The original BeachChatter discusses the housing market in the coastal communities south of the city of Los Angeles. Some articles are peculiar to a single city. Some discuss the region as a whole. The focus is on privately owned housing.
When renters are faced with rental price increases, as they are now, it’s typical for them to look for a cheaper place to rent. They don’t always find one, of course. But with the current inventory, it’s riskier to even look for one than to simply accept renewing their lease at a higher rent value.
Between April 2021 and April 2022, the share of renters renting at market value who chose to renew their lease increased from 53% to 57%. This is despite an 11% increase in rent prices during the same period. The problem is that there simply isn’t anywhere more suitable to go, partly because of low construction rates. Without renter movement, the number and type of vacant units doesn’t change very much, which further stagnates the market because what few vacancies exist are already deemed to be undesirable.
It is currently believed by experts that the US is heading towards another recession. It’s not a guarantee, and it won’t be for around six months if it does happen. So what exactly is a recession, and why is another being predicted? Many people are only aware of a recession as being a period of economic struggle. But it has a technical definition, which is two consecutive quarters of shrinking GDP. GDP is definitely not the entirety of the economic picture, but the conditions for a recession almost certainly indicate job loss and lower wages. What’s being predicted is simply a prolonged reduction in overall consumption, and this is mostly because interest rates are going up.
The Fed is purposefully raising interest rates in an attempt to reduce inflation. But a reduction in inflation doesn’t necessarily translate to no recession. If interest rates rise too quickly, it could actually cause a recession during a period of high inflation, which is called stagflation. This is what happened in 1981. Currently, experts believe the Fed is increasing interest rates too quickly. And it’s possible that they shouldn’t increase the rates at all; the prospect of increasing rates to reduce inflation is based on the outdated concept that high inflation is triggered by high wages. It’s true that businesses often like to take advantage of increased wages by raising prices without a significant decrease in demand, but this is calculated corporate greed, not an economic law. Perpetuating this idea only further lines the pockets of the already wealthy.
You’re likely aware that having a pool will probably increase the value of your property. But if that’s your only reason to get one, you may want to rethink your plans. It may or may not be a good idea, depending on the circumstances. Of course, if you want a pool anyway for your own use, you may be less inclined to care about the numbers. However, regardless of why you want a pool, there are several factors to consider.
A pool is expensive. It’s not like some small upgrades that can have a major impact over time for a low cost. Unlike energy upgrades, pools don’t generate more value as time goes on; their value changes only with buyer demand. In fact, a pool will actually cost you more money over time, in addition to the large up-front cost. Cleaning and filtering costs add up over time, and having a pool increases your insurance costs. If your plans don’t include using the pool, it may not be a good return on investment. In addition, depending on the area, you may not actually want to increase your home value. Pools are ultimately a luxury feature. If you live in a low-cost area, it’s unlikely that prospective buyers searching in that area have large amounts of money to spend. Conversely, if you live in a high-cost area but don’t have a pool, adding one could help bring your home some more appeal.
In order to figure out how best to organize your closet, there are two major questions that need to be answered: What can it store, and what do you want to store? The first question may seem obvious, but many people don’t actually properly measure their closet. You’ll want to know exact dimensions and also account for storage aids such as rods, dividers, and shelving. Figure out how to get the most out limited space. You can even hang hangers on other hangers, if you need to.
The second question is rarely considered at all. Any leftover space is generally occupied by anything that can be shoved in there with the clothes. This isn’t optimal, and you should really plan ahead what exactly you want to go in your closet. For example, snow clothes probably don’t need to be there. You’ll only wear them in winter, so you don’t need easy access to them most of the year. Think about what you use each item for, and group the items by function. Also, clothing doesn’t even have to be what it’s used for at all. Maybe all or most of your clothing can be put in a dresser, leaving room in the closet for things like sheets or towels.
Hard Rain, featuring Andy & Renee is a perennial favorite in the South Bay, taking the title of Best Original Music Band nearly every year. While Andy & Renee perform as a duo at several different venues each week, the whole band gets together about once a week for an outdoor performance. Below are the next few weeks of gigs for Hard Rain with Andy & Renee. For more information about the band or the duo, tickets when required, and the full calendar, go to https://andyandrenee.com/
South Bay Festival of the Arts, Torrance
Saturday, June 25, 1:00pm — 2:30pm Torino Plaza, Torrance Cultural Arts Center, 3330 Civic Center Drive, Torrance, CA 90503. Event runs 11a-5p. Our set time is 1-2:30pm.
The number of homes sold in the South Bay has declined from last month, and has declined from last year. The quantities are actually rather dramatic given that May is typically a time of increasing sales. The drops range from -7% to -17% lower than April sales of this year, and from -17% to -25% below May of last year.
With over half the year remaining, mortgage interest rates have doubled, currently sitting around 6%. The hike in interest rates has so far reduced the average buying power by about -25%. Coupled with home price increases estimated to have risen 38% since the start of the pandemic, the immediate future of real estate looks dismal.
Inflated consumer prices are also blocking potential home buyers as the Consumer Price Index (CPI) climbs toward a 10% annual hike. There’s little chance of saving for a down payment when the price of everything on the shopping list is going up..
Retirement accounts are often a source of down payment funds. As of this writing the major stock market indices are all down: Dow Jones Industrial Average, -16%; S&P 500, -22%; Nasdaq Composite, -31%. Forecasts are growing for a Fed-induced recession that may begin as soon as this fall. Some potential buyers may see borrowing from their retirement fund to purchase a property as a means to preserve the capital during a recession. Others may not be in a position to do that.
Median Price Sold
May prices delivered a mixed message. The Palos Verdes Peninsula, which had seen two months of decline from a temporarily high median price, headed back up again. The Beach cities continued a steady climb, and the Inland area showed a modest price increase after having dropped 1% in April.
However, the Harbor area, which is as large as the other three areas combined, took a -6% hit to prices. We anticipate the Harbor and Inland areas, which comprise the bulk of the traditional middle class family homes in South Bay, to be the first to react to the economic stress.
Typically, the recession cycle starts with a slowing of sales. As properties languish on the market, sellers begin to reduce prices. One after another, median sales prices will drop until the price reduction offsets the impact to buyers. At that point, buyers will begin to support the reduced purchase prices and we can see growth in the market.
Experts differ in their estimates of how long this cycle will take, and when we can expect the market bottom. There are some predicting a rapid fall based on the speed with which the Federal Reserve Bank (Fed) is reacting. The June meeting of the Fed ended with a .75% hike in the prime rate, and a promise to raise it at least another .75% before the end of the year. While that could slow the economy as early as the beginning of 2023, more conservative minds suggest the end of 2023 for a turn-around.
Area Sales Dollars
The total sales dollars tell the truest story. While sales are slowing and median prices are beginning to slow, the combination shows up here.
Everywhere except the Beach is showing reductions in total sales on a month to month basis, and on a year over year basis. The declines are small to date, with year over year ranging from -1% to -10% in May. Month to month changes ranged from +2% at the Beach to -19% in the Harbor area.
These early numbers follow the general pattern we’ve seen in recent recessions, whereby entry level homes are the first impacted and the last to recover. We anticipate the Harbor area to lead the charge down, followed by the Inland area. Recent years have shown the Beach to be the strongest growth area, so we expect the recession to hit there last, following declines on the Hill.
The nature of the impending recession is still uncertain. Some pundits are saying that at least initially we should expect “stagflation,” that odd environment we first encountered back in the 1990s when prices of everything continued to climb, along with job layoffs and massive unemployment. Other forecasters suggest that because the international economy is roiling with continuing high tariffs (courtesy of the last administration) and new monetary sanctions daily (courtesy of the current administration), this particular recession may last much longer than normal.
In Summary
As the table below shows, the majority of the negative impact for May happened in the quantity of housing units sold. With one exception, prices continued to escalate. We believe this is temporary and likely to change before the end of the year. The -6% drop in median price at the Harbor presages the direction of home pricing as inventory grows and listings stagnate.
Approximately 3 out of 4 listings coming across our desk recently have been either Price Reduction or Back On Market. That means property is staying on the market longer. The Average Days On Market (DOM) for May ranged from 10 days on the PV Hill to 14 days in the Harbor area. As recently as this winter we were still seeing multiple offers on the first day the property was available.
Another measure of the market condition is how far the average sales price declines in the first 30 days on market. We did a quick look for May and came up with these statistics. Thirty days after the original listing, the price had dropped from the original: at the Beach, -9%; the Harbor -6%; PV Hill -18%; Inland -5%. As of May, we’re also seeing property that has been on the market for several months, with several price reductions.
Notable Properties
The high and low sales for May were not terribly dramatic. A Manhattan Hill section home and a downtown Long Beach condominium. Thay are simply very big, and very small.
High Sale
Located at 812 5th St, this Manhattan Beach hill section home was originally listed at $10.5M and sold for $8,980,000 after 34 days active on the market. The home offers six bedrooms and seven full bathrooms in 5576 sq ft. Amenities included ocean view, pool, spa, custom waterfall & fire features, a full basement with recreation/media room, home theater, storage, a temperature-controlled wine cellar, and private guest quarters.
Low Sale
Measuring barely 381 sq ft, the studio condo at 819 E 4th St #25 sold for $215,000 in one day. Located in the vibrant East Village of Downtown Long Beach this tiny home offers a remodelled kitchen and bathroom. The unit sits on the second floor, overlooking the intersection of 4th and Alimitos and within walking distance of many downtown shops, clubs and eateries.
Commute times in California, and indeed across the country, have increased in recent years, as people have moved away from job centers. The theory was that this was mainly due to work-from-home options. For some, that may be true, but many of these people aren’t working from home, they’re just commuting longer to work. Surely long commutes aren’t desirable, so what are they getting in return?
The missing factor is lower housing costs. Job centers tend to be larger urban areas with higher prices. By moving to more out-of-the-way areas, workers have reduced their mortgage and property tax at the cost of longer commutes. With gas prices on the rise, it’s not entirely clear whether this is a good financial choice. But more importantly, the people who are making this choice are the ones who have the financial means for it to be a choice. Over three quarters of higher wage workers work somewhere they can afford to live, whether they live where they work or not. Lower-wage workers don’t have an option. Only 4% can afford to live where they work, so they’re forced into longer commutes to find affordable housing.
With the current market’s low inventory and high prices, buyers are struggling to find entry-level or starter homes. There is one type of home they can afford to buy, though: fixers. These also aren’t in high demand, so competition isn’t as fierce. The problem is, first-time homebuyers typically don’t want to spend extra or can’t afford the additional cost of fixing up their homes. But that can be resolved with home renovation loans.
Two common home renovation loans are the FHA 203k loan and the Fannie Mae HomeStyle loan. Both require a minimum credit score of 620 and a minimum down payment of 3%. They cover most home improvements, including both structural and cosmetic. However, keep in mind that the FHA 203k loan can only be used for primary residences, while the HomeStyle loan can be used for both primary residences and investment property.
An increasing number of people are seeking ways to contribute to the environment. While a single person isn’t going to suddenly solve the climate crisis, every little bit can help. Planting gardens improves air quality and also gives you access to fresh fruits, vegetables, or herbs, while also slightly improving your energy efficiency. Some other energy efficiency upgrades can also significantly reduce your annual costs.
Everyone knows about solar panels, and you may even have already upgraded to solar energy. But there are other solar energy upgrades you may not be aware of. There are solar attic fans and solar water heaters as well. If you haven’t upgraded to LED lighting yet, you definitely should. LEDs are massively more energy efficient than regular lightbulbs, which translates to much lower utility bills. They also last longer, so you won’t need to spend money on replacements as often. Even windows have gotten energy efficiency upgrades. Energy efficient windows combined with good insulation reduces the workload of heating and cooling units.
The idea of open concept living used to be pretty hot, but it’s started to cool down recently. Shifting trends in usage have made open concepts less useful to most families. That doesn’t mean the advantages have disappeared; they’re just not in high demand right now. This is mainly a result of COVID-19, which has made the advantages less appealing and the disadvantages more salient. Ultimately, though, it’s a personal choice.
But what are these pros and cons? The biggest con is noise. Open concept floorplans have fewer walls and doors to muffle sounds from other rooms. With more people transitioning to work-from-home, the added noise is distracting people from their work. In addition, having lots of empty space is just not a priority for most people. Yes, people want larger homes, but that’s to accommodate more usable space, not empty space. The biggest benefit of open concept living, and the reason it rose to popularity, is that the wide open spaces with good natural light allow for excellent entertainment spaces. However, the pandemic had drastically reduced the appeal of hosting indoor events. What it does still accomplish is creating a feeling of togetherness, even when family members are in different rooms.
New constructions are always built to certain specifications, whether that’s tract uniformity or client’s wishes. In the latter case, the client is usually also going to be resident. That’s starting to change, as investors are noticing that renting is becoming a lot more common as prices rise. Investors are now getting new constructions built for the express purpose of renting them out.
Only 3% of new construction SFRs were build-to-rent in 2019. By the end of 2021, this number jumped to 26%. It’s not entirely clear if this will continue to increase or not. While increased inventory of rental properties does benefit renters, renting is rarely a desired state. Almost everyone would prefer to buy if they can afford it. But it’s not renters pushing the trend. It’s the investors, and they stand to benefit as long as renters must continue to rent, whether they want to or not.
Buyers rarely find exactly the perfect home for them. There’s always something that isn’t quite what they wanted. But how do they decide what they’re willing to give up? Well, it’s different for everyone, because different buyers have different needs, and their decision may not actually be the best they could make. What can be tracked is statistical likelihood of certain decisions.
The most frequent concessions are age or condition, size, and style. Location is typically extremely important and not something most buyers want to budge on. While many buyers don’t want complete fixers, they may settle for homes with natural wear and tear due to age. Larger homes are becoming more popular, but the main attraction is more rooms. For many buyers, the rooms don’t actually have to be very big, as long as they’re big enough to serve their purpose. Style of a home does have some importance, since some styles may be more popular and fetch a higher price when you eventually go to sell it. Since you won’t know what will be trending far into the future, though, style is ultimately cosmetic. Many buyers are perfectly content ditching their preferred style for something that better suits their practical needs.
Especially if you are a first time buyer, buying a home can be an exciting prospect. Unfortunately, that excitement can lead you to overlook potential problems. Slow down and make sure you know what you’re getting into, otherwise you may regret your purchase. On the bright side, there are a few things you can do to curb potential issues.
Possibly even before looking at homes in an area, you’ll want to get to know the area itself. Visit the neighborhood to learn about the local amenities and maybe meet potential neighbors. When inventory is low, you may be tempted to look at homes that are slightly out of your budget. While this can be a good way to find homes that are overpriced, if it turns out the home is actually out of your price range, don’t think too much about it. Stick to what you know you can afford. But that doesn’t mean go looking for dumps that are well below your price point. Even if you’re a DIY type of person, fixers are a big job and frequently more trouble than you’d expect.
Another thing you don’t want to get involved with is large bidding wars. Even if you eventually win the war, it likely came at the cost of paying more than you intended. It may not be worth the cost anymore. Getting involved in homes that are selling fast also doesn’t give you time to really think about the properties. It could be an excellent deal for someone, but that someone isn’t necessarily you. When you do find a home you like, don’t rush to make an offer immediately. If you think you’ll run out of time, that also means you’ll probably run into a bidding war. Instead, take your time, look at other properties, then come back and look at that property again. You may find you missed some details that could be a dealbreaker.
In many regions, the weather during much of the year is not very conducive to outdoor living. Which is why many people like to introduce elements of nature into their home with a few houseplants. That’s all fine and well, but with the weather warming up, what about introducing your home into nature?
Instead of bringing plants inside, plant a garden outside. If you don’t have a large enough plot of soil, you can plant a container garden. That way, you can grow your own herbs and vegetables. Your garden becomes an extension of your kitchen. You can make it even more of an outdoor kitchen by cooking outdoors as well. The easiest way to do this is by grilling, but there are even outdoor stoves, ovens, and sinks. The kitchen isn’t the only room you can bring outside. An outdoor patio doesn’t have to have outdoor furniture. You can put a couch, coffee table, and even a TV outside and create a new outdoor living room. Since you probably don’t want to haul these back inside when the weather cools down again, you can invest in a patio covering.
Student debt is becoming a huge problem, for both those affected by it and the economy as a whole. Wages are stagnant and tuition is increasing. The UC system has also increased its tuition, but recognizes that it’s simply not sustainable with their current financial aid program, as students aren’t able to afford to attend.
As such, the UC has made a couple of changes, with the end goal of a debt-free education by 2030. First, some of that tuition increase is actually going toward student aid. Currently, 33% of the UC system’s revenue is allotted for student aid. The Board of Regents voted to increase this to 45%. Second, they’ve changed their prioritization order for student aid. Student loans are above student employment in the ranking right now. The new priorities shift part-time student work above student loans, and in fact, all students will be expected to have at least 15 hours per week of work. The eventual goal is also going to be dependent on the state’s debt-free grant that has, so far, only been partially funded.
Moving fraud has increased recently in the wake of the work-from-home relocation boom, nearly doubling from 2020 to 2021. Fortunately, moving fraud is actually fairly easy to detect if you know what you’re looking for. Most of the things you can look out for aren’t necessarily indicative of a fraudulent company, but probably wouldn’t be the case with a good company. Major red flags involve legal requirements not being met or legal information not being provided, and almost surely indicate fraud.
Very importantly, the company must provide a copy of Your Rights and Responsibilities When You Move. This is a legal requirement. Included in this document is the requirement that moving companies only collect money for successfully delivered items, meaning demanding up-front payment is illegal. Moving trucks are also subject to FMCSA regulations. If they aren’t willing to provide their FMCSA registration, they probably aren’t registered and therefore not operating legally. The company should also provide contact information, including an exact address, and you should be able to find them online.
There are also less surefire red flags. As usual, “if it’s too good to be true, it’s probably false” applies. Scammers offer low prices to entice customers, but frequently add hidden surcharges or fees, or simply bump up the cost well above their estimate — if they provide one at all. They may say they’ve been around forever, but they may not have any proof of that. Especially if all their reviews are recent. If they’re all five star reviews, they’re probably all fake. Scammers are also frequently very pushy.
Prospective buyers tend to cancel viewings on days of unexpected rain. This makes sense, as most people don’t want to be out in the rain. However, a sudden downpour may actually be an opportunity. If you’re able to tolerate the weather, rainy days are actually the best day to evaluate a home.
Water damage can be extremely expensive to repair. But how are you going to know whether or not a home is prone to water damage? Well, by looking at it in the rain, of course. After rainfall, the water is naturally going to run downhill. If you see water running towards the house, that’s a potential problem. You can also watch for signs of pooling or flooding, especially with waterfront properties, and try to spot leaks before water damage occurs. Sight isn’t the only sense you can use; mildew has a more pronounced smell in the rain. There’s also a bonus advantage — the fact that many people don’t know all this, meaning you’re going to have less competition.
When you’re trying to buy and inventory is low, it may seem inevitable that sometimes there simply isn’t anything available that suits your needs. If this happens to you, it may be that you need to expand the scope of your search. This doesn’t necessarily even mean broadening the range of acceptable homes, but rather looking for them in a different way. There are a couple different options for doing this.
The first option is looking at different media. Many homes are listed on a Multiple Listing Service (MLS) and can be easily found by your agent or on an aggregator site such as Zillow. Off-MLS sales aren’t common, but they do happen. And they’re becoming more frequent with the increasing popularity of social media sites. You can potentially find listings on sites such as Facebook or Twitter. The other is to look at old listings or listings slightly outside your price range. Often these will actually be one and the same. Overpriced homes tend to sit on the market longer because no one wants them at the current price. But that also means there will be less competition, so you may be able to offer below asking price, even in a generally competitive market. Even if the listing isn’t old yet, you can keep tabs on potentially overpriced listings and see if the price drops or it hangs around for a while.
Moving to a new area and not knowing anyone there can be an awkward situation. Some people are social butterflies and will be eager to get to know their neighbors. Others may need a little help. Here are a few suggestions to break the ice.
The most forward approach is to simply go up and knock on their door. Not everyone is going to answer the door to strangers, but you may be able to entice them. Consider bringing a gift of homemade cookies or any other dish you know and love. If you don’t want to take the situation to them, you can instead invite them over. Throwing a housewarming party is a great opportunity to invite all your new neighbors, or you can suggest a block party. For the less socially inclined, there’s an option that doesn’t require contact, but can build up familiarity over time. That is taking walks around the neighborhood and simply greeting people you happen across. If you have a dog, there’s a good chance you’ll do this anyway, but it could just be part of your exercise routine.
When buying a new home, you should not always expect that you’ll stay there forever. This is especially true for first time buyers, who often need to buy a starter home first before they can build up enough equity to buy a forever home. But sometimes it’s the right call. Keep in mind that you don’t actually have to live in your forever home forever; it just means that you could see yourself doing so. And a starter home doesn’t have to be your first home; it can be a middle stage on the way to your forever home. Neither is a binding commitment.
So when should you buy your forever home, and when should you buy a starter home? Starter homes are generally less expensive, and are something you plan to sell later. If you immediately purchase a new home after selling, you may be able to avoid capital gains tax. It’s an investment for the future. The downside is that they’re generally smaller. If you are planning to have kids soon, a smaller home may not be big enough, and moving frequently can be hard on kids. But that isn’t the only factor in determining if you should buy a forever home. Even if you could see yourself living there forever, that doesn’t mean it’s financially sound. More expensive homes will also have higher mortgage payments, taxes, and insurance fees. You may want to consider it, though, if you are able to secure a low interest rate.
