Posted on 10 October 2020
As a real estate economist, I am often asked about the effect of Covid-19 on the housing market in South Florida.
Some realtors, e.g. my wife Munara, who are experienced enough and know their market well, are able to comment on the health of the market and how things have changed during the global pandemic.
However, I wanted to go beyond the hunch based on casual observations and dig a little deeper. I decided to search for answers based on hard data.
So, this weekend, I’ve downloaded MLS data on 27,485 residential real estate listings going back to January 1, 2017 for Jupiter, Palm Beach Gardens, Tequesta, Juno Beach and North Palm Beach, Florida. I wanted to focus on our ‘farm area,’ but I’m sure the analysis can be extended to other parts of South Florida.
Armed with this dataset I analyzed the housing market a little more systematically. Not quite how I’d do a full-blown empirical inquiry suitable for an academic journal but still going much further than the intuition of a local real estate agent.
Figure 1 above shows that there was a sharp drop in the number of new listings in March (recall that the national state of emergency was declared on March 13). The total number of listings in the five municipalities nose-dived by 44%, from 656 in March to 368 in April but quickly recovered to the previous years’ levels within about a month.
Home sales showed a similarly volatile dynamic, initially plummeting by 48% between March and May with an even more dramatic recovery by July (see Figure 2).
Overall, contrary to casual observations, it does not appear that there is an acute lack of inventory on the market. The data also don’t indicate any noticeable changes in the total number of home sales, at least in the northern Palm Beach County. However, keep in mind that these totals may mask deeper fluctuations or deviations from the annual “normal” in some specific market segments, such as certain price ranges that attract different kinds of buyers or home types in a specific area, for example 2-story Abacoa townhomes.
Below is another chart that I built, just for fun. Figure 3 shows that the percentage of home sales at or above the asking price is up by almost 40% (from 11.9% to 16.6%) in 2020, compared to 2019. And I honestly doubt that it’s because the homes are being listed too low to begin with.
What about home prices? How were the prices of homes affected by the pandemic in Jupiter and Palm Beach Gardens, Florida, as well as other nearby towns? Has there been any noticeable change? Take a look at the next figure.
The chart clearly shows that home prices in Palm Beach Gardens, Jupiter, and the other three municipalities have experienced a significant rise in 2020. For example, the median price of a home in the northern Palm Beach County in September 2020 was more than 10% higher than it was in September of the previous year. That’s a substantial difference, and it also happens to be sustained, if you look several months back.
Of course, you might say I’m comparing apples to oranges. Actually, there is more than just apples and oranges; it’s a fully loaded grocery cart. The prices on the figure above are based on tens of thousands of very diverse residential properties, from 1-bedroom condos at the Legacy Place in Palm Beach Gardens to $5-million+ sprawling true-waterfront estates in Tequesta.
Despite this diversity of property types, sizes, amenities, carrying costs, and price points, the figure above is still reliably informative. First, the large number of observations help in hedging against random swings in data or statistical flukes. Second, the rolling averages of home prices shown above are based on the median values, which unlike the simple averages, aren’t affected by extreme values that are common in real estate. And third, the point of this chart is to show trends, or changes in home prices, rather than levels. The levels of home prices in my dataset range from under $50K to over $10M. So, instead of levels, the chart shows how most home prices (measured by the median) have been changing over similar periods in the past four years. Based on this information, prices of most homes in the area have gone up. To see home prices and trends in specific neighborhoods of Jupiter, FL, and Palm Beach Gardens, FL, see my monthly market report.
For those who are still skeptical (I don’t blame you; I also thought that the sample is just too varied), I wanted to know the price dynamics of roughly similar homes. So I ran a separate analysis of home prices in the Heights of Jupiter, Florida.
Why Heights? Because among the 75+ neighborhoods in Jupiter and Palm Beach Gardens tracked on www.Munara.info, the data on home sales in The Heights are best suited in terms of statistical reliability, given the amount of turnover in this community and the relative uniformity of listings: all homes here are of one type (single-family), nearly 93% of which are one-level, with no variation in HOA dues (there is no governing body), and this community has one of the highest numbers of homes sold in a given period, which is important for statistical significance.
The chart below shows the price dynamics. What’s striking is how similar it is to the previous chart. House prices in 2020 are consistently higher than in the previous three years, often by more than 10 percent.
You may have a natural follow-up question: What’s driving these prices? There are several possible leading reasons, including the overall economy, additional demand from the Northeast of the country, the CoreLogic index, stimulus money, ultra-low interest rates, etc. I think the “reasons” part deserves a dedicated analysis and its own blog. I’ll get to it in the next few days. Feel free to remind me, if I happen to forget.