosures in the price ranges where demand is the highest is putting significant upside pressure on pricing.
Like the weather this summers real estate market in South Florida should be hot….