It is now been several months since the coronavirus, Covid –
19 has existed as a substantial force on the Florida economy. This impact has
been felt especially hard in the real estate market, resulting in a substantial
drop in the number of sales compared to 2019.
The first quarter of 2020 reflected the strong economy with
a year-over-year growth of over 10% from 2019. In addition, inventory for
single-family homes was a low 3.4 months and the inventory for
townhomes/condominiums was a more average 5.5 months. The time periods from listing to contract was
a short 43 days for single-family homes and only 55 days for
townhomes/condominiums.
In addition to the strong economic news in the first quarter
of 2020, the low mortgage interest rates also helped encourage sales, dropping
nearly three quarters of a point from the same time in 2019, from an average of
4.37% to an average of only 3.51%.
The effects of the virus came to a head in April, 2020. In
Miami, sales declined 40% compared to April, 2019. Broward County experienced a
decline of 37.4% and Palm Beach County experienced a decline of 33.8% compared
to April, 2019.
Interestingly, the median price for sold homes actually
increased in April in all three counties. The median price increase in Dade
County was 7.3% to $382,000 for homes and 6.9% to $265,000 for condominiums.
The increase in Broward County was 6.1% to $382,000 for homes and 8% to
$183,500 for condominiums. The increase in Palm Beach County was 4.3% to
$365,000 for homes and 5.4% to 195,000 for condominiums
During March and April 2020 many pending deals were canceled
by purchasers asserting a force majeure clause in their real estate contract.
Some buyers gave up their deposits rather than proceed to close. Others sought
to delay closing or fight to obtain the return of their deposit.
Many sellers pulled their properties from the market and the
number of active listings in Palm Beach County fell 18.5% from April 2019 to a
total number of listings of 6,126. New listings eventually declined from 2019
as well, only 1,264 new listings in April 2020, a decline of 39.4%. The time period from listing to contract also
increased substantially from earlier in 2020 to nearly 76 days. This is a 21.6%
increase from April 2019.
Unlike April, sales actually picked up some in May, 2020.
Sales levels are still below similar levels in May, 2019 but listings and
closings increased compared to April, 2020. Houses that were withdrawn from the
market in March and April were relisted in May by many sellers. While the virus
has restricted sales throughout the market the effect has been less on very
high-end sales in excess of $10 million.
For homes priced over $1 million May. 2020 sales figures
were encouraging. Sales surged 45% in Miami-Dade County over May. 2019 with Palm
Beach County experiencing a 26% increase over May, 2019 and Broward County had
a 23% increase for the same time. It is not clear if this increase will be
sustained for the summer of 2020 or this just includes delayed closings from
April.
Because the combination of canceled listings and fewer new
listings the inventory of homes available for sale has fallen by 28.8% for
single-family homes and 12.5% for townhomes/condominiums. This equates to a 4.2-month
supply of homes in Palm Beach County. This number is below the generally
accepted equilibrium number of 5.5 month’s supply. When the supply is below 5.5
months it is generally considered to be a sellers’ market which is reflected in
the higher median sales price for homes that actually close.
The virus also affected the mortgage foreclosure market. The
number of homes being foreclosed and sold at the courthouse has dropped
dramatically. Only 24 homes were set to go to auction in June, 2020 at the Palm
Beach County Courthouse compared to a total of 136 homes that were scheduled to
be auctioned in June, 2019. In addition,
Fannie Mae, Freddie Mac and the Department of Housing and Urban Development of
all extended their stay of mortgage foreclosures through June 30, 2020, which
make up the bulk of the residential housing market. It is also possible that a
further extension of that stay maybe entered depending on the status of the
economy at the end of June.
The appears in the short run that the real estate market
will continue to be affected by the virus but that once the public perception
is that the virus is contained and the economy is rebounding the pent-up demand
for home purchases, coupled with the continuing low mortgage interest rates,
should see increased sales at some point in the future.
Michael J Posner, Esq., is a partner in Ward, Damon,
Posner, Pheterson & Bleau, P.L. a mid-sized real estate, estate planning
and business-oriented law firm serving all of South Florida, with three offices
in Palm Beach County. They specialize in
residential and commercial real estate and can assist with a closings and
loans. They can be reached at 561.594.1452 or at mjposner@warddamon.com
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