It is now been more than three months since the coronavirus pandemic entered our world, severely impacting our daily lives as well as the Florida economy. This impact has been felt especially hard in the real estate market, resulting in a substantial drop in the number of sales compared to 2019.
The first quarter of 2020 reflected the strong economy with a year-over-year growth of over 10% from 2019. In addition, inventory for single-family homes was a low 3.4 months and the inventory for townhomes/condominiums was on average 5.5 months. The time period from listing to contract was a short 43 days for single-family homes and only 55 days for townhomes/condominiums.
In addition to the strong economic news in the first quarter of 2020, the low mortgage interest rates also helped encourage sales, dropping nearly three quarters of a point from the same time in 2019, from an average of 4.37% to an average of only 3.51%.
The effects of the virus on the real estate market came to a head in April 2020. In Miami, sales declined 40% compared to April 2019. Broward County experienced a decline of 37.4%, and Palm Beach County experienced a decline of 33.8% compared to April 2019.
Interestingly, the median price for sold homes actually increased in April in all three counties. The median price increase in Dade County was 7.3% to $382,000 for homes and 6.9% to $265,000 for condominiums. The increase in Broward County was 6.1% to $382,000 for homes and 8% to $183,500 for condominiums. The increase in Palm Beach County was 4.3% to $365,000 for homes and 5.4% to 195,000 for condominiums.
During March and April 2020, pending deals were canceled by many purchasers asserting a force majeure clause in their real estate contract. Some buyers gave up their deposits rather than proceed to close. Others sought to delay closing or fight to obtain the return of their deposit.
Many sellers pulled their properties from the market and the number of active listings in Palm Beach County fell 18.5% from April 2019 to a total number of listings of 6,126. New listings eventually declined from 2019 as well, only 1,264 new listings in April 2020, a decline of 39.4%. The time period from listing to contract also increased substantially from earlier in 2020 to nearly 76 days, a 21.6% increase from April 2019.
Unlike April, sales actually picked up in May, 2020. Sales levels are still below similar levels in May 2019 but listings and closings increased compared to April 2020. Houses that were withdrawn from the market in March and April were relisted in May by many sellers.
While the virus has restricted sales throughout the market, the effect has been less on very high-end sales in excess of $10 million. For homes priced over $1 million, May 2020 sales figures were encouraging. Sales surged 45% in Miami-Dade County over May 2019 with Palm Beach County experiencing a 26% increase over May 2019 and Broward County had a 23% increase for the same time. It is not clear if this increase will be sustained for the summer of 2020 or this just includes delayed closings from April.
Because of the combination of cancelled listings and fewer new listings, the inventory of homes available for sale has fallen by 28.8% for single-family homes and 12.5% for townhomes/condominiums. This equates to a 4.2-month supply of homes in Palm Beach County. This number is below the generally accepted equilibrium number of 5.5 month’s supply. When the supply is below 5.5 months it is generally considered to be a seller’s market, which is reflected in the higher median sales price for homes that actually close.
The virus also affected the mortgage foreclosure market. The number of homes being foreclosed and sold at the courthouse has dropped dramatically. Only 24 homes were set to go to auction in June 2020 at the Palm Beach County Courthouse compared to a total of 136 homes scheduled to be auctioned in June 2019. In addition, Fannie Mae, Freddie Mac and the Department of Housing and Urban Development have all extended their stay of mortgage foreclosures through June 30, 2020, which make up the bulk of the residential housing market. It is also possible that a further extension of that stay maybe entered depending on the status of the economy at the end of June.
It appears in the short term that the real estate market will continue to be affected by the virus. But once public perception shifts to a feeling that the virus is contained and the economy is rebounding, the pent-up demand for home purchases, coupled with the continuing low mortgage interest rates, should see increased sales at some point in the future.
Michael J Posner, Esq., is a partner at Ward, Damon a mid-sized real estate and business-oriented law firm serving all of South Florida, with three offices in Palm Beach County. He specializes in real estate law and can assist sellers and purchasers remotely with closing and financing of residential and commercial real estate. Michael can be reached at 561.594.1452 or at email@example.com.