Writer: Joey Garrand
2 min read January 2021 — Palm Beach’s luxury home sector ended 2020 the way it started the year: in the sales stratosphere as the flight of high-net-worth individuals from high-tax states shows no sign of abating and buyers snapping up properties at a triple-digit pace in some segments.
The data for sales of homes priced at $1 million and higher in Palm Beach County are eye-watering. The market got off to a roaring start in January 2020 with a 52.5% jump in sales over the same month in 2019. That was just the start. By November, sales had climbed to triple digits, rising 167.6% in the month, according to the Miami Association of Realtors.
Sales for December are not yet available but one indicator of the landscape is tennis star Serena Williams. Mansion Global reports that Williams closed the sale of her mansion in Palm Beach Gardens for $2.78 million before the end of the year without even listing it.
The trend is not limited to Palm Beach, with luxury sales up nationwide. But the Palm Beach County market is outpacing the national market. In the three months to Nov. 30, luxury home sales volume across the United States was up 60.7% year over year (YoY). They’re also selling 33% faster. Palm Beach County’s luxury home sales volume has been much higher. In 3Q20 (to September), luxury home sales climbed 82.9%.
Palm Beach is recognized worldwide for its golf courses, equestrian events, sunshine, and beaches, but there’s more to the story than the simple desire for the first-class lifestyle offered by South Florida. Miami Realtors cites record-low interest rates, an exodus from high-tax northeastern states to Florida’s no-state tax environment, as well as the fallout from COVID-19, including the rise of remote work.
Regarding interest rates, the likelihood is for record low mortgage rates to continue. In the first week of the new year, the 30-year rate hit 2.65%, according to Freddie Mac. For context, rates were frequently above 8% in 2000, and they hovered around 5% in 2010. As well, the wealthy keep getting richer. Despite the pandemic, the S&P 500 has been consistently breaking new highs, providing investors with ever-higher returns.
From the supply side, constructors have been struggling to keep up with demand since well before the pandemic. Freddie Mac reported in February of 2020 that Florida was experiencing a severe housing shortage, which is primarily due to the state being ranked first for both domestic and international migration. In addition, the pandemic environment has worsened costs, delivery times for building materials, and the long-standing labor shortage. Although homes are still being built, the building process has become much more difficult in the present COVID environment. The pandemic has also brought with it a trend of migration from urban to suburban areas, further impacting housing availability.
This year, an expected increase in housing starts and home sellers could help alleviate the housing shortage. But given the perfect storm of low rates, low taxes and a high quality of life, Palm Beach will likely stay a seller’s market for the foreseeable future.