Palm Beach County in affordability “crisis”? Depends on your point of view

With its rising home prices, below-average wages and lack of new construction, Palm Beach County often is said to be in the throes of an affordability “crisis.”

But how dire is the crisis? That depends.

Compared to prohibitively expensive housing markets like those in California, we look like a bargain. In San Francisco, for instance, just 11.8 percent of homes sold in the first quarter of 2017 were in the price range of a median-income family, according to the National Association of Home Builders/Wells Fargo affordability index.

Other cities are oases of affordability. In Cleveland, fully 87 percent of homes were affordable for a typical buyer.

In Palm Beach County, some 60 percent of homes sold here in the first quarter were in reach of a family making $67,700, according to the NAHB index. It says the median home price here was $222,000, a figure that includes single-family homes, condos and townhouses.

So, compared to metro areas where housing is cheap and wages are high, Palm Beach County looks prohibitively expensive:

But measured against expensive markets, we look like a bargain:

Intriguingly, Palm Beach County’s affordability measure is similar to affordability levels in such cities as Austin, Houston, Denver, Salt Lake City and Asheville, North Carolina.

Low mortgage rates improve housing affordability

(Getty Images)
(Getty Images)

Palm Beach County homes grew a bit more affordable in the third quarter, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index.

Some 58.9 percent of homes sold in July, August and September were in reach of a typical family, based on a median home price of $236,000 and a median income of $65,400. Those numbers were mostly unchanged from the second quarter, but rock-bottom interest rates improved affordability.

Nationally, affordability ranged from a high of 89.9 percent in Youngstown, Ohio, to a low of 9.7 percent in San Francisco.

In Palm Beach County, buying beats renting by a wide margin, Trulia finds

(Getty Images)
(Getty Images)

For Palm Beach County renters, Trulia chief economist Ralph McLaughlin has some simple advice: Buy a house now.

Palm Beach County ranks No. 2 on Trulia’s list of cities where buying beats renting. We’re in a virtual tie with Miami-Dade County.

Nationally, for owners who move every seven years and can afford to put 20 percent down, it’s 37.7 percent cheaper to buy this year. In Palm Beach County, it’s 53.2 percent cheaper to own.

The arithmetic gets complicated, but here’s one way to look at it: Say you buy a $250,000 house with $50,000 down and take out a $200,000 mortgage with a fixed rate of 4 percent for 30 years. Your monthly payment is $955. Add $500 a month for insurance and taxes, and your tab is $1,455, for a seven-year total of $122,220.

Or you could rent a place for $1,950 a month. Assuming rents stay the same (an unlikely scenario), your seven-year total would sum up to $163,800.

Two WPB apartments to get multi-million dollar upgrades

Arium apartments in West Palm Beach
Arium apartments in West Palm Beach

An Atlanta-based company that turns around old apartments has swooped into West Palm Beach and purchased  two apartment complexes, with plans to spend a whopping $20 million renovating them.

Cortland Partners, an investment and management firm, purchased 396-unit Arium Palm Cove and 416-unit Arium at Laguna Lakes.

Cortland plans to combine the apartment complexes into one community to be called Portofino Place, in a bid to make the properties operate more efficiently. The apartment communities are north of Palm Beach Lakes Boulevard, to the west of Interstate 95.

The purchase closed on Oct. 14. Terms were not disclosed. The seller was Carroll Communities, which bought the apartment complexes just last year for $112 million.

A top Cortland executive said the purchase price was a premium over the previous $112 million sale, but still was less money than new construction would have cost.

John Builder of Cortland Partners
John Builder of Cortland Partners

 

As a result, Cortland will be able to rehab the apartments and make them as luxurious — or better — than new apartment complexes coming onto the market, said John Builder, Cortland director of investments for Florida.

Cortland’s move could signal a shift away from developers seeking to build new apartments, and instead indicate that some real estate players think it might be cheaper to buy old ones and fix them up.

After all, construction costs are going up and bankers are demanding stricter lending terms, according to a recent real estate forum featuring the region’s top apartment builders.

During the next two years, Cortland will take units as they are vacated by tenants and completely redo them. Kitchens will receive 42-inch cabinets, granite countertops, tile backsplashes and stainless steel appliances. Bathrooms will receive new plumbing and lighting.

A Laguna Lakes pool will be rebuilt because it is too small.

When the upgrades are completed, Builder expects rental rates will rise to between $230 to $250 a unit. Online rents now range from about $1,200 to $2,000 for one to three-bedroom apartments at Arium Palm Cove, according to apartments.com.

Although some apartment developers are starting to be wonder if rental rates can go much higher, Builder said Cortland is thinking of long-term housing trends. And those trends shows increasing apartment dwelling, Builder said.

A major reason: Young people in their 20s are putting off buying homes until they are well into their 30s.

“They’re more tied to a career than what they perceive as a financial anchor,” Builder said.

Cortland thinks Palm Beach County shows positive signs for continued job growth, a positive trend for apartment owners.

Cortland has been impressed by deals such as  UTC’s decision to build the Center for Intelligent Buildings in Palm Beach Gardens. The center, which will showcase UTC products and brands, is expected to create hundreds of new jobs.

Builder said Cortland has been eager to enter the Palm Beach County market, and this was a strong first deal.

“We needed a tent pole in Southeast Florida, and 812 units is a great way to have a tent pole,” Builder said. “It’s not going to be our last (deal) either. We’re bullish on the area over the long-term.”

Cortland owns 35,000 apartment units throughout seven states, mostly in the Southeast U.S. and also Texas.

 

 

 

 

 

 

 

Seven things to know about Palm Beach County’s real estate market

From left to right: Joel Altman, the Altman Companies; Mike Belmont, Minto Communities; Jeff Greene; Bob Vail, Kolter Urban; Michael Wohl, Pinnacle Housing
From left to right: Joel Altman, the Altman Companies; Mike Belmont, Minto Communities; Jeff Greene; Bob Vail, Kolter Urban; Michael Wohl, Pinnacle Housing. Photo courtesy Green Advertising.

Banks are turning off their money spigots.  Apartment rental rates aren’t likely to go up.

But people still need to live somewhere, and five prominent housing developers told a crowd of about 70 on Thursday they remain mostly bullish about the Palm Beach County housing market.

The speakers were Jeff Greene, a Palm Beach billionaire and West Palm Beach land investor;  Mike Belmont, president of Minto Communities Florida; Bob Vail, president of Kolter Urban; Joel Altman, chairman of The Altman Companies; and Michael Wohl, president of Pinnacle Housing.

They addressed a crowd assembled at Morton’s Steak House for the aptly-named Real Estate Developer Power Lunch. The lunch was hosted by Green Advertising and chairman Phyllis Green, in celebration of the company’s 30th anniversary representing a range of businesses, especially developers.

Although the real estate developers were enthusiastic about their own projects, they candidly voiced concerns about housing affordability, demand for rental apartments and the future of new projects proposed in the county.

And, in a one-on-one interview with a reporter, one developer  dropped a bombshell.

Here are seven takeaways:

  • Minto is not promising to build parks and recreational facilities at Westlake, a city created after the county gave Minto approval to develop 4,500 homes in a portion of the Acreage. “That’s up to the city (of Westlake),” Minto’s Mike Belmont told this reporter. Minto is the primary landowner in the Seminole Improvement District, whose boundaries now roughly equate those of Westlake. The project calls for 200 acres of parks and 15 miles of trails for horses, bikes and walkers. After Westlake was created, county officials worried Minto would not keep its promises and instead, punt to Westlake.
  • Boca Raton is about to become a hot market for apartment rentals.  Altman’s soon-to-open 396-unit apartment complex, Altis Boca Raton, is expected to attract professionals working in the nearby Park at Broken Sound. Altis is under construction on Military Trail and is expected to open in March. Rents will range from $1,800 to the high $2,000s for one, two and three bedroom apartments.
  • West Palm Beach remains an iffy market for more new apartments. Greene said there’s a limited pool of people who can afford pricey rents. At the Strand apartment building and City Palm condos, where Greene owns bulk units and rents them out, he consistently has a 10 percent vacancy rate. “We don’t have robust demand,” Greene said.
  • Housing affordability is a problem. Belmont said Westlake will provide for-sale homes for working families, but other developers who build apartments acknowledged rents are starting to become too pricey. In Boca Raton, Altman said rental rate increases will soon start moderating because the supply of apartments is increasing. In West Palm Beach, Greene said rental rates increases are “constrained” because there isn’t a huge pool of renters. This means rental rates are less likely to rise in the future, he said.
  •  Fewer condominium and apartment projects will be built, thanks to tightened lending practices. Making matters worse: Bank regulators are clamping down on banks that already have broad exposure to the housing market. Minto’s Belmont said one major bank dropped out of its lending group, but the company was able to replace it with another bank. “The (lending) pool is shrinking, and the banks participating in the pool are getting tougher,” agreed Kolter’s Vail. Kolter is building The Alexander apartments in West Palm Beach and the Water Club condominium in North Palm Beach.
  • West Palm Beach has a lot of proposed projects, but “of eight or 10 proposed projects, maybe one or two will get built,” Greene said. Greene said obtaining bank financing will be a problem for some developers, but not for him: He plans to self-finance construction of One West Palm, a twin-tower complex featuring office space, hotel rooms and apartments. “I’m taking a shot here, but it won’t ruin me if it doesn’t work out,” said the billionaire. Greene expects to break ground on the 30-story towers at Quadrille Boulevard within about four months.
  • Everybody wants the West Palm Beach condominium, The Bristol, to succeed. The ultra-luxury condo, now under construction on Flagler Drive, could provide a “viral” boost to the local real estate market, once the 25-story building is completed and word gets out, said Kolter’s Vail.

See how much West Palm Beach apartments sold for

money-house-nt

The Jefferson Palm Beach apartment complex in West Palm Beach traded hands in June for $56 million, or $198,936 a unit, according to county property records.

The new owners are Dedicated West Palm Beach LP and GP Florida LLC.

The address of Dedicated West Palm Beach is listed as the address of Brass Enterprises, based in Toronto, Canada. Brass is a real estate investor in multifamily housing in both the U.S. and Canada.

The newly built rental community was completed a year ago. It consists of 281 units. Monthly rents now range from $1,547 for a one-bedroom unit to $2,041 to a three-bedroom unit.

The Jefferson Apartments are at 300 Courtney Lakes Circle, near the Palm Beach Outlets, off of Palm Beach Lakes Blvd.

The Jefferson’s sales price was a nice premium for the apartment’s developer, JAG-Star, an affiliate of Starwood Capital of Greenwich, Ct. JAG-Star bought the 11-acre parcel of land in 2012 for $4 million.

 

 

Five things to know about a new WPB condo

Condo planned by Great Gulf of Canada on 1515 S. Flagler Drive in West Palm Beach
Condo planned by Great Gulf of Canada on 1515 S. Flagler Drive in West Palm Beach

So Canadian developer Great Gulf is teaming with the owner of the former 1515 Tower land to build a new luxury tower along Flagler Drive in West Palm Beach.

The property is at 1515 S. Flagler Drive, once home to the crumbly 1515 tower, and then briefly planned as the very large Modern condo.

Toronto-based Great Gulf just submitted plans to the city of West Palm Beach to build a different condo plan on the waterfront property.

So what does Great Gulf plan to build? Here are five things to know:

  1. Less is more. Sure, Great Gulf could build the same mass as approved for the never-built Modern condo. But the company doesn’t want to. Great Gulf’s Christopher Wein thinks a condo would look and perform better if it could “breathe” and have better site lines for residents and nearby neighbors. So Wein said he “right-sized” the old Modern design. Great Gulf’s tower will be slimmer, about half the mass of the Modern’s design. This means condo units will be roughly 2,000 square feet, about half of the Modern’s size, and cost between $1 million to $3 million.
  2. Visuals are everything. To sell the idea to the city, Great Gulf used a 3-D printer to create a model of its design and a model of the Modern condo design. The Great Gulf model ended up being slim enough fit into the Modern design, a visual that impressed city officials and made it easier to imagine the building when completed.
  3. The condo may be thinner, but it still will be tall. Great Gulf expects to go up 27 stories for 84 units. This means the unnamed condo still would tower over the neighborhood just as the 1515 Tower did, before it was demolished in 2010 following damage from hurricanes.
  4. Wein is really into aesthetics. He doesn’t like the notion of a building that’s “heavy on the skyline,” as he put it. He also doesn’t like a design that feels like it’s going to fall on you as you walk by. So he’s proud the plans features lots of landscaping and hefty setbacks, including along Flagler Drive. “Toward Flagler, it really steps down. We want (people) to get a sense of lush, beautiful landscaping,” Wein said. “We’re very big on landscaping.”
  5. Once approved, expect the tower to go up quickly. Great Gulf is a fully-integrated company, which means it has its own in-house construction, design, sales and marketing team.

As Palm Beach County home prices rise, housing affordability takes a hit

(Getty Images)
(Getty Images)

Palm Beach County’s home price rebound is putting the squeeze on affordability.

Just 57.7 percent of homes sold in Palm Beach County in the second quarter were affordable to a median-income family, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index.

That’s based on a median price of $235,000 for all new and existing houses and condos sold in the county from April through June. Palm Beach County’s median income was $65,400.

Palm Beach County was one of Florida’s least affordable counties, according to the index. Only Miami (where just 39 percent of homes sold were in reach of a median-income family) and Naples (47 percent) were less affordable.

 

Palm Beach County housing affordability slips

(Getty Images)
(Getty Images)

Homes in Palm Beach County became less affordable in the first quarter, according to the latest Housing Opportunity Index from the National Association of Home Builders.

Just 61.4 percent of homes sold in the quarter were affordable to a median-income family, down from 62.1 percent in the fourth quarter. The culprit? Not rising home prices but falling incomes.

According to the index, the median price of houses and condos in the county was $211,000 in the first quarter, up slightly from $210,000 in the fourth quarter. But incomes fell to $64,800 in 2016 from $66,000 in 2015.

In the Treasure Coast, on the other hand, median income rose to $56,300 this year from $53,300 in 2015, according to the index.

 

Top 10: Palm Beach County’s busiest new home developments have little for middle-class families


Valencia

For those who fret about the affordability of homes in Palm Beach County, the new-home market offers no sign of relief. The four busiest developments in 2015 catered either to retirees or to high-end buyers.

The list above, compiled by Metrostudy, shows the 10 most active single-family developments in South Florida and the Treasure Coast, ranked by housing starts in 2015.

In the top spot with 324 starts is Valencia Cove, GL Homes’ 55-and-older community in Boynton Beach. Ansca Homes’ Villaggio Reserve, a 55-and-older development in Delray Beach, was the second-busiest community in Palm Beach County.

Next up is Seven Bridges, GL Homes’ high-end development west of Delray Beach. Prices there start at $700,000. Rounding out the Palm Beach County list is GL Homes’ Tuscany, also in west Delray. Prices start at $400,000.

The median price of an existing house sold in Palm Beach County in February was $295,000. Palm Beach County’s wages, while high for Florida, remain below the national average.

valencia Home construction
Construction at Valencia Cove.