Where Have All The Good Deals Gone? FAU Study Shows Palm Beach County House Prices 20 Percent Above Long-Term Trend

MEDIA CONTACT: Jim Hellegaard
561-319-2233, jhellegaard@fau.edu

BOCA RATON, Fla. (January 22, 2019) – The housing market in Palm Beach County is 19.76 percent above its long-term pricing trend, while the market is experiencing moderate downward pressure on the demand for home ownership, according to a new study from faculty at the Florida Atlantic University College of Business.

“All of the good deals are gone from the market at this point in time,” said Ken Johnson, Ph.D., a real estate economist with FAU’s College of Business. “Folks are now purchasing to avoid rising rents or simply buying to lock-in at lower prices.”

At the same time, the Beracha, Hardin & Johnson Buy vs. Rent Index, which Johnson coauthors, indicates a moderate degree of downward pressure on the demand for home ownership in the county. The county’s BH&J score of .28 suggests that roughly only 15 percent of current purchasers will outperform renters that reinvest rent differentials (down payment and additional cost of owning) into a portfolio of stocks and bonds.

“As individuals decide to rent and reinvest as opposed to owning and building equity, we can expect to see the price of housing settle,” Johnson said. “This is all just part of the new dynamic in residential real estate. Housing cycles now make it necessary for all to keep up with where we are at any point in time in our current local real estate cycle.”

Compared with the peak of the last real estate cycle in the summer of 2006, Palm Beach County is not nearly as overheated in terms of pricing and is experiencing far less downward pressure on the demand for home ownership. In July 2006, the county was 66 percent above its long-term pricing trend and was experiencing an extreme BH&J score of +1. That meant that less than one out of every 100 buyers would outperform renters that reinvested. The result was an avalanche in falling home prices.

“It is difficult to say what is next,” Johnson said. “If prices continue to rise rapidly, we could see another market crash. However, we appear to be at the peak of the current cycle. So, it seems most likely that the county will experience flattening prices and extended marketing times.” 

- FAU -

About Florida Atlantic University
Florida Atlantic University, established in 1961, officially opened its doors in 1964 as the fifth public university in Florida. Today, the University, with an annual economic impact of $6.3 billion, serves more than 30,000 undergraduate and graduate students at sites throughout its six-county service region in southeast Florida. FAU’s world-class teaching and research faculty serves students through 10 colleges: the Dorothy F. Schmidt College of Arts and Letters, the College of Business, the College for Design and Social Inquiry, the College of Education, the College of Engineering and Computer Science, the Graduate College, the Harriet L. Wilkes Honors College, the Charles E. Schmidt College of Medicine, the Christine E. Lynn College of Nursing and the Charles E. Schmidt College of Science. FAU is ranked as a High Research Activity institution by the Carnegie Foundation for the Advancement of Teaching. The University is placing special focus on the rapid development of critical areas that form the basis of its strategic plan: Healthy aging, biotech, coastal and marine issues, neuroscience, regenerative medicine, informatics, lifespan and the environment. These areas provide opportunities for faculty and students to build upon FAU’s existing strengths in research and scholarship. For more information, visit www.fau.edu.