After defying gravity for years, Palm Beach County’s mansion market returned to earth in 2016.
Nearly every corner of the county saw sharp declines in sales prices from the fourth quarter of 2015 to the fourth quarter of 2016, according to data released Thursday by real estate brokerage Douglas Elliman.
“South Florida, after the financial crisis, successfully rebranded itself from foreclosure capital to luxury market.” said Jonathan Miller, the New York real estate analyst who prepared Douglas Elliman’s report. “But it’s been overplayed, and I just think it’s taking a breather. We’re going through this adjustment, where prices got too high or disconnected.”
In the town of Palm Beach, the average price of a single-family home dropped from $7.2 million in the fourth quarter of 2015 to $4.1 million in the fourth quarter of 2016, a 43 percent plunge. (A separate survey by Brown Harris Stevens found a 39 percent drop in Palm Beach prices over the same period.)
The decline was even more pronounced in the rarefied high end of Palm Beach’s market. Among the 10 percent of most expensive deals, prices plunged 50 percent.
In Wellington, the average price of luxury homes plunged from $3.25 million in the fourth quarter of 2015 to $1.68 million in the fourth quarter of 2016, a 48 percent drop. In Boca Raton, the average price of luxury homes fell from $2.25 million at the end of 2015 to $1.85 million at the end of 2016, a 20 percent decline.
In Jupiter and Palm Beach Gardens, the average mansion price fell from $2.21 million at the end of 2015 to $1.97 million at the end of 2016, a 12 percent drop. Only Delray Beach escaped the downturn. Prices there were essentially flat, hovering in the $2 million range.
“We’ve definitely seen the million-dollar-plus market decline quite a bit,” said Scott Agran, broker at Lang Realty in Boca Raton.
Palm Beach County mansion values had been soaring for years, in stark contrast to the U.S. economy’s generally tepid recovery from the Great Recession. In early 2016, mansion sales in Delray Beach and Ocean Ridge set new price records. And in 2015, a $33 million sale in Manalapan broke the old price record.
“This is not a blood bath,” said Jay Phillip Parker, head of Douglas Elliman Florida. “It is simply market cycles.”
It’s unclear exactly why the mansion market has faltered in the past year. After Donald Trump’s victory Nov. 8, stocks surged to new highs. And in an economy marked by an increasing wealth gap, the wealthy generally have grown wealthier.
While those factors bode well for mansion sales, the 2016 presidential campaigned stoked uncertainty about issues such as taxes and regulation, Agran said.
“When things are chaotic and uncertain, typically that market takes a pause and waits to see which way things are going to go,” he said. “There were a lot of reasons to pause last year.”
What’s more, much of the new construction in Palm Beach County in recent years has focused on the luxury market, not on the middle-class homes that once were builders’ bread and butter. The increase in supply has created pressure on prices, Miller said.
One explanation for the steep drop in Palm Beach: Compared to the fourth quarter of 2015, there were few sales for more than $10 million in the fourth quarter of 2016.
“It’s just a quarterly fluctuation,” said Ava Van de Water, broker at Brown Harris Stevens’ Palm Beach office.
In one sign of life, an oceanfront property in Palm Beach sold last week for $85 million, the second-highest sum ever paid in the town.