If the Palm Beach real estate market were a magnum of Dom Perignon, you would surely have heard a loud "pop" this season.
That's because the bottleneck holding back single-family sales over the past couple of years finally broke with a rush of closings, especially after the first of the year, real estate brokers and analysts agree.
“There’s no doubt we’re in a very strong uptick,” said Brown Harris Stevens broker Ava Van de Water. “And I think it’s going to be a strong summer, at least through May and June, based on what’s under contract.”
Palm Beach Board of Realtors President Suzanne Frisbie echoes Van de Water. Just in the first three months of the year, there were 47 single-family real estate transactions in town — a 62-percent hike over closings in the first quarter of last year, said Frisbie, an agent at the Corcoran Group. Her figures included closed sales of single-family properties in the island’s multiple listing service as well as those that changed hands privately but were recorded at the Palm Beach County Courthouse.
The dollar volume of those transactions during the first quarter totaled $328 million, a 28-percent jump over the first three months of 2017, Frisbie added. In fact, single-family sales this year generated the highest first-quarter dollar volume ever recorded in Palm Beach, according to the research prepared by her family’s company, The Frisbie Group.
Frisbie's findings generally echoed the favorable sales picture for single-family houses and land painted by other first-quarter sales reports released by real estate agencies that do business on the island. Those reports also showed, however, that sales in the island's condominium market have not been nearly as robust as those in for single-family properties.
The single-family sales numbers were particularly impressive in the upper price brackets. Last season, from October to May, seven real estate sales recorded at more than $17 million. This season, there were a dozen. And as of last week in the local MLS, five properties were under contract with asking prices of $15 million or more, including a $59.5 million listing for a lakefront estate at 1485 S. Ocean Blvd., marketed by broker Christian Angle of Christian Angle Real Estate.
In the lower end of the market, the first quarter also saw robust sales of MLS-listed single-family properties, said Van de Water. The number of houses that sold for between $5 million and $10 million, for instance, totaled 14 in the first three months of this year versus eight in the first quarter of 2017, Van de Water said. Among those buyers was rocker Jon Bon Jovi, who in April paid a recorded $10 million for an oceanfront house at 230 N. Ocean Blvd. Angle handled the buyer's end of that deal opposite the listing agent, Lawrence Moens of Lawrence A. Moens Associates.
Tax-reform and sales
In the last couple of seasons, the real estate scene was marked by a fitful start-and-stop-and-start-again rhythm. Many would-be buyers sat on the sidelines in the year leading up the 2016 presidential election, uncertain what the outcome would bring. The shake-ups accompanying President Donald Trump's first months in office didn't do much to ease the uncertainty, even as the buoyant stock market continued to fatten portfolios.
But by the time the season kicked off in October, many brokers were optimistic that the tide finally had turned. Angle echoed many of his colleagues when he told the Daily News last fall that "the velocity of transactions in 2017 has been far stronger than what I saw last year."
And then came December and the long-awaited Congressional tax overhaul, which generally favors business, industry and the wealthy, thanks to changes to the estate tax and the alternative minimum tax.
Add in a robust economy, and even February’s stock-market correction couldn’t dampen sales in Palm Beach, where there’s no state income tax, a relatively low sales tax and a limited tax on intangible personal property. The Wall Street dip may have actually encouraged some buyers to invest in real estate rather than in a volatile stock market, some brokers have speculated.
“We have the perfect storm, with the tax changes that are driving people here,” said broker Bill Yahn of the Corcoran Group, where his duties as senior regional vice president have included overseeing the island brokerage.
More residents of high-tax states — think New York, Connecticut, Massachusetts, Illinois and California — are looking to establish a homestead here to boost their bottom lines through tax advantages, Yahn said.
And many of those buyers are younger and work in the financial, investment or technology fields. They are realizing that a primary home here won’t hinder their ability to do business elsewhere, thanks to the internet and the proximity of Palm Beach International Airport, Angle said.
“The world has become a smaller place, and the desire to live in South Florida — and particularly in Palm Beach — continues to increase every day,” Angle said, noting the growth over the past decade of academic, health-care and cultural institutions in Palm Beach County.
“We’re becoming more of an established community, a place that many people are going to use as their home base,” Angle adds.
That famous snowbird
Also playing a role in attracting new residents, brokers say, are the traditional selling points, including its natural beauty, security, handsome architecture and warm climate. The latter may have played a strong role in Palm Beach’s go-go market this season, considering that many northern cities were walloped this winter by a series of snowstorms. Weather-weary residents there may have given the island a second look, especially amid the international news coverage that accompanied Trump — the town’s most famous snowbird — on his frequent visits to Mar-a-Lago.
Even the landscape damage and power outages left after Hurricane Irma's outer winds hit on Sept. 9 appear not to have had a lasting impact on buyers' willingness invest in Palm Beach real estate.
Indeed, some properties that had been on the market for a year or even longer finally found buyers this season. That doesn’t surprise real estate analyst Jonathan Miller of Miller Samuel Real Estate Appraisers and Consultants, based in New York City. Miller prepares detailed quarterly sales reports for the markets where Douglas Elliman Real Estate does business, including greater New York City and South Florida.
“Palm Beach is a national outlier,” Miller said, noting that many other upscale markets have not experienced such “an expansion of luxury sales.”
Miller is particularly impressed that the sales on the island, for the most part, haven’t been driven by drastic price reductions, even as the market has surged, according to his analysis of MLS figures.
“We just haven’t seen a significant discount of the asking prices,” Miller said, adding that buyers and sellers seem to be meeting in the middle from the get-go. That’s not the case in other affluent markets he studies, such as Greenwich, Conn.
“In Greenwich, for example, we are seeing much larger discounts,” he added. “In Palm Beach, the surge wasn’t about the pricing itself. It was about buyers who had been in a holding pattern finally getting the signal last fall” to take the plunge and sign contracts.
And that has left buyers facing an inventory crunch that ultimately may boost prices, based on the laws of supply and demand, he added.
“Sales are way up but pricing was flat and inventory hasn’t really risen,” Miller said. “It suggests to me that at least there’s a potential for (upward) price pressure going forward.”
How big is too big?
Because Palm Beach is built-out, buyers looking for a new or newer house — as many are, brokers agree — often find that the selection is limited. No wonder some would-be home buyers have opted to forgo the island entirely, instead paying millions for condominiums in The Bristol, the under-construction, ultra-luxury tower under construction in West Palm Beach, just across the Royal Park Bridge.
And that means developers who build houses on speculation are continuing their scramble to keep up with the demand, even as land on the island fetches historic highs. Prices for even smaller lots begin at $250 per square foot these days, said Yahn. Do the math and a 100-by-100 foot lot, the standard minimum for a house, is typically selling for least $2.5 million.
The North End, in fact, has become a construction zone for houses offering the sort of features buyers want — open floor plans with plenty of natural light and fine interior finishes. And their demand for higher ceilings — coupled with higher elevations to meet new flood-plane requirements — can result in taller houses.
That's been a sore spot for neighbors who have complained vigorously to the Architectural Commission about projects they view are simply too large for their lots. The board this season regularly faced that issue and as a result, the approval process from some projects took six months, or even longer, as commissioners demanded multiple revisions.
Subdividing large estates
Complicating the picture is a trend to knock down aging larger estate houses and subdivide the land or resale as vacant lots. The Architectural Commission this season wrestled with the scale of spec houses proposed for newly subdivided lots on the North End at 446 N. Lake Way, 901 N. Ocean Blvd. and 535 N. County Road. So far, only the contemporary-style house proposed for the latter lot has won approval and only after multiple revisions by developer Mark Pulte of Mark Timothy Inc.
In the Estate Section, developer Sir Peter Wood in October sold for $7 million the first of five vacant lots he carved from the 4.2-acre former estate of the late John Kluge at the corner of South County Road and El Bravo Way. In April, Wood also sold, for a recorded $18.25 million, a landmarked 1921 oceanfront house at 89 Middle Road that Kluge had used as a guesthouse. Angle brokered both deals.
Meanwhile, at the opposite end of town, billionaire hedge-fund manager Ken Griffin took a completely different tack. Since late 2012 with the help of Moens, Griffin has spent more than $230 million assembling properties for his ocean-to-lake estate at 1265 S. Ocean Blvd. It could total more than 17 acres, once a pending sale is finalized.
By the beginning of this season, Griffin had cleared his oceanfront land of several houses and began excavating the basement for his house, which was designed to stretch longer than a football field.
But in early April, Griffin astounded real estate observers by pulling the plug on the project and sent word to town officials that budget overruns had caused him to abort the planned house. A spokesman told the Daily News Griffin plans to head back to the drawing board at some point with a new design team. Griffin still owns a house on the estate at 70 Blossom Way that he uses when he visits Palm Beach.
His abrupt decision to regroup gave brokers and their agents plenty to talk about, even as they uncorked another bottle of champagne to celebrate their latest deals.
