Real estate buyers had no vaccine to protect them from luxury home prices that hit stratospheric levels in 2021. A record number paid $20 million or more for coastal homes in southern Palm Beach County as a 2020 pandemic bump in residential sales turned into a 2021 juggernaut.
• The average sales price for a Manalapan home, which sat at $5 million in 2019 and $5.5 million in 2020, quadrupled to $22.4 million.
• A Highland Beach home sold for $21.6 million in March 2021 and then resold for nearly $8 million more a half-year later.
• The coastal stretch from South Palm Beach to Boca Raton recorded 20 home sales of $20 million or more — up from three such sales in 2020. Ten sold in Manalapan, four in Delray Beach, three in Highland Beach, two in Boca Raton and one in Ocean Ridge. Another Highland Beach home sold for $34.7 million last month.
“We have, in my 25-plus years of experience, never seen the velocity and the pricing [of the past year] ever before,” says Senada Adzem, executive director of luxury sales for Douglas Elliman Real Estate in the region.
She and other agents say the market, typically fueled in the past by out-of-state shoppers from the Northeast, also saw unprecedented demand from places like California, Chicago and Texas, with buyers “very comfortable with the pricing.”
Sales and prices skyrocket
The luxury market figures, provided by the Palm Beach County Property Appraiser’s Office, tell only part of the story of the booming demand for residential properties.
The number of single-family and condo sales in the county dipped 5% in 2019 from 2018, while increasing a tepid 1% in 2020 as the pandemic took hold. Then came 2021. Sales jumped 30% — going from 30,493 in 2020 to 39,835 last year.
Prices climbed even higher. After the county’s average sales price for a house or condo fell 31% in 2019, it rose 11% in 2020. It then skyrocketed 59% in 2021. The average price, which sat at $544,088 in 2020, increased to $865,636 last year.
The biggest-ticket home purchases also reached new levels. In the 15 years prior to the pandemic, only five Palm Beach County homes sold for more than $50 million, with one topping $100 million.
That changed in 2020, with four sales in one year for more than $50 million. And that was nothing compared to 2021, when 11 sales in the county exceeded $50 million. All were along the coast, including two for more than $100 million.
There’s more at work in the high-end market than a lack of inventory or increased demand, says Jonathan Miller, president of New York-based Miller Samuel Inc., who has been studying the super-luxury market nationally for almost a decade.
“There are really three major markets doing heavy lifting for super luxury: New York, LA and Palm Beach,” Miller says. “It’s not because properties like this are appreciating more; it’s buyers in this market are doing a new calculus of what this property’s worth.”
Nationally, there were 12 to 16 home sales a year topping $50 million between 2014 and 2018, he says. That jumped to 23 in 2019, 29 in 2020 and 40 last year, he says.
“Think of it as a reset in values,” Miller says. “This in many ways represents the surge in global wealth, the disparity between high end and low end.”
Twice sold in Highland Beach
The resets may be happening in real time.
No sales epitomize the South County market in 2021 as much as the ones in Highland Beach for 3715 S. Ocean Blvd., a roughly 11,000-square-foot mansion on the ocean with seven bedrooms, nine bathrooms, floor-to-ceiling ocean-view windows, a 1,200-bottle wine wall and a 3,000-square-foot sky deck.
A Nevada family purchased the home for $21.58 million in March 2021, having seen the property only through a Facetime chat with Adzem. Once the buyers settled in, though, they realized the home wasn’t big enough to meet their needs, she says.
While the family wasn’t in a rush to sell, it took advantage of a $29.5 million purchase offer — almost $8 million more — six months later. The family moved to Stone Creek Ranch 10 miles to the west, where it bought a 30,000-square-foot property in unincorporated Delray Beach for $17.2 million.
“For some, oceanfront is a must. Others, who have a boat, want a dock. For others, it’s having a gated, secure community. This was the case for this family,” Adzem says. “They got double the space minus ocean views. They got lakefront.”
More families in the mix
Adzem says her clientele — people in the market for homes priced at $10 million or more — looks different these days.
“I’ve noticed a huge influx of families,” Adzem says. “In the past, we used to have many empty-nesters,” retirees whose children had moved away from home.
Couples in their 30s and 40s are now moving their families and businesses and working remotely, says Nicholas Malinosky, another Douglas Elliman agent.
“There’s a reason why these wealthy buyers want to be here — and it’s not to vacation. Buyers are not buying here for three months in the sun,” Malinosky says. “Now it’s, ‘We’re getting out of New York. We’re getting out of California. We’re making our homestead here. We’re bringing our business here. We’re bringing our family here.’”
South County’s small coastal towns are making a big impression on them.
“We’re hearing a lot of our clients coming from California mentioning the influx of crime in their neighborhoods in California. They feel our coastal towns are very safe,” Malinosky says. “These small towns with their police departments provide a certain sense of security.”
Manalapan makes a mark
It’s not just security, says Manalapan Mayor Keith Waters, whose town of about 450 attracts the biggest prices in South County. It had sales of $94.2 million, $89.9 million and eight others topping $20 million last year.
Waters describes Manalapan as “calm, serene, small, cloistered,” traits he says many buyers find desirable.
“People have second and third and fourth and fifth homes, but they’re not in communities necessarily,” Waters said. “It’s a different lifestyle here. You come and you have a chance to be a neighbor and to have a neighbor and friends who care about you and what’s going on in your life. It makes for a true community.”
Stewart Satter, a Manalapan commissioner who made mansion redevelopment a “hobby” of his when he moved to town, says today’s prices are driven by basic economics — “a crushing demand and zero inventory.”
He purchased four ocean-to-Intracoastal lots in 2005, paying just under $5 million each for the properties, and picked up another for $6.8 million in 2010. One he kept as his own home; a second he sold in 2010. The three others all have connections to the recent market surge, catching the eyes of interested buyers.
“They’re getting square footage, they’re getting extraordinary finishes, getting extraordinary views,” Satter says. “There’s no inventory and people want these extraordinary homes and they’re willing to pay for them.”
Among Satter’s properties:
• 1660 S. Ocean Blvd. sold for $38.875 million in December 2020, the most expensive sale in Manalapan that year.
• 1560 S. Ocean Blvd. sold for $16.35 million in 2013. It went on the market again last year, selling for $26.2 million in February 2021.
• 1400 S. Ocean Blvd. sold for $25.2 million in 2016. The property is now on the market for $75 million.
“I think the buyer of my house at 1660 could sell that house for $20 million more today, easily, because there’s nothing for sale. It’s a one-of-a kind house,” he says.
Pascal Liguori, a broker associate with Premier Estate Properties who represented the buyer of 1660, says Satter might not be far off. He said his clients were “jaw-dropped” by the new construction — its finishes, floor plan, views and contemporary style.
“They saw it and bought it within a week. It was stunning,” Liguori says. “Manalapan is the perfect place for a contemporary-style house. You have glass on both sides. You look out one way, you see the ocean. You look out the other way, you see the Intracoastal. You really get the perspective that you’re on an island.”
Satter has a vacant lot at 1260 S. Ocean Blvd. that he purchased for $15.45 million in March 2021. He was offering to build a home there and sell it for $125 million, a number not seen before for a spec home. Instead, he says he will close in March on a contract to sell the property for $42.5 million — almost tripling his investment in a year. The sale comes with permitting in place and construction plans ready to move forward.
“They’re going to step into my shoes and let my general contractor build it for them with some minor changes inside,” saving millions of dollars, Satter says.
Value is often in the land
As that deal shows, the value of a property doesn’t have to be in a house. Buyers may be more interested in Manalapan’s biggest draw — its 60-or-so ocean-to-Intracoastal properties that Satter says give their owners “the best of both worlds.”
Oceanfront mansions built in the 1980s and 1990s often don’t have the amenities that are in demand today. Satter says his contractor has three current projects on properties with direct ocean access, including one that was a knockdown and another that was raw land where a house had been demolished years ago.
“There are a couple of sales of direct oceanfront that have not been recorded yet, in the $30 million range, and they’re going to knock down the houses,” Satter says. “People are spending a lot of money for land because you can’t find it in Palm Beach. It’s already been picked over and developed.”
Sharing the spotlight
Other communities, some not considered pricey enclaves, have also experienced their own price surges.
A house in South Palm Beach — one of only four in the town — sold for $10 million in December 2020 after selling for $3 million just four years earlier.
Most people in South Palm Beach live in condos, which also made tremendous gains in 2021.
The centerpiece of the town’s condo market is its newest tower, 3550 South Ocean, which opened in 2019 and is decades younger than the others in town.
The top 24 highest-priced condo sales in town the past four years have been units at 3550 South Ocean. Nine were recorded in 2019 and 15 in 2021 for prices ranging from $1.5 million to $6.45 million. Only seven other condo sales in town — five in 2021 and one each in 2020 and in January 2022 — topped $1 million.
“It’s the only new building along that strip of buildings,” says Satter, who has friends living in 3550 South Ocean. “People want new if they can get it. They don’t want to live in a 30-year-old unit.”
Older condos may not be getting prices at that premium, but they’ve done well in today’s tight market. That’s seen in South Palm Beach’s average sales price in its nearly condo-exclusive market, which rose 35% last year.
Where the sales are
Still, when it comes to expensive island properties, not even Manalapan comes close to the sales taking place in the town of Palm Beach, just a short drive north on State Road A1A.
Palm Beach had eight of the county’s 10 highest residential sales prices in 2021, 2020 and 2018, and six of the top 10 in 2019. Manalapan managed only two entries in the top 10 last year and one sale in each of the previous three years.
Of the town of Palm Beach sales, eight were for over $50 million in 2021, including sales of $122.7 million at 535 N. County Road and $109.6 million at 1840 S. Ocean Blvd.
“Palm Beach has an incredible brand and certain people are willing to pay for that brand,” Satter says. But Liguori says the tight housing market may be opening buyers’ eyes to Manalapan and other South County coastal alternatives.
“The people that would come to Palm Beach to look for property, typically wouldn’t look south to Manalapan,” Liguori says. “In the last two or three years, that’s changed drastically. … People are seeing it as a very good alternative.”
Other coastal communities are also seeing more high-priced sales.
From 2018 through 2021, South County coastal communities besides Manalapan had 66 sales of $10 million or more, with half of those sales coming in 2021. A dozen — all but two from 2021 — sold for between $20 million and $34 million.
Where were those 66 sales? Nearly half — 32 — were in Boca Raton. Another 11 were in Highland Beach, 10 were in Delray Beach, eight were in Gulf Stream, three were in Ocean Ridge, and there was one each in Lantana and South Palm Beach.
In 2021, of the 33 coastal South County sales of at least $10 million recorded outside of Manalapan, there were 10 each in Boca Raton and Delray Beach, nine in Highland Beach, and two each in Gulf Stream and Ocean Ridge.
In other coastal communities since the pandemic began, a top sale of $7 million was recorded on Hypoluxo Island in Lantana, one for $3.9 million in Boynton Beach and one for $950,000 in Briny Breezes.
How hot is too hot?
Despite the record sales happening, the county’s real estate market is not as overheated as it was leading up to the market crash experienced here during the Great Recession, says Ken Johnson, an associate business dean and real estate expert at Florida Atlantic University.
Johnson and Florida International University Professor Eli Beracha have created a ranking that looks at housing market overpricing in the country’s top 100 metro areas (www.business.fau.edu/housingtop100).
While homes in South Florida, including Palm Beach County, were selling in January for 23% above what would be expected based on long-term pricing trends, that was still the lowest of any region in Florida and ranked 57th of the 100 nationally.
“This is not a Top 10 list you want to make,” Johnson says.
What it shows is that South Florida buyers may have learned from the earlier beating here, when prices went from selling for 80% above what would be expected historically in 2006 to plummeting to 28% below the expected long-term trends over the next five years.
Palm Beach County is not at the same risk today. Instead of the tremendous oversupply of housing it had back then, there is a tremendous undersupply now, Johnson says.
“We’re not going to see a market crash. We might see unaffordable housing for a very long time,” Johnson says. And the luxury market, which he says is consumption-oriented, is the least sensitive to an economic crisis.
“People consume based on their income and their taste. The financial component, the potential gain in value, is far less of a concern for people in Palm Beach, Manalapan,” Johnson says. “No one would walk away from that financial gain, but it’s not the No. 1 driving factor in why they bought the home they bought.”
Buying unlisted homes
Expect the strong housing demand to continue. The state says some 547,000 people exchanged another state’s or country’s driver license for a Florida one in 2021, a 40% increase from 2020.
“That’s an incredible statistic and an indication of what’s coming here. That’s why demand and prices are going to remain strong,” says Bill Mate, a Jupiter Realtor who is on the boards of directors of the Florida and National Realtor associations. “There is little supply and tons of demand.”
As the residential inventory continues to shrink, expect more sales involving unlisted homes, with real estate agents knocking on the doors of the most desirable homes, hoping to convince owners it’s time to sell.
That’s how an $89.9 million sale came about in Manalapan in December. The property was never listed on the market.
“Most recent sales are all going to be off market, simply because the public inventory is diminishing every day,” Adzem says. “A lot of the ultra high-end are oftentimes off market. There is exclusivity, there is special access, there are many reasons. Some sellers also don’t want their property available to the public. They’re private people.”
Persuading homeowners to sell is the tricky part, especially with owners happy to be living on the ocean in South Florida, Malinosky says.
“Sellers are hesitant to sell. Even though they’re selling at record prices, there’s nowhere for them to go,” Malinosky says. “At some point, a seller will sell based on the increased value. In most cases, those sellers have other homes in the state that they can go to.”
The recent surge may have started with the pandemic, but it won’t end there, Mate predicts.
“We’re going to level off a little bit, but we’re not going way down,” Mate says. “It’s a wild, wild time and it’s going to be this way for a while.”
What we examined
The Coastal Star researched qualified single-family and condominium real estate sales — not all sales — from 2018 through early 2022 using data supplied by the Palm Beach County Property Appraiser’s Office. The state defines a qualified sale as “an arms-length transaction in an open, competitive market between an informed and typically motivated buyer and seller.” The appraiser’s office uses qualified sales when putting together its mass appraisals. Qualified sales do not include distressed sales, those between affiliated parties, those conveying less than 100% ownership, and those involving government agencies, banks, or loan or mortgage companies.