Absorption rate in Jupiter down again to 5.35 months
It has been another month since we updated our readers on the latest real estate absorption rates in the northern county region. Median prices for single family homes in Palm Beach County are up almost 30% compared to year ago numbers, sales are up almost 15% during that period and inventory is down almost 45%. Pending sales, those homes that are under contract, continue to climb and absorption rates continue to decline. It seems like nothing can stop this locomotive train as the real estate market continues it’s amazing turn-around.
Interest rates are the most obvious choice when looking for a sign that could reverse the trend that seems so firmly in place. Last week marked the ninth straight week of increases taking the average overnight rate for a 30 year fixed loan for the good old days of 3.42% up to 4.4% as we started this week. Since then the rates have continued to climb to 4.64% as of this morning. So far we have not seen rising interest rates have any measurable effect on the market but as time marches on this may in fact change. The Fed has been clear that their Quantitative Easing program that currently has them buying 85 trillion dollars of our debt each and every month is going to end and that has been the cause of these rather significant increases.
There is some truth that increasing rates will cause some buyers to jump in before rates go much higher, which they could do. I still think we should see rates trend in the 4% to 5% for much of the year but as fast as they have been rising one really never knows. The Fed who has effectively kept rates at artificially low levels for so long is the key. Increased rates changes how much home a buyer will qualify for and with prices up 30% over the past year this is significant. They also may slow down investor purchases which currently account for about 15% of all purchases in the area as other options to place their money become more attractive in a rising interest environment. We will be keeping a close eye on these market changes and bringing you the latest in upcoming articles.
Each month at this time we take a look at the absorption rate in Jupiter and the surrounding communities as the trend of these numbers shows buyers what they can expect in choices when they are heading out to look for a home. We base this number on how long it will take the market to absorb all of the homes on the market if sales levels over the prior 30 days remain constant and no other listings are added to the market. We look at the absorption rate which includes pending and contingent listings as it gives us a truer picture than the inventory level which eliminates those listings. The absorption rate will always be higher than the inventory level. So let’s check in on the absorption rate in Jupiter and the surrounding communities to see what has changed since the last numbers we published.
Absorption rate in Jupiter – 5.35 months down from 6.27
Absorption rate in Palm Beach Gardens – 6.48 months up from 5.95
Absorption rate in Hobe Sound – 7.14 months down from 7.27
Absorption Rate in Tequesta – 7.15 months down from 9.11
Last month we had 75% of our reporting municipalities show higher absorption rates with the average absorption rate sitting at 7.15 months which was a significant 10% increase from the previous month. We had been at 7 year lows until last month and it is a very significant sign that things reversed course this month pointing to the recovery continuing. This month we saw 75% of reporting cities show a decrease in the absorption rate with the average falling 9% to 6.53 months and once again we are nearing 7 year lows in this important market metric. We next move in this months report to the absorption rate in Jupiter where the market strength has been stupendous. We saw a large 15% move to the downside to a new low. A 7% decrease in final sales numbers coupled with a 9% decline in inventory brought the absorption rate in Jupiter to 5.35 months down from the 6.27 months we reported last month. With this decrease we stayed significantly below the 12 month average which sits at 7.77 months and far below our year ago numbers when we reported 7.2 months.
Watch those interests rates as they hold the key to where the market goes as we chug our way through the remaining months of summer.
Fins up ………….