Palm Beach County Condo Prices Most Overvalued In At Least 14 Years
In this latest issue of the Miami Condo Market Intelligence Report™, we examine Palm Beach County condo prices based on applying the "1% Rule" to the sales statistics from the Summer Buying Season.
Volume 2024, Issue 48 (Subscribe here)
This week’s Miami Condo Market Intelligence Report™ newsletter examines whether now is the right time to buy a Palm Beach County condo or are today’s investors risking a possible “catching a falling knife” scenario.
After all, Palm Beach County condo sales have slowed dramatically for the last 18 months and asking prices are starting to decrease, especially for older units facing increased costs resulting from Florida legislative changes made in the aftermath of the Surfside condo collapse.
This has some buyers thinking now is the time to start acquiring units.
To answer this question, we ran an analysis based on the “1% Rule” of real estate that is commonly used by investors to assess valuations.
As you may know, the “1% Rule” is a simplistic - or “back of the napkin” - approach that calls for the monthly rent of a residential investment property to represent about one percent of the purchase price of a unit.
For example, a $100,000 condo - if you can find one in South Florida - should rent for about $1,000 monthly under the “1% Rule.”
The “1% Rule” can “help an investor gauge the risk and potential gain that might be achieved by investing in a property,” according to Investopedia.
To analyze the condo market in the tricounty South Florida region, we used our recently compiled statistics and published reports for Miami-Dade, Broward and Palm Beach counties that were generated within the last 60 days based on the 2024 Summer Buying Season, which stretched from May through October.
Based on a recent report, Palm Beach County condos traded for an average price of about $497,170 per unit in the 2024 Summer Buying Season.
Under the “1% Rule,” a Palm Beach County condo should generate more than $4,970 per month in rent.
In reality, Palm Beach County rental units were leased out at a median price of about $2,300 monthly during the 2024 Summer Buying Season.
This means, condo prices need to go down or rents need to go up to make up for the difference required to comply with the “1% Rule.”
This is the most overinflated period for Palm Beach County condo prices in at least 14 years, according to the report.
It is probably even longer but the rental statistics only go as far back as the Great Recession year of 2010.
For context, Palm Beach County condo prices in previous summer seasons were overinflated by about 114 percent in 2023, about 81 percent in 2022 and about 111 percent in 2021.
Before the 2021 season - the pandemic year when hordes of people relocated to Florida to take advantage of the state’s no mask policy - Palm Beach County condo prices were overinflated based on the “1% Rule” by between five percent in 2011 and nearly 87 percent in 2019, according to the report.
It is not to say that investors cannot buy condos at current pricing but that those investors are probably going to end up subsidizing tenants to live in their units.
The Summer Buying Season is traditionally when visitors and locals, alike, flee South Florida to avoid the humidity, hurricane warnings and limited number of events.
As the busier Winter Buying Season - which extends from November through April - begins to ramp up for the masses of tourists expected to visit, there are lessons to be learned from the summer condo market trends for buyers, sellers and real estate professionals, alike, in South Florida.
The summer trends are especially important this Winter Buying Season as Florida’s condo market is undergoing dramatic changes as a result of the implementation of new requirements in the aftermath of the Surfside condo collapse.
Beginning in January, condo associations in Florida will be required to start collecting money from unit owners to place into reserve accounts - based on the results of Structural Integrity Reserve Studies (SIRS) conducted by experts - that will be used exclusively to fix, maintain and improve the structural integrity of residential buildings that are at least three-stories tall.
People are dubbing this moment as the 2025 Florida Condo Association Financial Cliff as it is expected to result in significantly higher costs for unit owners. News reports are already chronicling condo owners selling their units at deep discounts ahead of the 2025 deadline.
Buyers - who are seeing condo asking prices fall - are probably thinking this might be the time to make a purchase.
Conversely, sellers are increasingly worrying that they need to unload now as prices could be lower in the future.
For real estate professionals, they are probably wrestling with whether or not it is worth their time and the marketing expense to accept condo listings that are too richly priced and never going to transact.
This is a push-pull scenario that many are facing in late December now that the U.S. elections are over and the year is coming to an end.
It is a lot of information but we are confident our reports will assist you to better understand current market conditions in South Florida.
It is worth noting that we are sharing a portion of our research for free with subscribers to our newsletter and readers of MiamiCondo.Club.
If you want access to all of our published information and charts, we would encourage you to join the Miami Condo Investing Club™.
The objective of the Club is to create a community that shares realtime, actionable information on the latest real estate trends, opportunities and service providers in South Florida.
The Club is ideally suited for Do-It-Yourself (DIY) condo buyers and real estate professionals, alike, who can rely on our latest statistics, expert opinions and access to consulting services.
Additionally, we encourage you to listen or view our podcast wherever you get podcasts. The podcast is available on Apple, Spotify and/or YouTube.
As a reminder, we are always available for consulting, expert witness work and buyside brokerage services just as we have been since 2006.
If you are seeking information on condo resales in South Florida, please visit CondoVulturesRealty.com or call the office at 305.865.5859.
— Peter Zalewski, Founder of the Miami Condo Investing Club™
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Analysis: Palm Beach County Condo Prices Overvalued By 116%
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This information is provided for general informational purposes only, based on research, personal experience and interviews. It should not be considered legal advice, as we are not attorneys. While believed to be accurate and complete, this information is provided "as is" without warranty or guarantee of any kind.
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