Coronavirus Florida: Is Palm Beach’s Once-Booming Real Estate Market Starting to Recover?

Coronavirus Florida: Is Palm Beach’s Once-Booming Real Estate Market Starting to Recover?

By Darrell Hofheinz, Daily News Real Estate

The real estate season just ended in Palm Beach had seen sale after sale, including a record-setting deal recorded at $105 million, just a few months before the coronavirus health scare upended the market. But things may be turning around, with real estate agents and brokers saying they expect a busy summer. Here’s an end-of-season wrap-up.

The Palm Beach real estate market entered the season last fall with a strong wind at its back.

And then in March, it got the wind knocked out of it by, of all things, a global pandemic.

summer of big-dollar deals had established a sales momentum that swept through the fall and continued into the early spring. As much as $671 million in single-family transactions were recorded during the six-month period that began in October, according to quarterly sales reports. Compare that to the $253 million that changed hands in the same period a year ago.

Among this year’s deals was the most expensive property ever sold in Palm Beach — a sale recorded in December at $105 million for hair-and-beauty mogul Sydell Miller’s estate at 1415 S. Ocean Blvd. on the stretch of coastal road dubbed Billionaires Row.

And then came the brutal and unexpected blow delivered by the coronavirus health crisis.

By mid-March the coronavirus threat had Palm Beach reeling, as town officials quickly moved to issue a March 16 emergency order that set a nighttime curfew and closed beaches. Residents were soon hunkering down at home. Restaurants closed their dining rooms. Businesses, retail stores and hotels, led by The Breakers, temporarily shuttered their doors.

As the stock market plunged and people avoided commercial air travel, the initial couple of weeks of panic and paralysis were followed by several more weeks of sluggish sales. That scenario continued even after Gov. Ron DeSantis issued an April 1 emergency order designating real estate offices and related industries “essential businesses” that could stay open during the crisis.

But as of last week, the town’s single-family market appears to be finding its feet again, as multiple brokers, agents and real estate attorneys told the Daily News.

“I think there are stirrings of optimism — I think that’s a good way to put it,” said broker John Hackett, who supervises the Corcoran Group’s office in Palm Beach as well as other locations in Palm Beach County.

“The reality is that I don’t think we’re out far enough from this thing to make any firm predictions. But we anticipate a relatively busy summer, as long as this thing doesn’t make a U-turn and circle back around. Barring that, I definitely see very, very bright spots for Palm Beach real estate.”

Others were even more bullish as they eye a summer they hope will be filled with sales.

“In the past 10 days, the market has arguably picked up to where we left off” in mid-March, said Christian Angle of Christian Angle Real Estate. “The quality of interest and traffic has really picked up. And because of the market’s tight inventory in certain sectors, the market (pricing) is firm.”

Palm Beach real estate attorney Guy Rabideau has been scratching his head over the spurt of deals he’s been seeing over the past week and a half.

“During the initial phase (of the health crisis), a lot of people panicked and tried to cancel contracts. But activity picked up last week,” Rabideau said Wednesday, “and this week it appears to me we’re having a near-normal week for the season. I can’t quite believe that, but it looks like we have turned the corner on panic.”

Off the fence?

The crisis, Angle added, appears to have spurred some people who already were thinking about buying here to make the move.

Palm Beach has long attracted buyers for its beauty, climate, tax advantages and a sense of security and safety, agents and brokers said. But the latter now includes Palm Beach’s relatively low number of officially counted cases of coronavirus-related illness — 18 at last count with two reported deaths.

And that situation — along with the realization by many people over the past seven weeks that they can work remotely from anywhere — “has pushed (would-be buyers) off the fence,” Angle said, echoing sentiments expressed by others who work in Palm Beach real estate.

“I’m also dealing with local families who have family members who want to come down here from the Northeast,” he added.

Margit Brandt, an agent at Brown Harris Stevens, said she has spoken with young families from the metropolitan areas in the Northeast who have been weathering the crisis for weeks at their parents’ homes in Palm Beach. It wouldn’t surprise her if some them consider moving here, she said, “now that they’ve seen how appealing Palm Beach is, even in a crisis. They’ve seen how the quality of life here is superior.”

The recent pickup in sales activity has been largely concentrated in the upper end of the market — for properties priced above $10 million — and at the lower end, agents and brokers agreed. Mid-range properties between $5 million and $8 million have been slower to spark interest.

Desperate to rent

Even with the recent escalation of activity, the effects of the initial news about the coronavirus can’t be overstated, several brokers agreed.

Broker Linda Gary of Linda A. Gary Real Estate saw the panic firsthand during the first weeks of the health crisis. “I did have a couple of contracts where the buyers canceled — and now they’re both sorry they did,” Gary said. “I’m getting a lot of calls from people looking for homes.”

Ava Van de Water, whose regional duties at Brown Harris Stevens include managing the Palm Beach offices, said the initial slowdown was dramatic.

“January and February were crazy busy. And then everything stopped,” Van de Water recalled. “But after a week or two of that, it looked like everyone wanted to come to Palm Beach. We’ve sold two properties sight unseen.”

The majority were desperate to flee densely populated metropolitan areas where the coronavirus was wreaking havoc, especially New York City but also in Connecticut, New Jersey and Chicago.

Since mid-March, brokers and agents have consistently reported an unprecedented demand from Northerners hoping to find rental properties in Palm Beach.

Available houses for rent, which are always in short supply at the height of the season, were quickly snapped up during the first weeks of the crisis.

And condos for rent were similarly scarce, but for a different reason: Many homeowners associations quickly locked down their complexes by barring visitors — including real estate agents, their clients and moving-company workers — to help prevent the spread of COVID-19, the disease caused by the virus.

“You can’t (rent) a condominium; they’re are off the table,” said broker Linda Olsson of Linda R. Olsson Inc. “People are looking for a house that’s ready to accept a short-term rental, so it has to be furnished. We’re getting a (prime) seasonal rental rate for the summer months for houses. I have people paying $30,000 or $40,000 a month in the summer for houses. That’s what they would normally be paying during the (high) season. Off-season rentals might usually be $25,000 a month.”

Rentals aside, new sales activity continued to sputter during the first few weeks of April, with some exceptions, although many deals in the works before the crisis closed as planned. Palm Beach also saw two sales above $25 million that went into contract early in April, both closing by the end of the month.

But the recent turnaround still has taken some real estate pros by surprise.

“There’s a lot of strong activity. It’s like it’s the middle of the season,” said Premier Properties Estate agent Jim McCann, immediate past president of the Palm Beach Board of Realtors.

He added: “People are just tired of sheltering in place. There seems to be a shift, and people are looking at real estate again. As brokers, we’re eternal optimists. But I do think we’re seeing some pent-up demand.”

Big numbers

Here are a brief recap and a few other takeaways from a real estate season that defied expectations in so many ways.

— The biggest deals were plentiful. Last season between Oct. 1, 2018, and May 1, 2019, just three single-family properties sold at prices documented at $17 million or more. For the same period this season, there were a dozen sales in that price category — 13 if you count one that recorded at $16.9 million for a vacant lakefront lot at 445 N. Lake Way.

— During the fourth quarter of 2019 and the first quarter of this year, an eye-popping $862 million worth of single-family properties, condominiums and co-ops sold in Palm Beach, according to the market reports prepared by agent Suzanne Frisbie of Premier Estate Properties.

— Once the health crisis hit, agents, sellers and buyers almost overnight changed the way they have done business, wearing masks and gloves and following social-distancing and other guidelines. Agents are still showing houses when they can, but they are often staying in their cars while clients tour, communicating only by phone, said agent Whitney McGurk of Brown Harris Stevens. And most of the showings are taking place in houses where the owners are not in residence.

— If the condo lockdown continues at length, it may pose problems for buyers who do manage to land a unit and want to renovate it in time for the next season. In Palm Beach, buildings typically allow renovations from the middle of May until the beginning November, and the clock is ticking.

— The Palm Beach market appears well positioned to regain strength, said New York-based analyst Jonathan Miller of Miller Samuel Inc., who monitors markets nationwide when he prepares quarterly sales reports for Douglas Elliman Real Estate.

“We’re going to see suburban markets and second-home markets benefit during the next few years,” Miller said. “Palm Beach went into this crisis on a very solid footing and in theory — and this not based on data, just logic — will come out on the other side in a better position,” Miller said.

City dwellers who have endured the pandemic indoors may certainly better appreciate Palm Beach’s pleasant climate, open spaces and easily accessible outdoor amenities should disaster strike again, said broker David Fite of William Raveis South Florida, which has an office in Palm Beach.

“What we’re seeing in high-density markets — New York, Chicago, Boston — is that people are looking to Palm Beach rather than having to sit in their 2,000-square-foot apartment,” Fite said.

McCann agreed. “If you have to shelter in place, Palm Beach is not a bad place to do it,” he said.

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