Is it a buyer or seller's market?
This is the Treu Real Estate 911 Podcast with Lisa Treu. Lisa will share up to date real estate information with you that you need to know.
Welcome to Treu Real Estate 911. It's Brian Mudd, along with your local real estate pro, Lisa Treu, talking about the latest information in Palm Beach County real estate that you need to know to stay informed, and also we're going to talk about some of the trends because there have been some changes, as there typically are not just seasonally, but also with this economy, this market. And we also know that you have the impact, as well, of rising rates, but still there is so much misinformation out there. I continuously hear people just automatically assume, well, rates are higher so it must be bad. Well, no, rates are higher. They're actually still historically low, so we'll talk about all this throughout the course of today's show.
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Lisa is taking a look at the latest information on Palm Beach County real estate. Looks like it's generally good, but a bit of a mixed bag.
Lisa Treu: Yes, there's definitely some improvements. There's improvement in our median sales price, so that depends whether you're buying or selling whether that's good news or not. And inventory has actually gone up year over year, just a little bit, and we're definitely seeing that in the marketplace that inventory and certain price points, certain areas are starting to increase, which means there's more choices for buyers and less demand for sellers.
Brian Mudd: It looks like if we take a look at everything in context, it's still been generally a bit more favorable for sellers than not. If we take a look at days to contract, last June, 46 days. Most recently, 43. So when you take a look at some of the most recent comps, it looks like the trend has actually still been favoring sellers a little bit. Is that still the case in real time?
Lisa Treu: It is still the case. However, what many sellers have started to believe is that they can ask anything and still sell it for a great price, and that's really not the case. I mean this is not a ignore the comps, ignore the interest, ignore the inventory. So the ones that are pricing it right, we're getting the marketing right and have the condition right, they're having success. The ones that are not able to get that pricing right, their homes are just sitting, and as days on market increase, then buyers are less interested in the properties.
Brian Mudd: Lisa, I see it all the time. A lot of folks, when something goes up for sale in the neighborhood, will take a look at it, and you see it almost more often than not that properties are obviously mispriced. What is it that is causing that? Is it simply a real estate agent that's willing to take a listing and say whatever it takes to get it?
Lisa Treu: I think that it's having conversations of what somebody needs versus what the market will allow, and I believe that you get top dollar by pricing it right in that sweet spot. When you overprice a property, then there's fewer people that want to actually buy that property. Steve did a statistical study one time, and we'll bring that in and talk about it, where when you overprice it just a little, how you lose over half of the buyers in the marketplace. It was daunting when I saw that report, and I actually questioned his numbers on it. I couldn't believe that that much of a drop off happened if you just were over 10%, and yet when we started looking at it and he challenged my thinking, I realized he was right, which he usually is when it comes to data, right? And yet it just didn't seem possible.
So if you're just off a little bit ... See, everybody says, "Well, I can always come down." Well you can, but you're going to have to come down a lot more than if you had priced it right to begin with, and the other thing that people always say, "Well, if I'm listed high, they'll throw me in a low offer." Not in today's market, they won't. Many times buyers won't throw you that low offer. They'll just go to the one that's priced right, and there's always competition. Even in low inventory, there's competition of somebody who's priced right, and as inventory grows in an area, it's really important to get ahead of it, not trying to chase behind it.
Brian Mudd: While we're taking a look at the market, we're continuing to see, not surprisingly, that the more affordable properties are fairing best in unbalance, the luxury properties are not, although we are seeing a little bit of improvement again. This is, I believe like three out of the past four months we've seen a little bit of an improvement on the luxury side.
Lisa Treu: Yes. The luxury is now down to 11 months of inventory, and gosh, that sounds crazy to say it that way, right? Because we are still in a buyer's market, and yet it is better than what it was. I remember we were talking much higher numbers not that long ago, so I am super happy with the trend.
Now, once again, that doesn't mean that you can, if you have a luxury home, just overprice it, right? You have to price it per the market, and we actually have created ... Going back to prior days ... a checklist of ways to get top dollar as a seller, and there's a formula, and this even goes deeper than just getting the three things we've spoken about, even ease of showing. You wouldn't believe, Brian, how many properties we list that have been on the market and they were so difficult to show, agents just put them aside. We fixed some of the marketing, but also some of the ease of showing, making it attractive for agents to want to show it, and guess what? It sold, and sold for a great price, and sold quickly. So it is getting everything right, not just one little thing.
Brian Mudd: Lisa, when I take a look even at the luxury side, fairing a little bit better, the inventory coming down, it appears as though the reason the inventory's come down is simply some listings that have been out there for a while came down, not that necessarily there has been a huge shift in the market otherwise, speaking to what you're talking about about properties not being listed properly, not being priced right.
For example, in that million plus territory, we see that 152 properties came on market last month, where 135 closed. So we had the inventory go down, but we actually had more come on than actually close, which would seem to indicate that, well, the reason it came down is simply because you had other listings that just were taken down for now, and it's again emphasizing what you're talking about because we talk about the value, but the other thing is being able to move on with your life. A lot of folks you see on the luxury side have been stuck in the same place for a year or even two years at this point
Lisa Treu: And it's not just luxury. I see this a lot of times where people can sell, but mentally they can't deal with the reality of whatever the number is. And one of the things, especially if you're moving ... Even if you're moving to another area, if you're going to buy another property, why not be where you want to be and allow the real estate market to adjust there? I don't think that you should just stay because of a number.
Now, it's different if you can't. It's a whole different conversation, and yet if you have equity and you're just being stubborn because you do not want to sell it for less than you think you should sell it for, like I said, go buy where you want to be and enjoy life because let's face it, life's short and you might as well enjoy it, be where you want to be instead of being stuck and tied to a house.
Another thing to think about, if your home is listed for sale and nobody's making an offer on it, you were actually the highest bidder for that home. Just a thought.
Brian Mudd: That's a good point. You're making a lot of sense. Now, when we take a look at the median and the average sales price, something else came into focus here. We're continuing to see price appreciation year over year, anywhere from about three to over four percent, but we're seeing what appears to be a normal rate of market return. Historically, real estate's around four percent. So for a long time we had been kind of in recovery mode coming back from the recession, and then even over the past couple of years that we weren't seeing the big spikes, we were still seeing larger numbers that were making some people nervous because the question was, well, is this sustainable? We're kind of where we probably should be from a sustainability standpoint at this point, it would appear.
Lisa Treu: Yes, I think we're at a kind of a healthy standpoint, and we're even seeing some communities where their prices are sliding backwards a little bit. And that, a lot of it, I believe has to do with too many homes coming on the market all at once, overpricing happening, things sitting on the market longer. So when you overprice a home, you actually impact the value of today, but also of the future, because if there's too many overpriced properties, eventually somebody's going to say enough's enough, drastically drop their price, and that becomes the new comp, right? So if you price it right, you're actually helping you, which is the number one thing you would need to think about, but then also the continued growth of your community.
Brian Mudd: Something else that I found to be interesting taking a look at this from a sustainability standpoint, I always like looking at the percentage of cash deals that are being done because that obviously can be a tell if people are being stretched. And year over year when we take a look, we actually saw, despite the higher prices, slightly more all cash deals than we did this time last year, which continues to show that people by and large are well positioned for the homes they're buying.
Lisa Treu: We are definitely seeing more cash, and I think we will continue to see that as long as our international buyers continued to come. We're watching that very carefully. I mean, there's so many changes going on internationally that, obviously, that impacts south Florida at a very high level. The nice thing about the international buyer is that, let's face it, they spend more money. They really do. They're not buying, generally, fixer uppers. They're buying properties that say wow, and properties that they can show their friends and say, "Look what I just bought in the United States."
Florida was still number one for international buyers. We are ... 19% of all the international buyers buy in Florida. Now, obviously not all of them are in Palm Beach County, however we get our share of them. And so we always watch that international market because that's a big part of our cash and, the northeast is another big part of our cash because they have a lot of equity in their homes and they come down here and they think our prices are really affordable.
Brian Mudd: Yeah, no question about it. We've talked about the differences between a lot of areas, not just in the northeast but internationally as well, and kind of to your point, we've actually seen the euro fare a bit better against the dollar here of late, and that is all part of why it's so important to have that kind of strategy. I know you guys are constantly looking for those international opportunities.
Lisa Treu: Yes. And every time we travel, we build relationships. We have somebody traveling right now to three different countries, and while they're there, they're obviously enjoying a little bit of time off, but they're also looking to who do they need to meet in order to bring more opportunities to our company for ... and our clients for future international business.
Brian Mudd: Now, the next move here. Real estate's always seasonal. South Florida is always a little bit different than the norm. As we're heading into fall, and it's kind of crazy that it's August already, what are the trends? What's changing right now in today's real estate market?
Lisa Treu: Well, our calls and our visits are definitely up for people that are looking for seasonal product. Makes sense. They do not want to be stuck with winter again. They just don't.
Brian Mudd: And how important to ... I'm thinking in season this year because of the new tax law. We've talked a lot about the higher tax states, many of which are traditional in snowbirds states in the first place. This now becomes real. It's the first season where they're staring at tax implications that could mean, for many people, tens of thousands of dollars of difference, for high net worth individuals, potentially more than that.
Lisa Treu: So we really have two different types of people looking to come to Florida. We have the seasonal person who is coming down to escape winter, and then we have the person who says, "How do I make this my primary residence?" From a tax standpoint, they're not buying second homes because they're probably going to have a challenge with that. They are coming down to actually buy a permanent residence and establish evidence that they are a Florida resident.
And so we really have two opportunities in the marketplace. The new permanent resident is ... Many of them are pre-retirement, many of them own businesses or have careers where they can work anywhere that they want to work. And they say, first of all, "Why not live in Florida?" because they also don't want to do winter again, and yet they're really looking at it from a tax benefit standpoint. We're putting together a great webinar with a tax professional, our mortgage professional and myself, with more information on this because we know this is a hot topic for people in the northeast.
Brian Mudd: Yeah, no question about it. And to your point as well about the international buyer and what they're looking for, obviously these individuals, if you're coming down here for tax purposes, approximately only 6% or so of people this really applies to, you're talking about those that are going to be likely of well above average means and thus are going to be looking for significant properties.
Lisa Treu: Yes. I mean, most of the people that are looking at this are in that luxury price point, because like I said, they're not looking at second homes. That's really not going to fly for most of them. They're going to have to make it a legitimate residency if they're coming down here for tax reasons. The states up north are not going to want to easily let go of those tax dollars, so it's important to have a strategy. That's why we've teamed up with people that can actually answer those tax questions and help them kind of be on point with it versus just thinking, "Oh, I'll go buy something," and then, well, okay, that really doesn't qualify for what you need. So it's important.
Brian Mudd: And I want to ask you a little bit about rates and the impact in the market because I come across a lot of people that just go, "Well, they're higher than they have been." That's true. It' was funny. I was taking a look, and when we purchased about six and a half years ago, the rates today are no different than they were six and a half years ago. In other words, yes, the Federal Reserve has been raising rates, but even in years recent where the Fed was at a lower fed funds rate, we actually had rates that were comparable to where we are now, in the four and change range, the four and a half range, what have you.
I mean, that is not only still historically low with average 30 year fixed rate mortgages over 8%, but a lot of people just go, "Well, they're higher so it must not be good." Are you having to kind of play through that a little bit with some people that might not have good information?
Lisa Treu: You know, I think most people are not all that focused on interest rates. The ones that are feeling it are the ones that thought about purchasing last year, and actually went and got pre-approved and found out what they can afford, and then for some reason they didn't purchase and now they're finding out that they can no longer qualify for that amount because the rates are higher from what they were a year ago. Right? So those are the ones that are being impacted by it most, and yet we've been able to even help those buyers because we've been able to put together a plan and say, okay, this is your first home. It doesn't have to be the dream home, as we always say, and how do we find you something that will be something that you'll love and then have a good exit strategy for the next home?
So I think those are the ones that are really impact, the ones that had planned to buy and then didn't, and now they're comparing, "Well, wait a minute. I could buy $90 thousand more last year," and in the 350 and under, losing $90 thousand is a lot of money and a lot of buying power. So that's really where we've seen it, and yet, like I said, we've been able to still help that buyer get a property that they're thrilled with.
Brian Mudd: And again, the most important thing if you're thinking about real estate decisions is to have good information so you can make informed decisions. So if you're not already there, again, go to treurealestate911.com and the Treus, they're ready to help you. You don't have to be looking to buy or sell. They're happy to answer questions. 561-972-8326, 561-972-8326.