Nicole Moore bounced from Palm Beach Gardens to Boynton Beach to Wellington, visiting 20 properties at nights and on weekends in a dogged pursuit to find her first home.
“We were all over the map,” said the 25-year-old, whose house hunt with her fiancé began in October.
The couple initially struck out — outbid by someone willing to pay asking price. Their second attempt ended similarly. By the third try, they made an offer the same day, accepted a higher counteroffer, and will pay cash for the more than $200,000 purchase.
Such goes the search for homes in Palm Beach County.
The market bottomed out in 2011, three long years after the death of Lehman Brothers and the birth of the Great Recession.
But the rebound has been swift. The double-digit ascent in median sale prices had heads spinning in 2013 as economists worked overtime to dissect the harrowing climb and tamper enthusiasm with predictions of a price slowdown.
In Palm Beach County, the increases buoyed home values from the tony streets of Palm Beach to the green border of the Everglades, and motivated developers to snatch up remaining swaths of land in multimillion-dollar deals that bank on baby boomers to drive a lasting market.
Fueled by corporate investors and Wall Street hedge funds, ZIP codes countywide have seen gains, rebounding as high as 47 percent from the bottom of the market, according to an analysis of median home values through October conducted by Seattle-based Zillow.
Zillow economists said 2014 will see Palm Beach County’s median home values gain another 5.8 percent, ranging from 4 percent in Boynton Beach to nearly 7 percent in West Palm Beach.
Others are even more optimistic. South Florida housing expert and consultant Jack McCabe predicts Palm Beach County’s median sales price for a single-family home will jump 8 percent in the coming year.
Areas recovering the fastest may be a surprise. Downtowns and historic communities with grand homes from the 1920s, as well as downtrodden neighborhoods attractive to investors have seen steep increases.
Slower growth was experienced in specialty communities, such as suburban West Palm Beach’s Century Village, where retirees saw median values peak at $108,000 in 2006, only to bottom out at $37,800. The gain from the bottom in the 33417 ZIP code has been just 4.5 percent, according to Zillow.
In Palm Beach, where money is an insulator to mainland upheaval, median values rose a reserved 17.8 percent from a less severe bottom.
“Certain markets are hotter and certain markets saw shallower drops in prices,” said David Cobb, South Florida regional director for the Royal Palm Beach-based housing analysis firm MetroStudy. “If you look at where you see appreciation, there was also a very strong price fall.”
That’s true for the 10 ZIP codes in Palm Beach County that experienced the biggest rebound in their median values. Topping the list are two West Palm Beach ZIP codes that encompass the city’s downtown condominium market and neighborhoods to its west.
Both zones have seen value gains of 47 percent since the bottom. But downtown, once rife with unsold new condos, also fell 63 percent from its boom-time values to its low point.
The 33409 ZIP code to the west, which includes a mix of the modest Westgate community and the high-end Bear Lakes Estates, plummeted 70 percent, but has since gained 47 percent.
Eric Schreiber, a Realtor with Leibowitz Realty who lives in The Classics at Bear Lakes, said a handful of investor-abandoned condominium conversions contributed to the steep value decline in that area. But he’s experienced the rebound firsthand. Just two of 110 homes in his community are on the market, and he’s optimistic that values will increase even more with the Feb. 14 opening of the Palm Beach Outlets.
“I think we’re getting back to where we should be,” Schreiber said.
Investors reviving market — and paying with cash
While investors with toxic mortgages helped kill the real estate market in the mid-2000s, Schreiber said investors with cash are now reviving it, buying both small fixer-uppers and pricier turn-keys to rent out until they can sell for a profit.
That’s who is “grabbing everything” in some of the lower-priced single-family neighborhoods hugging I-95 in Boynton Beach, said Hudson Realty Realtor Diane Giafaglione. The median value in that area was $86,800 in October, a 22 percent increase from the bottom of the market, according to Zillow.
Giafaglione said many of her clients looking for condos are second-home buyers from Michigan, New York and Canada. Almost everyone is paying cash. In November, 47.5 percent of single-family homes sold in Palm Beach County were cash deals. Seventy-five percent of condos were bought with cash, according to the Realtors Association of the Palm Beaches.
A hot pink three-bedroom home off Seacrest Boulevard was marketed in August as an “investor special” — “$15,000 in rehab, needs paint, bath vanity, kitchen and a/c.” It sold for $53,000 in cash in November. It was relisted in December for $79,000, but has since disappeared from the Multiple Listing Service.
“I’m seeing a few families, but the problem is a lot of them have to get a mortgage and sellers want cash, and they will take a cash buyer over a mortgage any day of the week,” Giafaglione said. “It’s really difficult for the average person.”
And that has given economists pause.
Earlier this month, the Wells Fargo Economics Group said home prices jumped nearly 12 percent nationwide over the past year, but have been exaggerated by a “shallow market” of investors. The fundamentals for housing demand — job growth, income growth and household formations — have improved “much more modestly” the report noted.
“If you step away from the investor transactions, you haven’t seen anywhere as near the price volatility,” said Mark Vitner, a Wells Fargo economist and expert on Florida’s economy. “Once we get back to a more normal market, the prices will rise at a moderate rate of mid- to low-single digits.”
Wall Street started buying single-family homes to rent in 2012. Companies such as the Blackstone Group, Starwood Property Trust, Colony Financial and American Homes for Rent, own hundreds of houses in Palm Beach County.
But investor Mike Mondelli, president of the Delray Beach-based company Flip Homes Today, said investors have started tapping the buying brakes waiting to see whether price climbs they’ve predicted the past 18 months are coming true.
With so many cash deals by investors, Mondelli said it’s hard to know what a bank is willing to lend a traditional buyer. He predicts the hedge funds will start selling their single-family homes within five to seven years because they won’t make high enough returns.
“You are talking about the management of thousands and thousands of homes, and I don’t care who you are, owning and managing real estate is very challenging and taxing,” Mondelli said. “It’s a gamble. That’s exactly what it is.”
Builders grabbing vacant land
Still, the fast-track turnaround in real estate has revived builder optimism with several large Palm Beach County land grabs occurring in the past year.
In December, Kolter Group’s $112 million purchase of the high-profile Briger property just south of Donald Ross Road marked the priciest real estate deal of 2013. The vacant land carries approvals for homes, stores, biotech space and offices.
Minto Communities paid $51 million for the 3,800-acre property Callery-Judge Grove in September. The developer hopes to build 6,500 homes on the land along Seminole Pratt Whitney Road, which would more than double the already approved density of 2,996 homes.
And in late 2012, South Florida developer GL Homes added hundreds of acres to its Palm Beach County holdings with a $150 million purchase of land straddling Lyons Road west of Florida’s Turnpike and south of the developer’s posh Bridges community.
The price escalation for new homes in Palm Beach County was nearly 12 percent in the third quarter of last year from 2012, according to MetroStudy. The average sale price countywide for a new home is $617,715, but the biggest appreciation was seen in the north and west parts of the county.
Frank Fernandez, director of sales and marketing for Lennar Homes, said the reason to buy in Palm Beach County is simple: “It’s an area that has land, which we do not have much left of in Miami-Dade or Broward County.”
Lennar has four communities in Palm Beach County, three of which are new.
Wellington Parc is a community of 92 townhomes north of Lake Worth Road on State Road 7; Aspen Glen, which broke ground in September, will have 45 homes in Boynton Beach, and the 110-home Capistara community began construction in August on a trim 37 acres in unincorporated Lake Worth along Military Trail.
Before Christmas, workers busily outfitted seven Capistara model homes with Pottery Barn-esque décor. Lennar wouldn’t say how many units have sold, but 20 were already under construction.
“We’ve done very, very well,” Fernandez said. “We’re not at the same level as we were in 2005 by any means, but the company is overall very happy.”
Lennar’s fourth-quarter profit beat analysts’ estimates with a net income of $164.1 million, compared with $124.3 million a year earlier. Home deliveries nationwide were up 27 percent from the previous year to 5,650 and new orders increased 13 percent to 4,498.
Cobb, of MetroStudy, said builders fully jumped back into the market in 2012 with predictions of what they would need to meet demand through 2015.
“By 2013, all of the good stuff was gone and they had to buy raw land,” Cobb said. “What you’re seeing is that we’ve come full circle.”
Return to Growth
Palm Beach County real estate is booming again. Palm Beach Post real estate reporter Kimberly Miller looks behind the numbers to explain where prices are rising and why.
- Boynton Beach & Southern Communities
- Wellington & Western Communities (Feb. 16)
- Palm Beach Gardens & Northern Communities (Mar. 16)