3 min read August 2023 — In an interview with Invest:, Lesley Deutch, managing principal at John Burns Research and Consulting, discussed the firm’s highlights, emphasizing its coverage of diverse housing markets, and addressed the challenges posed by the dynamic housing market. She detailed to Invest: the impact of land costs on housing affordability, complications around insurance availability and how communities respond to the Live Local Act as additional factors to consider moving forward.
What have been some of the firm’s highlights over the past 12 months?
The firm has expanded both geographically and across industries. We are now known as John Burns Research and Consulting, reflecting our coverage of various housing segments, including for-sale, rental, build-to-rent, single-family rental and building products. It has been an exciting challenge to keep up with the dynamic housing market and forecast changes and to provide clients with insights amid constant fluctuations driven by factors like mortgage rates, consumer behavior, politics and new legislation.
Our priorities revolve around staying ahead of these changes. The market’s volatility demands constant vigilance. Monitoring migration patterns, interest rates and potential impacts from legislation allows us to guide our clients effectively.
How would you describe the state of the market?
The for-sale market in Palm Beach County, or West Palm Beach, remains remarkably strong. Our regular interactions with builders indicate steady sales, traffic and substantial home price appreciation. Unlike many other parts of the country, Palm Beach stands out as an outlier, attracting significant migration from areas like New York and bringing businesses along. However, affordability is a growing concern, with the median price of new homes at $721,000, a notable increase from $500,775 a year ago. The limited availability of land in the area contributes to the high prices. The resale market follows a similar trend, with an average home price of $610,000, reflecting a 6% increase from last April. While the market exhibits strength at higher price points, affordability challenges emerge, impacting local workers.
How are county relocations impacting the market?
The migration to Palm Beach has been remarkable, with individuals and businesses relocating from areas of higher income. They can afford more within our community. Interestingly, the largest percentage of in-migrants came from Fort Lauderdale, accounting for 18.5% of total moves over the last twelve months. New York City follows with 12%, then Miami. We also see movement from Long Island, Nassau County and Port Saint Lucie. There is a commitment of those who move here, as evidenced by their investments in the local market. Office buildings, education, community colleges and universities are receiving substantial financial support. Such investments bode well for Palm Beach’s future.
What are your clients’ top concerns and how are you addressing them?
The concerns regarding home affordability in Palm Beach County revolve around land costs, which significantly contribute to high home prices. Builders strive to offer affordable options but the challenge lies in balancing land and construction costs. Construction costs have been steadily rising and although lumber prices have started to decrease, materials like concrete remain a significant expense. Builders are unable to push home prices as much due to higher mortgage rates, putting pressure on their profit margins. Another hurdle is obtaining project approvals and finding available land, leading to redevelopment, like golf courses as a creative solution. The scarcity of land also contributes to the substantial increase in home prices. Inventory was a key concern last year but that has now flipped.
Is the trend of homes with outdoor space still ongoing and what is driving that?
The trend of people moving to Florida for our weather was definitely accelerated by the pandemic. Outdoor space remains popular and builders are making smaller houses that maximize the use of outdoor areas as additional living space. Another factor is the growing number of pet owners and families with children who require outdoor space. Additionally, a noteworthy trend this year is the rise of build-for-rent projects. These professionally managed single-family homes and townhomes are emerging in different areas, particularly in Saint Lucie County and now in Palm Beach County. It’s an interesting phenomenon to observe.
What other housing trends have emerged and what are the driving factors?
In new communities, one of the prominent trends we’re witnessing is the inclusion of more private workspaces in clubhouses. This is primarily due to the increasing number of people working from home, especially those who have recently relocated. They require designated areas, often referred to as “Zoom rooms” or quiet pods, where they can have conversations without distractions. Consequently, many new amenities now feature conference rooms and private workspaces. This trend has significantly impacted the amenity space. As for home designs, there hasn’t been much deviation and we continue to see the construction of very similar homes.
What are your expectations for Palm Beach’s housing market in the near term?
The housing market is thriving with strong demand but it does come with significant risks. One aspect we haven’t touched upon is the challenge of obtaining insurance for homes or for builders involved in new construction projects. Insurance has become increasingly difficult to secure, posing a problem in the industry. Additionally, there are political risks to consider. In July, several new acts, such as the Live Local Act which may spur new construction and make it easier for entitlements. Another notable concern is interest rate risk. Uncertainty regarding mortgage rates can significantly affect the housing market.
While we find ourselves in a favorable position with positive job growth, inward migration and robust development, it’s crucial to remain cautious due to the presence of these warning signs and potential risks that could impact the industry. Vigilantly monitoring market conditions, both at a local and national level, will be essential as the market is likely to experience some turbulence. Given the impediments we’ve discussed, it is vital to stay informed on how these factors will affect builders and developers moving forward.
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