Frisbie Group Quarterly Report: Q1 2024

The Overview

The first quarter ushered in a run of healthy growth for the U.S. economy, somewhat unexpected given wide-spread concerns that it could weaken. Job creation and labor force participation are exceeding expectations, wages continue to rise, and consumer sentiment has reached new highs, all boosting the supply-side of the economy.  As noted recently by JP Morgan, “So far in 2024, there are signs that U.S. growth is still strong, and that growth in the rest of the world may start to accelerate.”  While economists on the whole agree the inflation-surge has passed, opinions are mixed on the extent to which – if at all – rates will be cut this year. Down considerably from its peak, inflation still remains above the Fed’s 2% target, yet a healthy economy likely reduces any sense of urgency to cut rates further. While geopolitical tensions and the upcoming election are likely to cause intermittent volatility, recession risks are relatively low, and an overall positive performance can be expected in the near term.

True to form, the Palm Beach residential real estate market has maintained its steady pace through the first quarter of this year. Persistent demand parallels a slowly increasing supply, and continues its upward pressure on pricing, with Q1 witnessing the highest median price on record for single family residential. The Midtown condo market appears increasingly hindered by competing new, luxury product over the bridge, but still maintains high price points for premium offerings. Although season is winding down, the second quarter is historically the most active as deals are finalized before the summer, thus we predict continued momentum in the months ahead.

Observations

The ongoing population surge into south Florida, specifically Palm Beach County, continues to catalyze demand for high-end housing. Recent IRS data revealed Palm Beach County as the number one destination for wealth migration in the US during the pandemic, leading with a $7B net gain in adjusted gross income.  Florida as a state experienced the highest net gain in the country at $39.2B, driven in large part by New Yorkers seeking safety, security, a warmer climate, and more favorable tax conditions.  As a result of this in-migration, West Palm Beach and Palm Beach have experienced a dramatic rise in high-net-worth individuals, ranking second in the US for influx of millionaire residents (Henley & Partners). According to Forbes’ latest list, at least 59 billionaires own property on Palm Beach, the majority of whom experienced increases to their overall net worth in the prior year. Businesses, too, have been flocking to the state, with the number of Florida corporate headquarters increasing by 86% in the 12 months ending in March of 2023, the largest growth rate of any state. Further promoting positive economic impact is a significant rise in tourism, with Palm Beach County welcoming 9.5 million tourists in 2023, a 4.4% increase over the prior year.

Despite any macro-level economic uncertainty, the local Palm Beach real estate market appears poised for continued, stable growth, as we’re currently witnessing a likely strong start to the second quarter and can anticipate the momentum to continue in the months ahead. As always, Palm Beach is distinguished for its safety and quality of life fundamentals, as well as its inherent tropical beauty, all of which make it an enduring and attractive safe haven for end-users and investors alike.

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Frisbie Group Quarterly Report: Q4 2023