Absorption rate in Tequesta reverses 2 month trend
This big old goofy south Florida real estate market keeps ebbing and flowing much like the waves that lap the shoreline at our incredible beaches. Summer has passed and we await the annual arrival of our friends from the north. Traffic is picking up and hopefully that will mean good things for the local economy over the next 6 months.
For those of you who don’t know, finding well priced homes in many price and product segments has been very, very difficult. Buyers are frustrated and inventory continues to be a problem. There has been a hint of change, not only in the weather, but it does seem over the past week or so there are more choices for those looking for the perfect home. But prices are up and you will see many listings priced above the most recent comparable sales which creates a couple issues. Buyers are still price conscious but feel the market has finally bottomed and know that now is the time to pull the trigger. Psychologically the fear of paying 10% more than the home next door sold for 3 months ago is a tough obstacle. But for those financing the purchase, or concerned about appraised valuations, there may be a surprise and this is causing more “back on market” listings.
So far sales have kept up, even with the shortage of inventory and valuation concerns but for the first time in many months we are seeing signs of change. Our two largest local markets showed slight declines when we reported final August sales figures but early tallies on September are showing strength so like the waves hitting the beach the only constant is change. Demand remains constant and the shortage of inventory remains the metric that is causing prices to move higher for the first time in 7 years. Every month around this time we take a deeper look at the absorption rate of local markets as this gives us a glimpse as to where the market is heading. The absorption rate is simply the total number of months it would take to absorb all of the existing inventory if sales remained constant based on the most recent 30 day period. Absorption rates had been declining steadily for about six months but we have seen those numbers move a bit higher so let’s see where we stand today.
Palm Beach Gardens –
Tequesta – 11.82 months down from 16.50
Hobe Sound – 12.03 months up from 11.06
The strength of a market can change quickly and the “average” absorption rate for our four reporting municipalities, after 2 straight increases, showed a decline. No doubt it was a very small decline to 10.66 months from 10.69 months just 30 days earlier but a solid sign that the market continues to show strength. But absorption rates are up from a few short months ago and again the cause is more attributed to a lack of quality inventory than anything else. We next move in this months report to our 3rd place finisher of Tequesta whose absorption rate was the only reporting municipality to show a decrease and it was a substantial one of 28%. A solid increase in sales coupled with a slight decrease in inventory brought the Tequesta absorption rate to 11.82 months down from the 16.05 we reported the previous month. This was a welcomed change from two straight months of substantial increases. With this decrease we fall below the 12 month average which sits at 12.01 months. From a “seasonal” perspective we stayed just above our year ago numbers when we reported 11.76 months.
Interest rates remain a positive sign and with the FED’s new QE3 program pressure there should remain to the downside. After years of devastation the real estate market has improved but these numbers show that we certainly are not, much like the overall economy, out of the woods.
Until next month………