With demand way up and housing inventory sharply down, Palm Beach this season promises to be a town where the art of the deal may require even more artfulness than usual, according to island real estate professionals.
So don’t be surprised if many of the properties that change hands over the next several months do so privately — without ever entering the two multiple listing services that serve the island.
“I think the market is very strong, although we have such limited inventory right now,” said broker Linda Olsson of Linda R. Olsson Inc. Realtor. “But there are plenty of privately listed properties. Properties are moving so quickly, people are not even listing them anymore. Frankly, they’re not even making it into MLS.”
Buoyed by the economic recovery and pent-up demand, post-recession buyers have returned to the island in droves. Although brokers encountered a busy sales season last winter and spring, the warmer months proved just as active, said Palm Beach-based Bill Yahn, the Corcoran Group’s senior regional vice president for Florida operations.
“It’s really bizarre. The phrase ‘the season’ is kind of a misnomer for us now. We were as busy during the past summer as we were during the previous season,” he said.
Although they don’t reflect off-the-market sales, figures in the Palm Beach Board of Realtors MLS show that recent closings for houses, vacant land and condominiums beat last year’s summer transactions. From June 1 to Oct. 9 of this year, 59 single-family properties changed hands, compared to 38 during the same period in 2012.
Meanwhile, Sotheby’s International Realty’s latest “Market Update” report compares MLS single-family sales data from the first three quarters of this year to last year’s figures. In the first nine months of 2012, 80 properties changed hands. This year, that number climbed to 128.
Condo sales during the summer also were better, although the numbers weren’t quite as dramatic — 107 this year versus 97 last year, according to the MLS. In fact, the condo market, which had lagged far behind the single-family recovery, finally appears to be back on track, said Scott Gordon, whose Scott Gordon Realty in Manalapan specializes in sales of condos and cooperative units.
“This was the first summer in maybe five years that we conducted a lot of business, and that’s great. We’re back to a year-round market,” he said. “There’s a level of confidence among buyers and sellers we haven’t seen before.”
The island’s overall property values are up as well, scraping levels last seen at the height of the real estate boom, according to the Palm Beach County Property Appraiser’s office. For this year’s tax rolls, the overall “total market values” of property in town is $9.9 billion, based on 2012 sales, said county Property Appraiser Gary Nikolits. In 2007, that number was $10 billion.
Echoing other real estate observers, broker Christian Angle of Christian J. Angle Real Estate credits a variety of forces for sparking demand — historically low interest rates, escalating numbers of retiring baby boomers and more young families eyeing Palm Beach as their primary home.
“There’s more demand in general on our market, which has become a year-round market. It’s no longer just seasonal,” he said.
Angle and others also have seen more people seeking a residential haven from states that impose their own income taxes and estate taxes, neither of which is levied in Florida. Transplanted New Englanders have always been on that list, but brokers also have noticed a strong influx of house-hunters from California — an unusual demographic for Palm Beach.
David Fite of Fite Shavell & Associates
“We’re seeing a lot of people from California, Illinois and New York,” said David Fite, who owns Fite Shavell & Associates. “People are just fed up with taxing — and over-taxing.”
In any event, the resulting uptick in sales has kept real estate agents busy, even if house-hunters this season will be frustrated to find that the available housing stock has simply failed to keep up with the continuing demand.
As of early last week, just 112 single-family houses and eight townhomes in Palm Beach were available for sale in the island’s MLS, the lowest number in recent memory, brokers say. Of the houses, seven also were being marketed as buildable lots, complementing an additional 14 land listings.
And according to the MLS figures cited in the Sotheby’s report, in the third quarter of this year, there were 157 single-family properties “active listings,” compared to 214 the year before.
It’s a similar story in the condominium market, Gordon said.
“Right now on the South End, there are 260 apartments on the market. And last year, we were probably at around 350,” he said. “Inventory is being absorbed, which is a great thing, and there’s just not a lot of inventory coming back onto the market. Anything that is nicely outfitted and finished with an exceptional view doesn’t last more than a week.”
When it comes to single-family homes, you can blame the tight inventory on lingering effects of the downturn, real estate professionals agree. Except for a few exceptions, never-lived-in houses just aren’t available because developers and builders only began returning to the island late last year. Once again enjoying ample credit lines, they have been buying land and readying plans for projects, none of which will be finished for at least a year.
Likewise, during the first sputtering years of the recovery, home buyers bought dozens of outdated homes, especially on the more affordable North End. They either have started planning custom replacements or remodeling the existing houses, with no intention of selling anytime soon.
“The builders are back. You can’t drive up a street in Palm Beach without seeing significant construction,” Yahn said. “But we’re short on potential tear-downs. In the Estate Section, for instance, there are only 10 or 12 properties that have not been landmarked or maintained. Most properties are landmarked, renovated or fairly new.”
The tight inventory has sent developers searching fervently for vacant land or outdated houses that they can demolish to build homes without specific buyers in mind.
“Builders have been reaching out to us,” Fite said. “Many builders have called us, and they’re looking for land — everything from interior lots to oceanfront to the Intracoastal (Waterway).”
126 Casa Bendita, Palm Beach. Listed by Kerry Warwick & Roger Warwick of Fite Shavell & Associates.
Likewise, private investors have returned to the market. This summer, for instance, entities linked to Palm Beachers Barbara Stovall Smith and her husband, hedge-funder Randall “Randy” Smith, bought at least seven Palm Beach houses at prices ranging from just under $2 million to more than $6 million, spending more than $23 million on the North End and in Midtown. Some of those properties already were leased when purchased, while others were immediately advertised for rent by agent Tina Roberts of Sotheby’s. And one house — 126 Casa Bendita — was re-sold privately at more than a $2 million profit within just a few weeks.
Reluctant to sell?
In the wake of so much activity, home buyers are competing for what’s left on the market. They have snapped up better-quality homes quickly — sometimes within weeks or even days of the properties entering the market, Fite said.
“We have seen bidding wars going on — and people getting their asking prices. We hadn’t seen that in a while,” he said. “Sellers are in a much stronger position than they were a year ago.”
The most active price segment for single-family homes in Palm Beach is in the lower to lower-mid price ranges — and those properties are typically on the North End or on certain streets in Midtown, Yahn said.
“The sweet spot of the market seems to be between $2.5 million and $6 million,” he said.
Still, many homeowners have yet to make the leap into the market, brokers agree, either because they don’t feel any real pressure to sell, they aren’t satisfied with the pricing picture, or they don’t want the hassle of showing their homes to buyers during the season.
And some would-be sellers aren’t sure where they would move, given the lack of properties on the market, said Ava Van de Water, broker of Brown Harris Stevens in Palm Beach and president of the Palm Beach Board of Realtors.
“Many sellers are saying, ‘Gee, I better look where I can go before I actually sign the papers to list my home to sell.’ They are very aware that there’s low inventory, so they go out first and look at what’s on the market that they might want to buy,” she said.
Deals on the down low
Brokers say they expect more listings to appear within the next few weeks, a typical occurrence accompanying the advent of the season. But they still expect inventory to remain tight.
And that means agents will likely be involved in more private deals this season. In some cases, a seller who doesn’t want his or her property to be listed in MLS will forgo the more widespread exposure in favor of working with an agent to privately market it in a so-called “pocket listing.” And that means relying on the agent’s network of contacts in the real estate community to get the word out.
In other deals, an agent working with a would-be buyer may be aware of a property that would fit the client’s needs but isn’t on the market. And that means a phone call to the owner — often with an offer — is in order.
“Everything is available at the right price, whether it’s listed or not,” said Fite, adding that house-hunters who solely rely on the Internet to identify properties for sale may miss out on a potential buy.
In fact, the summer’s largest sales in three categories — for single-family homes, vacant land and condos — involved private sales :
* The highest-dollar single-family sale so far this year, one that made national headlines: In May, radio shock-talk personality Howard Stern paid a recorded $52 million through a limited liability company for Martin and Diane Trust’s oceanfront estate at 601 N. County Road. The deal and several related ones, all totaling more than $71 million, were orchestrated by Lawrence Moens of Lawrence A. Moens Associates. Moens, who is known for putting together complex off-the-market sales, never confirmed the identity of the buyer in this one.
* Moens also put together the year’s biggest land deal, involving nearly 2 vacant acres on Maddock Way. The June deal included two lakefront parcels that were not on the market when they sold to three Delaware entities for a combined $18.42 million. A third dry lot in the same deal sold for $5.7 million, but it had been listed in the MLS by agent Jim McCann of the Corcoran Group.
* The most expensive condominium ever sold in Palm Beach changed hands privately in May. Lee and Laura Munder sold their lakefront penthouse — No. 6A in Il Lugano, 300 Seminole Ave. — for a recorded $17.45 million to a company associated with the Tisch family of Loews Corp. McCann confirmed he was involved in the deal but wouldn’t comment further.
‘Patience’ a watchword
Overall, the volatile housing market is writing its own rules, said broker Linda Gary of Linda A. Gary Real Estate, who is urging would-be sellers to take advantage of the strong market.
“This is what I tell sellers: Now is the best time for you to sell; the market is changing all the time. We don’t know what’s going to happen in three years,” Gary said.
Olsson agreed: “It might be the last hurrah for low interest rates and lower prices, which are only going to go higher. The time to get in is now.”
Fite, meanwhile, advises would-be buyers to have some patience.
“With the tight inventory, it’s almost impossible to find people the exact house they want,” he said. “I think buyers are becoming more flexible because there’s a lot more competition for each property.”