I see a lot of data being shared and speculation circulating about the real estate market in various territories as well as here in Palm Beach County. I want to provide you all with some real facts about our local market and give you some insight compared to historical data for the area. Since we are still in the middle of April, I have used data from February and March for 2020 and previous years as well as data from the housing boom in 2006.
First, I want to go over a few definitions of terms used in the data.
- Median Price – The price where half of the home prices were lower and half of the home prices were higher.
- Average Price – The price that is made up of all the numbers added together and divided by the amount of numbers in the set.
- Absorption Rate – The number of months that it would take to sell the homes currently listed for sale if no other homes were listed in the interim.
Example of Median price – Homes sold at $100,000, $150,000, $300,000, $400,000 and $450,000. The median price is $300,000 with two homes selling below that price and two homes selling above that price.
Example of Average price – Homes sold at $100,000, $150,000, $300,000, $400,000 and $450,000. The Average price is $1,400,000 (All prices added together)/5 = $280,000
Example of Absorption Rate – 25 homes sold in March and 100 houses active. The absorption rate is 100/25 = 4 months to sell inventory. A more in depth explanation of absorption rate can be found here.
As you can see, an average price and median price can be close or they can vary greatly. For real estate purposes, the median price more accurately shows a markets trends because a very large sale price or very low sale price can sway the average. For further reference on the difference between average and median, please click here.
Now that we have discussed a few definitions, I would like to give you the information for our market here in Palm Beach County. First, we will look at the most recent numbers from March of 2020 which was our last full month of data. During this time period, the average list Price was $1,015,405, the median list price was $379,000, the average sold price was $498,727, the median sale price was $300,000, the absorption rate was 5.63 and the average days on market was 83 days for the county. This information is only valuable if you compare it to other data from previous years. Next, we will look at the numbers for March 2019. During this period, the average list price was $880,411, the median list price was $359,900, the average sale price was $439,679, the median sale price was $271,750, the absorption rate was 5.73 and the average days on market was 86. As you can see, the average list price went up 15.33%, the median list price increased 5.31%, the average sales price increased 13.43% and the median sales price increased 10.40% when comparing March 2019 to March 2020. The absorption rate for the same period dropped 20.77%. This is a good indicator that we are in a stable real estate market with low inventory even with the outside influences that are occurring right now in our country.
To dive a little deeper into the information regarding our local real estate market here in Palm Beach County, I will give you some of the numbers from March 2017 and March 2018. In March 2017, the absorption rate was 5.62, the average list price was $805,739, the median list price was $349,000, the average sale price was $380,692, the median sale price was $249,000 and the average days on the market was 87. This shows that the absorption rate was also balanced during this time. Now, when looking at the data from March of 2018 we had an absorption rate of 5.63, the average list price was $835,401, the median list price was $350,000, the average sale price was $437,717, the median sale price was $270,000 and the average days on the market was 83. If we compare these numbers for 2017 and 2018, you will see that the absorption rate stayed almost exactly the same, the median list price only increased by $1,000 which was .29% , the median sale price had an increase of $21,000 or 8.43% and the average days on market dropped 4 days or 4.6%. This shows a trend between these two years where the inventory remained constant along with the listing price, but the actual purchase prices had a jump because of the factors leaning towards a seller’s market. The market was not saturated with inventory during this time so sellers were able to get a higher price for their listings, but the absorption rate was not grossly favoring sellers so buyers were still able to get into a home at a decent value for the market.
If you look at all four years for the month of March, you can see the trends the area has experienced. If we look at March of 2017 compared to March of 2020, you will notice the median list price went from $349,000 to $379,000, the median sales price went from $249,000 to $300,000, the absorption rate went from 5.62 to 4.54 and the average days on market went from 87 to 78. All of this data shows the trend tilting slightly in favor of sellers during this market, but with interest rates at historically low numbers, buyers are still able to purchase a home that fits their needs and they have increased buying power because of these rates.
Lastly, I want to provide some insight to what the numbers were like in November of 2005. This was the peak of the real estate market here in Palm Beach County before the economic crisis that we experienced. I see a lot of information and articles circulating with conspiracies and indications that we are at the same pricing and levels that we were before the crisis. I can tell you, that is not the case and just looking at the data will provide knowledge as to the differences between that time and where we are today in our local market. For example, the median sale price was at $421,500 (When adjusting for inflation, that equates to $534,439 in today’s dollars). This number is 78% higher than the median sales price of $300,000 in March of 2020 for the county. Another factor that is different is the interest rates on a mortgage. Back in November of 2005 and November or 2006 interest rates were around 6.3-6.5% on average. Today we are seeing advertised rates below 4% for some borrowers. These are major factors to consider when determining the status of our local real estate market. This shows increased borrowing power for buyers along with a median sales price well below the peak of the market. Another factor to consider is the low absorption rate which is good for sellers making the market balanced and stable here in Palm Beach County.