Pandemic Creates Additional Pressures on Housing in Palm Beach County
By: Robert S Weinroth
Homelessness in Palm Beach County? Unfortunately the answer is yes. For many of us, South Florida is our slice of paradise. When compared to the cost of living in the northeast, South Florida is downright reasonable.
However, over the past year (due in part to an exodus from the northeast in the shadow of the pandemic) the housing situation in Palm Beach County has gone from bad to critical. Housing costs have continued to increase while, for many within our community, the ability to pay has not kept pace.
Rents have grown by over 20 percent in Palm Beach County over the past 12 months. Demand for apartments has doubled over the past 10 years.
The increases are due to many factors including high demand for apartments with the influx of new residents. People are renting as they wait out the blistering housing market, further exasperating the apartment shortage. Landlords have been grappling with increased costs and reduced income due to the eviction moratorium imposed for over a year.
The number of “for sale” homes on the market has decreased dramatically. In Palm Beach County, listings for homes have plunged 61% compared to four years ago.
Palm Beach County has less than a 2-month supply of single-family homes on the market, a 55% decrease from last year. The number of credit-worthy shoppers competing for a diminished inventory of supply has created a sever imbalance between supply and demand.
In 2017, nearly 40 percent of all households in the County spent more than 30 percent of their income on housing costs. The problem was much more acute for renters who spent, on average, over 50 percent of their gross income on housing. However, as bad as it was in 2017, 2021 has ushered in a period of increasing pressure on individuals seeking housing in Palm Beach County.
The median price of a home is now $500,000 in the tri-county area. However, individual zip codes tell a much different story. These are a sampling of average home sale prices for July 2021:
- 33432: $1.1 million
- 33480: $6 million
- 33483: $1.3 million
- 33473: $695,000
- 33487: $600,000
- 33496: $555,000
- 33434: $495,000
- 33433: $450,000
- 33437: $390,000
- 33493 $130,000
Clearly there is a significant spread between Palm Beach (33480) and South Bay (33493).
The County, in partnership with the development community, has required new projects to set aside up to 25 percent of the new housing as “workforce housing” units.
Between 2017 and 2019 over 1,600 housing units were created through new construction, acquisition, rehabilitation and foreclosure prevention. However, this is truly a drop in the bucket as demand keeps increasing as the gap between wages and rents continues to widen.
In 1991, the Florida Home Builders Association and Florida Realtors intent on creating jobs in the housing construction industry and getting more low and moderate income families into home ownership, respectively, asked the Florida Legislature to increase the transfer fee on all real property transactions and dedicate that increment to the state and local housing trust funds.
The Sadowski Fund, officially the William E. Sadowski Affordable Housing Trust Fund, was created as a dedicated source of revenue to help pay for local and state housing programs across Florida. Proceeds of the Fund are supposed to be split roughly 70/30 between local governments, for programs offering down-payment assistance to homeowners and to pay for repairs to existing housing, and state programs that help fund affordable-housing development.
Unfortunately, the funds have been swept and used for other legislative priorities on a regular basis. Last year, Palm Beach County should have received $17 million from the trust but ultimately only received $2 million!
Since 2003, the fund has been continually raided with $2 billion diverted away from the housing programs it was created to address. Palm Beach County has seen over $200 million that should have been dedicated to affordable/workforce housing reallocated by the state.
For homeowners this sudden surge in prices is creating a windfall of wealth. For those individuals attempting to scrape together a down payment for their “starter home,” a median price of $500,000 becomes, virtually, unattainable. Low mortgage rates do give the new buyers greater buying power.
Rates for a 30-year fixed mortgage stood at 3.25%, while the rates for a fixed 15 years are 2.30% as of Sept.1. Sixty percent of homebuyers who financed with a mortgage said the low rates played a role in their decision to get a home. However, absent the required down payment of 20 percent, these rates do not make homeownership possible for many within our community.
Until the market finds a new equilibrium, buyers will be competing with the influx of new residents carrying large piles of cash and ready to make cash offers on listings, site unseen.