If there’s one question our Boca Raton real estate agency gets more frequently than any other in real estate, it’s “so, how’s the market?” Many real estate professionals will simply assure the questioner that it’s great or incredibly busy, but that really is doing the person asking a disservice. In reality, there is truly not a succinct answer. As I touched upon last month, our local area is actually more of a dual market. As is true in most markets, the higher up the price ladder, the more lengthy the time on market will be.
In addition to neighborhood and price, there are several other factors that must be considered to accurately determine market condition. The good news is that real estate cycles are long, slow and predictive, and studying these factors can help us predict the future health of the market.
Factor #1: Employment
The employment rate is a leading indicator of real estate activity. On this front, our market is doing well, with unemployment below the national rates and an increase in the number of jobs in our area. According to U.S. Department of Labor statistics, the West Palm Beach-Boca Raton-Delray Beach MD (Metropolitan Division) saw a year-over-year increase of 25,000 net jobs. The unemployment rate for September 2017 was 3.6 percent, as compared to 5.2 percent in September 2016. On the national level, unemployment rates were 4.2 percent in September 2017 and 4.9 percent in September 2016.
Factor #2: Population and Demographics
The population in Palm Beach County is rising, largely fueled by growth in the southern part of the county. Boca Raton, Delray Beach, and Boynton Beach saw some of the biggest population boosts from 2015 to 2016, according to U.S. Census Bureau population estimates. Leading the pack is Boca Raton, which added 2,570 residents for a population increase of 2.75 percent, bringing its total residents to 96,114.
Factor #3: Supply and Demand
Here we look to see if the supply of homes is keeping up with the demand created by the increased population. We need to keep an eye on new construction, including apartment vacancy rates as well as new homes. Our local inventory is aging, and there is a high demand for new homes. That said, most newer developments are in the higher price ranges where demand is lower. There is a shortage of homes for sale under $500,000, as evidenced by the short time on market for these properties (67 days on average) and the short supply, which sits at only 4.7 months of inventory. This contrasts with 133 days on market and 16 months of inventory for homes currently listed for more than $500,000.
Factor #4: Affordability
One of the main problems that trouble our region is a lack of affordable housing. For first-time buyers, the greatest challenges lie in coming up with a downpayment and having to compete against cash buyers. Additionally, any interest rate increases will affect the amount that this group can borrow. However, since we are also a resort market, many of our buyers are purchasing second homes with cash. Thus, the local market is less affected by the affordability issue than many other areas in South Florida.
These are just some of the factors we look at when providing a thorough response to questions regarding the state of our market. The overall shortage of housing and low-interest rates should continue to push up home prices faster than incomes rise in many submarkets — particularly the lower price ranges. This is good news for those that are already in the market, but not great for those looking to buy. As we rise up the price ladder, the indicators change somewhat to favor buyers.
Our Boca Raton real estate agency will be keeping a close eye on all of these factors to see if these trends continue or not. The more information we have, the better we will be able to answer the question and to predict market changes in the near future.
Gloria Singer is the Broker of Boca Expert Realty, a boutique Boca Raton real estate company with a focus on professional service and an unparalleled customer experience. Our select agents are amongst the top performing professionals in the field. Visit www.BocaExpert.com for information on Boca Raton, Delray Beach and Highland Beach real estate and to connect with an expert in the local market.