Home Inventory in Hobe Sound Hits Another New Multi-Year Low
Another month has passed us by with the South Florida real estate recovery continuing to move forward seemingly with no obstacles in its way. Another month of extremely strong sales was followed by signs that absorption rates had increased but the big news on everyones radar has been interest rates. If you haven’t followed what has happened to rates since our last update on home inventory in Hobe Sound and the surrounding communities then it is time to take notice.
What has transpired since then has been remarkable with the average overnight rate on a 30 year fixed mortgage moving higher by a rather stunning 22%. During the past month those rates have moved from near records lows at 3.42% to 4.16% as of this morning and the highest levels we have seen since October 30th of 2011. A buyer who was pre-qualified to have a $1,000 monthly payment for principal and interest has seen the value of the mortgage they can afford fall from $225,000 down to $205,500.
Some top economists have gone on record that they expect rates to settle into a range between 4% and 5% over the next year. Still very inexpensive rates on a historical basis but certainly much higher than we have been accustomed to and the effect on the housing market recovery needs to be monitored closely. There is no doubt that right off the bat the number of mortgage applications have been down significantly. With housing prices still down measurably from the peak in 2006 the pressure for buyers to react quickly may spur even stronger buying. From my seat it would seem a pullback in sales over the coming months would be a strong possibility but we will not know until sales for the months of June and July are recorded. While we are still a week or so from publishing final May sales numbers look for them to remain strong with contracts already in the pipeline.
One group of buyers continues to snap up properties at a fevered pitch and that is the large investment groups who have spent billions of dollars on homes over the past year. Firms like Blackstone, who has already purchased over 26,000 homes, and Colony Capital, who has a portfolio in excess of 10,000 homes, are a force to be reckoned with. Wall Street is banking that they can efficiently manage these large portfolios of rental properties and unload them for a significant profit as prices continue to recover. These firms and countless others continue to flood the market, snapping up inventory, and it will be very interesting to watch how it all unfolds. No doubt this is not what one would consider a traditional market recovery and the forces on prices and inventory are something we have never seen before in the housing market.
Every month at this time we take a closer look at changes in home inventory in Hobe Sound and the surrounding areas. Last month in this report we saw decreases in inventory in all of our reporting municipalities so let’s take a closer look at what has happened since then.
This report shows our home inventory “power rankings” for the month starting on June 1st. These rankings are set up so the top rated municipality will be the one who shows the highest overall reduction in inventory levels. Since it is these reductions, when coupled with stronger sales, that will continue to move prices higher we want to rank those accordingly. So here are the inventory power rankings are the rankings for the month that ended on May 31st .
#1 Jupiter –
#2 Juno Beach –
#3 Palm Beach Gardens –
#4 Tequesta –
#5 Hobe Sound – down 4%
Once again in May all of the reporting municipalities in the northern Palm Beach County region showed further inventory declines with the average falling by 7.2% and the median decrease weighing in at 7%. Not only is two straight months of declining inventories in all municipalities a rare occurrence we are seeing 7 year lows almost everywhere we look. We begin this months reports with home inventory in Hobe Sound where inventory levels decreased for the second straight month down 4% on top of the previous months reduction of 3%. As of June 1st, total home inventory in Hobe Sound sits at 278 which is down 12 units from the 290 available on May 1st. With these levels we find ourselves with home inventory in Hobe Sound down 11% from the 12 month average that now sits at 312.5. Looking at the “seasonal” factor we are down 16% from the level of home inventory of 329 in Hobe Sound that we reported on June 1st of last year.
The beat goes on and the big questions we now ask are will interest rates cause us to change course and will Blackstone, or another investment giant, be your new neighbor?
Fins up until July………..