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Home sales, recovering prices had agents scrambling to keep up

Posted On: 05-05-2013

By Darrell Hofheinz

Daily News Real Estate Writer

Although Palm Beach real estate sales slowed to a trickle during the first years of the recession that began in late 2008, take note: The floodgates appear to have opened, judging by the number of contracts inked this season for single-family homes.

To be sure, most of the houses, vacant lots and condominiums sold at prices nowhere near the island’s historic highs of 2008. But the sheer number of transactions — and especially the return of more high-dollar sales, including a record-setting four-property deal in December that hit the stratosphere at nearly $130 million — have many local real estate professionals heaving sighs of relief, a contrast to last season.

“Last year, we were looking at much of the lower-priced things selling. This year, it has been much more across the board,” says Ava Van de Water, president of the Palm Beach Board of Realtors and head of Brown Harris Stevens’ island offices. “We’ve been writing contracts like crazy. It’s been a very strong season.”

The numbers in the mid- and upper-price brackets, however, are particularly telling. In 2011-12, for instance, just 10 transactions closed at $6 million or more between the start of September and May Day; that number jumped to 34 in 2012-13, according to the prices recorded with the deeds by the Palm Beach County Clerk’s office, the source of all the figures presented here.

Of the 2011-12 season’s sales, the two largest recorded at $13.5 million and $15.75 million. This season, 10 sales topped $13.5 million during the same period.

They included that multi-property stunner totaling nearly $130 million at the tail end of last year, when broker Lawrence Moens of Lawrence A. Moens Associates orchestrated the off-the-market sales of three side-by-side oceanfront properties and an adjacent house on the South End at Nos. 20, 30, 40 and 50 Blossom Way. The entities that bought the properties are all linked to Chicago hedge-fund manager Kenneth Griffin of Citadel Investments Group.

Two other 2012-13 deals hovered at just above $20 million, while four were recorded at between $14 million and $17.5 million.

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THE NEW RULES … FOR NOW

So what lessons can home buyers and sellers draw from the busy season that has just ended? Here are a few takeaways, based on conversations with island brokers and agents.

Trust the axiom of “last in, first out.” Across the country, higher-end real estate markets — including Palm Beach’s — were the last to feel the effects of recession and the first to recover. Although experts generally agree that the U.S. housing market peaked in 2006, the effects of the country’s housing bubble weren’t noticeable in Palm Beach until the first quarter of 2009, when just six houses changed hands. And by the middle of 2011, analysts generally agree, property prices bottomed on the island and have steadily risen since.

Never underestimate the power of pent-up buyer demand to jump-start a housing market. Would-be buyers not only held off on purchases during the recession but also were stymied, more recently, by uncertainty over the outcome of November’s presidential elections. Once Election Day passed, many buyers who had been waiting on the sidelines were ready to commit.

Among those were residents of high-tax states such as California, New York and Massachusetts who benefited from establishing residency in tax-friendly Florida. Citing the island’s tax advantages, a March report in Barron’s Penta magazine named Palm Beach the second-best spot in the country to buy a second home, just behind Jackson Hole, Wyo. Palm Beach, said the article, “is slowly becoming America’s stylish tax haven for the very rich.”

Tax incentives can motivate some homeowners to sell, but not all. A jump in December closings likely reflected the eagerness of some Palm Beachers to sell by start of the 2013 tax year. They were motivated by fears of skyrocketing federal estate taxes — as yet unrealized — and by the hike in this year’s capital-gains tax, which has risen to nearly 25 percent for some taxpayers.

But others, secure in their financial positions and buoyed by the recent gains of a bullish stock market, have felt little pressure to sell their homes. Instead, they are comfortable to remain in place, waiting for prices to rise further before they sell. And that means better-quality properties have become rare indeed.

Those who hesitate often miss out. Better-quality houses and condos — on the water, say, or recently renovated — have been selling quickly, often within weeks and sometimes days of entering the market. A key reason is that the price gap between buyers and sellers has narrowed, thanks largely to increased sales that have given agents more data to price them in line with market realities. Multiple bids on better properties were common this season, while some homes that had been on the market for more than three years finally made their exit.

Newer houses remain rare. The recession effectively stopped the development of new homes for sale, and that has left a gaping hole in the market. As a result, many buyers, especially on the North End, are only now making plans to replace outdated houses with new custom homes. The rub? Some seem in no real rush to rebuild, especially younger families who are flocking to the area and often choosing to renovate rather than replace.

In any case, it will likely be several years before such buyers are ready to sell their new or updated homes. Many developers, meanwhile, are still regrouping. Is it any wonder one real estate agent this season trumpeted a North End house built in 2004 as “newer construction?”

Private deals can deliver big results. A homeowner who hasn’t entered the market can still be enticed by the right offer. None of the properties in Moens’ Blossom Way deal, for instance, were listed in the Palm Beach Board of Realtors Multiple Listing Service when they sold. Likewise, another off-the-market sale this season came close to setting a Palm Beach condo record, when agent Susan Polan of Illustrated Properties closed a $9.5 million sale of Unit E 3B in the oceanfront Leverett House at 100 Sunset Ave.

The condo market is still finding its feet. Records in the Palm Beach Board of Realtors Multiple Listing Service show that in Midtown, selling prices have been on the rise. But units in densely packed Condominium Row south of Sloan’s Curve continue to play catch-up in terms of numbers sold and the amount of cash changing hands.

Palm Beach rentals are hot — and so are the prices they fetch. Brokers are reporting that the market for rentals is the liveliest in several years, with agents recommending that potential renters book early for next season. Likewise, owners of houses and condos who aren’t using their Palm Beach homes as much — but aren’t yet ready to sell — are finding that leasing out their properties makes financial sense, even if they’ve never considered it before.

And here’s the final takeaway, looking ahead to the fall: Real estate agents have long known that seasonal tenants who find Palm Beach to their liking often become homebuyers during the next season.

 

Source: Darrell Hofheinz, May 5, 2013, Palm Beach Daily News

http://www.palmbeachdailynews.com/news/business/real-estate-sales-recovering-prices-had-agents-scr/nXg43/

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