Home prices in Palm Beach County increase in September despite insurance, interest rate concerns

Article first appeared: https://www.palmbeachpost.com/story/news/local/2023/10/20/home-prices-increase-amid-concerns-about-insurance-interest-rates/71202168007/

Price tags on existing single-family homes in Palm Beach County inched higher in September compared to last year despite pressures on buyers, including from spiking interest rates, dogged inflation and ballooning insurance costs.

At $600,000, the median price for a home last month was 3.4% higher than in September 2022, according to a report released Thursday by the Broward, Palm Beaches and St. Lucie Realtors Group.

That’s down from a record high of $625,000 set in June, but still illustrates that Palm Beach County remains in a sellers’ market even with the number of new listings up 8% in September over the same month in 2022. The supply of homes for sale also grew to 3.3 months, which is nearly 14% higher than last year.

A balanced market where neither the buyer or seller has the advantage is considered a 5.5 to 6 months’ supply.

Jeff Lichtenstein, president of Palm Beach Gardens-based Echo Fine Properties, said the market is still humming but that homebuyers may be reevaluating their budgets or asking more insurance-related questions.

“The first question people ask today is, ‘How old is the roof?’ not ‘How sexy is the kitchen?’” Lichtenstein said. “Insurance is a factor, but it will settle down a year-and-a-half from now.”

About 1,100 home sales closed in September, which is down 6% from the same month in 2022.

Insurance reforms approved by Florida lawmakers are expected to reduce the amount of fraud that has contributed to higher rates, but it will take time for the market to stabilize, according to the Insurance Information Institute.

Meanwhile, Florida homeowners pay an average insurance premium of $6,000, which is more than three times the nationwide average insurance premium of $1,700. Also, the institute says Florida’s average premium has increased by a cumulative 102% over the past three years. It projects an average statewide increase of 40% or more in 2023.

“Insurance is something that will always be higher in Florida because we like to live where hurricanes can get us,” said Florida Atlantic University housing economist Ken H. Johnson. “But do I think this is causing more people to leave Florida than come into the state? No way.”

U.S. Census data released in June found Florida grew by 706,600 people between April 1, 2020 and July 1, 2022, which was a 3% increase. Palm Beach County added 26,280 people during the same time period, which was a 2% increase.

In addition to insurance concerns are the constraints of higher interest rates, which not only deter people from selling their home, but also reduce what some buyers can spend. The average rate for a 30-year fixed-rate mortgage as of Thursday was 7.63%, according to Freddie Mac. That’s the highest it’s been since December 2000.

Still, buyers have been willing to pay the asking price or near the asking price. Sellers last month got a median of 96% of their original listing price.

“There are still a lot of out-of-state cash buyers, and season is coming so that’s only going to increase,” said Donna Alexander, who works with renters and homebuyers in the Palm Beach Reserve office of Keller Williams.

About 44% of the Palm Beach County home sales last month were paid in cash.

Alexander said a couple she knows recently bought a house in Lake Worth Beach. It wasn’t their first choice of where to live but they wanted to buy when they could. Some Realtors speculate that pent up demand among buyers will mean higher prices when interest rates start falling.

“The market is getting harder and harder because peoples’ expectations continue to remain high while our inventory doesn’t reflect what their needs are,” Alexander said.

Statewide, the median sale price for a single-family home last month was $409,243, which is 1% higher than in September 2022. The median price for a condominium or townhome was $324,990. That’s 6% higher than last year.

In Palm Beach County, the median sale price for a condominium or townhome last month was $309,900, which is nearly 7% higher than in September of last year.