It’s no secret that Boca Raton home prices have risen at rapid rates since last year. Prices that are almost 30% higher than a year ago are not uncommon and multiple bids on Boca homes for sale are not uncommon, either.
According to the Realtors Association of the Palm Beaches, median home prices in all of Palm Beach County were at $210,000 in April of 2012, and had risen to a median price of $265,000 as of April of this year. From what we can see, it appears that prices are still rising around 2% per month.
Median Prices still far below their peak
Despite this trend, we are still well under the 2005 zenith of a $421,000 median home price in Palm Beach County. In addition, as mortgage rates continue to rise, home price rises typically start to slow.
What’s holding back the slowdown is that there are not enough houses in Boca, or anywhere else in South Florida for that matter, to satiate the swelling appetite among buyers for homes in the area.
Granted, the market for homes in Boca Raton over $1 million has not overheated to the same extent as the lower priced home market has; however, seller concessions on the higher priced homes are moving down from the 10% or slightly higher range that was typical a year ago.
Seller concessions are becoming extinct.
In today’s seller’s market, the odds of obtaining seller concessions on homes priced under $400,000 are about the same as those of winning the lottery. Buyers are fortunate if they don’t find themselves paying a premium over the asking price.
This is not unusual, however. Agents in the area report that their buyers may make offers over price on several houses, only to find that another buyer’s bid was even higher.
Cash buyers abound.
Because there are hordes of cash buyers in the market, first time buyers with pre-approved mortgages are finding themselves at a disadvantage. Almost 33% of homes in the area were purchased for cash this year. This is a far higher percentage than we’ve ever seen.
So even with a pre-approved mortgage, which used to be the gold standard in the market, these buyers come in second to cash. After all, cash has no chance of being disapproved by a bank. There’s always a chance, especially in today’s very tightly regulated mortgage market, that a mortgage will fall through at the last minute.
We’re not bubbling over in Boca.
So, are we in a bubble? The real estate pundits suggest that cities distant from us – Los Angeles, San Diego, San Francisco, even Washington D.C. – may be in one. Our area, so far, has a long way to go.
The tightly regulated mortgage market, combined with a lack of homes, holds us back. In 2003-2005, anyone who could prove he or she was breathing was granted a mortgage.
If you’re thinking of buying, think fast.
Today, even people with credit scores in the 800s must undergo a financial proctoscopy before getting an approval. Also, many homes are being purchased with cash. These measures provide us with a larger degree of protection.
Now, what we need is more homes for sale. Once we have a larger supply of homes that answers the demand, prices may start to moderate.
But in the meantime, if you’re thinking of purchasing a home in Boca Raton, bring your game face and be ready to make a rapid decision.
Marc Jablon, The Jablon Team
Re/Max Complete Solutions