Hot Ponte Vedra Home Prices Expected to Cool

We’ve been experiencing a sweltering hot “Seller’s Market” in Ponte Vedra (and all over The Beaches) for most of 2018. Recently, however, the rate of home price appreciation has been slowing down. With interest rates on the rise, new construction booming, and housing affordability at an all-time low, I expect the trend toward a cooler market to continue.

In October of this year, the median sale price of a home in Ponte Vedra was about $420,000. This is a full 12.6% increase over prices in November of 2015 (and substantially higher than prices five years ago). However, last month’s price is practically no different from the median sale price in October of 2017. This is a good indication that the market has begun to stabilize.

With consistently high turnover, we can see that even as prices level off, there is no “buyer shortage” here in Ponte Vedra. According to the Northeast Florida Association of Realtors (NEFAR), last quarter the amount of available homes in St. Johns County declined by 10% year-over-year. About 6 months’ worth of housing inventory is considered a good amount in a balanced market, and we’re currently at about 4.3 months.

So why are home prices cooling off, despite record-high demand for housing?

First, housing developers are taking a big bite out of buyer demand here in Ponte Vedra (and all throughout St. Johns County). 432 permits for single-family homes were issued in July in St. Johns County, which was the third largest surge of new permits in the area since 2008. In fact, in an effort to keep our building frenzy under control, last July the county increased the “impact fee” for new home construction permits. These homes have added a lot of supply to the market – which, as we know from Economics 101, usually leads to lower prices.

But keep in mind that new and existing home values are affected by market forces in different ways, and to varying degrees. Most buyers start their home search in their ideal location, and usually those locations are well established neighborhoods. Because new homes tend to pop up on the outskirts of the most desirable communities (and tend to be active construction sites while buyers are house-hunting), their values don’t often pace with the broader market. And with rising lumber prices and yet another impact fee hike scheduled for next year, construction costs are climbing quickly. While new construction is certainly contributing to our softening market, sellers of existing homes are more insulated from the “chill.”

Second, rising interest rates are beginning to push some buyers out of their desired price range (due to their impact on monthly housing payments). Mortgage rates are still very low, but a single percentage point can have a significant impact on a buyer’s overall cost of purchasing a home.

Finally, we may have just about hit the ceiling with what buyers can afford. According to a report from Florida Realtors, housing affordability in the second quarter of 2018 was at its lowest point in over a decade (based on the National Association of Home Builders and Wells Fargo Housing Opportunity Index). While there are indeed thousands of eager buyers in St. Johns County, a growing percentage of those buyers aren’t able to make an offer at these historically high home prices. With plenty of buyers waiting in the wings for a slightly lower price point, I don’t expect a dramatic drop in prices.

Just like the seasons change, so do housing markets.

Right now, sellers in Ponte Vedra are in an excellent position – especially those in established, desirable communities. It’s still possible to get a top-of-the-market price, and many buyers are anxious to purchase a home before the end of winter.

A portion of every closing by Tara Belanger benefits the Kids in Need Foundation. www.TaraSupportsKINF.com.

Tara Belanger
Real Estate Professional
Watson Realty Corp
904.501.9037
Tara@NortheastFLLiving.com
Northeast FL Living
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