South Florida's supply of luxury houses and condominiums isn't only limited. It gets even worse.
"This isn't just a drop in inventory," said Jonathan Miller, CEO of Miller Samuel, an appraisal and consulting business that monitors 14 regional real estate markets for brokerage Douglas Elliman. "This is a disaster."
According to the data, it is not exaggeration. According to Miller's statistics, South Florida inventory reached a record low of 7,906 units in the first quarter of this year. This is down from an average of 27,000 units between 2017 and 2019.
Miller does not expect things to return to normal anytime soon. "Even if listing inventory quadrupled or tripled, supply would still be regarded 'poor' in most markets," he explained.
However, sales are brisk.
Despite the low quantity of available properties, overall sales in the first quarter exceeded $11.8 billion, outpacing the previous quarter by more than $1.9 billion. According to Miller, several luxury markets reached all-time highs.
According to figures prepared by Miller for Douglas Elliman's Elliman Report published earlier Wednesday, the area's top five luxury real estate markets accounted for more than 45 percent of total regional sales volume, or about $5.4 billion.
Here is a list of the top five luxury markets in South Florida based on average sales price, as well as an examination of how challenges like as low inventory and rising mortgage rates may effect future sales.
Palm Beach held the top rank in South Florida for the highest average luxury house sale price for the fourth consecutive quarter. According to Miller's study, the municipality accounted for more than $500 million in total sales volume.
A luxurious single-family home in the posh coastal resort costs more than $21 million on average. (The Elliman Report defines luxury as the top 10% of a market's sales.) The average price per square foot was $3,659, down 2.7 percent from the previous quarter's record price, but the number of transactions finalized in Q1 reached 15, up nearly 67 percent from the previous quarter, according to the study.
Palm Beach has the highest first-quarter sales volume in South Florida. According to public documents, the oceanfront mansion at 854 S County Rd. sold for $53 million. According to the ad, the 10,171-square-foot home lies on 2 acres across the Intracoastal Waterway and has 220 feet of water frontage. The price per square foot was astronomical at $5,210.
According to listing agent Gary Pohrer of Douglas Elliman, the size of the estate and lake frontage set the property apart from the competition. When questioned about the market's future, Pohrer told CNBC that he is "cautiously optimistic," with his major concern being a significant inventory problem.
"If you look at the history of active listings, we are at an all-time low, and that doesn't change quickly," says one real estate agent.Pohrer said.
Miller believes that the inventory problem will have a big influence on the following quarters.
"It will keep sales below potential and maintain or enhance the market share of bidding wars," he predicted.
With 17 closings and an average price of nearly $17.9 million, Miami Beach, Barrier Islands was the report's second most expensive luxury single-family house market. The average price per square foot was $2,766, a decrease from the previous quarter's record of $2,835 per square foot. Total market sales volume at all price levels was about $2.9 billion, trailing only the Miami Mainland market, which tallied up $3.9 billion in sales.
According to Miller, Miami's Fisher Island witnessed the greatest first-quarter transaction in the Miami Beach, Barrier Island market: a $30 million acquisition for a penthouse apartment in Palazzo Della Luna, a 10-story ultra-luxury condominium located at 6800 Fisher Island Dr. According to the listing agent, Dora Puig, the home known as Penthouse 3 covers about 6,800 square feet, includes four bedrooms, 4.5 baths, and an over 8,000-square-foot rooftop deck.
In terms of possible headwinds, Puig said she is less concerned about rising mortgage rates because the majority of her rich buyers in the high-end market pay cash.
In essence, the luxury buyer's reliance on cash dampens, but does not eliminate, the effect of rising rates. Miller told CNBC that they might cause "a modest rise in listing inventory and a tiny decline from the current frenzy."
Puig is concerned, though, that the Federal Reserve will raise interest rates too quickly and too high, perhaps pushing the country into a devastating recession.
"If that happens, individuals in all sectors of the market will be affected, and no one will be immune to the economic impacts that will ensue," Puig added.
Coral Gables, located southwest of downtown Miami, saw 15 closings with an average transaction price of roughly $10.6 million, a record for the area. According to Miller, the average price per square foot reached an all-time high of $1,609, up 33.7 percent from the previous quarter.
According to Miller, the Fort Lauderdale market came in fourth place, with 57 luxury house sales at an average price of over $6.9 million and an average price per square foot of $1,167, both of which are all-time highs for the city.
With 60 transactions at an average price of just over $5.5 million, Boca Raton/Highland Beach was the seventh most expensive luxury house market. The average price per square foot of $670 was also a market high.
According to official records, the oceanfront property at 2455 S Ocean Blvd. sold for $40 million, making it the fourth-highest home sale in South Florida and a record-breaking price for the municipality of Highland Beach. According to Miller, the 17,600-square-foot mansion sold for the highest price ever in Boca Raton/Highland Beach. Beverly Aluise Knight of Ocean Estate Properties, the home's listing agent, told CNBC that the mansion's move-in-ready quality was a bonus.
"Fully designer-furnished — write a check, move straight in — rare in this market," she explained. Knight reportedly told CNBC that the buyer paid an extra $5 million for furnishings, bringing the total transaction price to $45 million.
When asked how increasing interest rates and low inventory would affect South Florida real estate sales, Knight answered it all depends on the market. However, she feels that when unanticipated circumstances have a negative influence on the market, properties on the lake have shown to be the most durable.
"I believe that history has proven that the coastline is always the last to crash and the first to rebound," Knight added.
Phil Schneider
