Median used home price in county tops $400,000

By Linda Rawls

07/26/2005

Housing prices in Palm Beach County continued their explosive surge in June, with the median price of an existing home soaring above $400,000 for the first time, the Florida Association of Realtors reported Monday.

Fueled by low mortgage rates, ferocious demand and limited supply, the median price reached $406,800, a 30 percent increase over June 2004, when the median was $312,000.

"It's an unprecedented, all-out seller's market," said Thomas Flood, HomeBanc's regional senior vice president for South Florida. "It's nuts. I've never seen anything like this — ever."

In five years, the median price of an existing home in Palm Beach County has risen more than a quarter of a million dollars, Realtors' association records show. In June 2000, the median was $145,300.

A 30-year fixed-rate mortgage averaged 8.29 percent at the time, mortgage giant Freddie Mac's archives show. Last month, 30-year fixed-rate mortgages averaged 5.58 percent, down from 5.72 percent in May and 6.29 percent in June 2004.

Mortgage rates are expected to rise to 6.1 percent by the end of the year and to 6.5 percent in 2006, the National Association of Realtors says. Rates would have to spike more than that to dampen buyers' enthusiasm for owning a piece of paradise, experts agreed Monday.

"If the market gets above 8 percent, that would have a real dampening effect," said Chappy Adams, broker/owner of Illustrated Properties, the county's largest independent real estate agency. "But even if we had a 10 percent home-appreciation rate going forward, that would still be amazing."

Palm Beach County ranked third in the nation in home-price gain for the first quarter of this year, posting a 36 percent jump over the same period a year ago, according to the National Association of Realtors.

Such increases aren't sustainable in the long run, said David Scott, executive director of the Dr. Phillips Institute for the Study of American Business Activity and professor of finance at the University of Central Florida.

If you want to know how long single-family home prices in Palm Beach County can continue their dizzying rise, just look to California, a real estate finance expert said Monday. California's statewide resale home price in June was $522,590.

"You have to look at other parts of the country that are similar to our economy and demographics," said Jim Sahnger of Palm Beach Financial Network. "That, to me, is California, and we still have a long way to go before we approach where they are. I don't see that any burst in (mortgage) rates will stop what we see now in Palm Beach County."

In part, that's because hidden behind Palm Beach County's home-sales reports is an issue that Flood of HomeBanc calls "the wealth factor."

"With sales prices of $400,000, the first-time home buyer no longer fits into the picture," Flood said. "We're going to be leaning on a heavy-duty second-home marketplace going forward — primarily Europeans and Northeasterners.

"Europeans are eating up South Florida right down the coastline. The Euro is still good against the dollar. And the South Americans have been investing heavily in Wellington for a long time. Northeastern money is still comfortable with South Florida prices, and they'd rather have their dollars in real estate than the stock market."

Add to that mix the aging Baby Boomers buying retirement homes in Palm Beach County, and "the demand is amazing," Flood said.

In addition to historically low interest rates, Palm Beach County's soaring home prices are driven by a market that doesn't have enough homes for sale to meet the unceasing demand, analysts said. As a result, existing home sales declined in June for the 11th consecutive month, to 1,551 from 1,824 in June 2004, the Realtors' report said.

In the Treasure Coast, existing home prices continued their steady retreat from affordability, rising to a median of $260,700 in June, up 38 percent from June 2004, when the median was $189,200.

In May, the median price of existing homes in Martin and St. Lucie counties surpassed $250,000 for the first time.

Sales in the Treasure Coast remained flat, with buyers closing on 768 homes in June, compared with 770 in the same month a year ago.

Statewide, the median price rose to $223,000 in June, up 28 percent from the same month a year ago. But sales slumped 3 percent, to 25,455 from 26,112 in June 2004.

Nationwide, existing home sales in June smashed all records, rising to a seasonally adjusted annual rate of 7.3 million, the National Association of Realtors said. That's up 4 percent over last year, when June sales posted a rate of 7 million.

The median price of a home nationwide rose to $219,000, up 15 percent from June 2004's median of $191,100.

Earlier this month, the National Association of Realtors revised its 2005 forecast upward, predicting that existing home sales would set another record this year with a rate of 6.97 million. That would break 2004's record-setting pace of 6.78 million.

"The most notable problem in the housing market is the shortage of homes available for sale, as well as some shortages of building materials," said David Lereah, the national association's chief economist. "These challenges are continuing to put pressure on home prices."

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