Jupiter real estate market torn between the haves & have-nots

This morning when I woke up, the average overnight rate on a 30-year mortgage had risen another 9 basis points overnight to a new modern day high of 5.97%. After today’s Fed announcement you can count on them to climb even higher.

Back in the good old days, you found a job, worked hard and saved enough money to put 20% down on a home. You dressed up, visited your local bank with hat in hand, and prayed they would lend you the remaining 80%. You got married, raised a family, and didn’t even think about moving, You had a big party to burn your mortgage once you finally paid it off. You were financially sound and most happy. You died in "your" house that you loved and cherished.

That was a long time ago it seems, but about 20 years ago I worked for one of the largest developer/builders in the State of Florida and he would not agree to build you a home unless you deposited 20% cash with him up front. My have times changed.

Good jobs, steady paychecks, and excellent credit were the rule and struggling to make ends meet was the exception. Yes, those were the good old days. The “haves” were a far larger percentage of the United States population, but the gap these days is widening. The American dream, for many, is nothing more than a fantasy that will never be fulfilled.

In markets like the Northern Palm Beaches, one looks around and believes everyone is flush with cash. Homes that sell for over a million dollars continue to set record after record and drag the median home price higher and higher.

As interest rates were manipulated to all time, historic lows, it helped obscure excessive government spending and debt. Those low rates helped more of those living paycheck to paycheck afford an ever-increasing median home price in places like the Northern Palm Beaches. Back in February of last year, if you put 20% down on a median priced single-family home and borrowed the rest at the average overnight rate for a 30-year fixed mortgage your monthly payment for principal and interest would have been $2,027 per month. Pretty affordable to anyone, even if they were working paycheck to paycheck. In fact, it’s less than half of what the median single family unfurnished rental will run you today in Jupiter.

Fast forward to this morning and put 20% down on the median priced single-family home (that will run you $187,000 by the way) and borrow the rest at today’s going interest rate and your monthly payment is $4,470. That’s 221% of what it would have cost you just 16 months ago. No, the average income of the working family has not kept pace.

Those who cannot afford today's prices are growing in numbers and right now, the chasm between the haves and the have-nots is only getting wider.

So, what does that mean to the local real estate market? It means the same thing Paradise Sharks Real Estate has been telling you for years. Watch the million-dollar sales as they direct where this real estate ship is heading. In May, closings above a million dollars shattered all the records. That month, 62% of single-family home sales closed above a million dollars in the Northern Palm Beaches. 60% of those buyers paid with cash and were pretty much unaffected by rising interest rates.

While Covid and today’s record setting inflation tosses many “rules” out the window, we fully expect the deep pocket, out of towners to take the summer off. Pending home sales at the top end of the market will drop significantly and pull down the median home prices a bit. The big problem we are now facing are buyers who need to borrow money.?

If the wealthy continue flocking to our area, what happens to neighborhoods where the wealthy are not buying? They suffer and we are already starting to see that come to fruition. Right now, there are 184 single family homes on the market in Jupiter. Only 44 of those are listed below the median sales price and 16% of those have just reduced their asking prices. It’s very interesting days in many neighborhoods as people start to freak out about all the news surrounding inflation and interest rates.

No doubt, the Northern Palm Beach real estate market has been changing and it will continue to do so. Inventory levels have jumped 37% over the past month. Last year over the same period they were up 2%. Inventory levels today are 204% of what they were on January 1st. Last year, over the same period, they dropped 47%. Buyers have more options that they have had in 16 months and 29% more than they did last year on this date. Sure, we can go back to pre-covid days and see far higher inventory levels but sales volume was also far higher than we see today.

Pending home sales fell another 18% over the past 30 days and are down 40% from last year's totals on this date. Going back to before Covid landed in this county, and we find today’s pending home sales are 25% below where they were on this on this date in 2019.?

The key to everything, and especially the million-dollar buyer who has been driving this bus, is the overall economic news. Inflation at 40-year highs and interest rates heading higher than many have ever seen trying to combat it. I always say I don’t have a crystal ball but it’s very easy to see that the American dream of buying a home is slipping further and further away from more and more people. The gap between the haves and the have-nots is only going to get wider and deeper. If the economy keeps the wealthy flush with cash, the local real estate market at the top end is going to be just fine. What happens on the other side of the equation is going to continue to be very, very interesting indeed.

I got my first real estate license almost 30 years ago and I have never seen anything close to what we are going though right now. Certainly, the bubble bursting in 2005/2006 was crazy, but it was a totally different kind of crazy. On top of that, in 2005, our national debt was under $8 trillion dollars. I don’t care if you are buying, or selling, there are no easy answers. But there is education and making informed decisions on the metrics surrounding a specific property, at a specific time, need to be fully explored.

Paradise Sharks Real Estate has been writing weekly articles about the Northern Palm Beaches real estate market for longer than I care to remember. Years and years. Our motivation is helping others. Our clients, friends and neighbors. Saving them money. Saving them headaches. Our consultations are complimentary, and we are happy to answer any and all questions that you may have. We would love the opportunity to earn your trust and your business. If we can ever be of assistance in any way, you will find us very easy to reach at 561.308.0175 or at?[email protected].

Fins up……