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.
South Bay’s favorite folk-rockers open the new Grand Annex season September 16, 8pm, with their phenomenal homage to Carole King and her album, Tapestry. This promises to be an outstanding show, led by the unforgettable playing of Andy Hill and the sumptuous voice of Renee Safier. For tickets to see and hear the performance, go to https://grandvision.org/event/andy-renee-hard-raintapestry-tribute-to-carole-king/.
Andy Hill and Renee Safier with their band Hard Rain have been referred to as “America’s best kept secret.” Performing over 200 shows a year, the band delivers a style of Americana folk-rock that’s thoughtful, musical, danceable and full of memorable hooks. The duo are also behind “Dylanfest” the day-long music festival, now in its 33rd year, celebrating the music of Bob Dylan and featuring over 70 of L.A.’s best musicians.
With 17 CDs and 3 DVDs in their pocket, Andy & Renee have won countless awards, including “Americana Group of the Year” by the LA Music Awards, “Best Duo/Group” at the International Acoustic Music Awards and a Regional Emmy for their PBS concert special “Black Box Opens – Andy & Renee.” Their relatable lyrics, unforgettable melodic content and tightly crafted arrangements have brought together fiercely loyal audiences up and down the West Coast in the US and Canada.
Moving can be a challenging experience filled with mixed emotions. It involves leaving behind familiar surroundings, friends, and routines, which can create a sense of loss and instability. However, it also presents opportunities for personal growth and new experiences. If you’re moving soon, check out these three tips for dealing with the emotions it may bring.
Talk openly about how you feel with your household. Bottling up emotions can create barriers to contend with inside the household alongside the already charged feelings of saying goodbye to your old home. This can be especially true if you have children. Being open to discussing the impact of the move on you all can help to create a sense of togetherness, give each other emotional support, and alleviate any feelings of grief or anxiety.
Seek out community events in your new neighborhood. Activities such as volunteering or joining classes or local groups can help speed you on the road to meeting new people with similar interests in your new neighborhood. Finding people with similar interests in your new community can help give you a sense of belonging.
Stay connected to old friends. In the age of social media, it is easier than ever to stay connected with your old friendship group, no matter how far away they are. Don’t just rely on liking and commenting, though. Have video calls with your pals when you can, and perhaps carve out time to go visit them when you’re able to, ensuring those relationships are not broken by distance.
Real estate agents make their income from commissions when they represent buyers or sellers on the sales of homes. By law, the amount of commission charged must be negotiable. The industry average is 5% to 6% of the home sale price.
Although the percentages of the split may vary, traditionally, a 6% commission would be divided between the listing broker’s office and the selling broker’s office. The listing agent represents the seller, and despite the name, the selling agent is the one who represents the buyer. Three percent would go to the listing broker’s office, which would be split between the broker of record and the listing agent, per their office agreement. Likewise, the other 3% would be split between the selling agent’s broker of record and the selling agent.
For example, if a seller agrees to pay a 6% commission on a $1,000,000 sale price for their home, the total commission paid at closing would be $50,000. Of that, $25,000 would be disbursed to the listing office, where the agent would be paid $12,500 or more, depending on the agent’s commission agreement with the broker. The other half would be shared between the buyer’s brokerage and agent. Agents also generally pay Errors and Omissions insurance premiums as well as other transaction fees.
Year to date through July, the gross revenue for South Bay is a mere 3% above that of 2019. At the same time, sales volume, the number of homes sold, is 23% below the sales of 2019. By most standards, 2019 was the pinnacle of real estate business prior to the turbulent years of the Covid pandemic.
Many sources compare current business to that of the pandemic years, partially because it’s easy and partially because the “numbers look better.“ Undeniably, the statistics do look more favorable, however, this analysis takes comparisons beyond the normal “last month” and “same month last year” to include 2023 versus 2019. This allows our readers to see 2023 in a historical context and to more readily recognize the unfolding recession.
While median prices are still above those of 2019 right now, we project the median prices will also drop below the 2019 level before this recession ends. On a month to month basis, prices are falling approximately half the time. On a year to year basis, 2023 prices have dropped below 2022 medians 82% of the time. Median prices for June and July of 2023 fell below 2022 in all four areas both months. Buyers and sellers should anticipate the bottom of the recession in late 2024, or possibly 2025. Normal growth should return in 2026.
The July report from the Federal Reserve Bank (Fed) notes that inflation is expected to continue above the target of 2% through 2025. Accordingly, the Fed efforts to “restrain” the economy (meaning increase interest rates) will continue into 2025. The report indicates that while housing costs are slowing, they continue to increase at inflationary levels, necessitating further reduction.
In the meantime, buyers who are financially able should plan to acquire desirable properties at substantially better prices than will be available after recovery begins. Sellers who anticipate a need to sell before the economic turn-around, should look toward selling sooner rather than later, to minimize the impact of the down-trending market.
Beach Cities Summer Market Fizzles
From June to July the number of homes sold in the Beach Cities fell 27% and those sold for a median price of 2% less. Some of the decline in sales is attributable to fewer homes available, as sellers hold properties off the market in hopes of improving conditions. Even more is a result of buyers who have lost significant purchasing power as mortgage interest rates have rocketed to over 7%.
Compared to July of 2022, the number of homes sold this July dropped 22% with a decline in median price of 4%. This set of statistics is somewhat deceptive in that last July the real estate market was still in the early stages of the downturn. As the current year progresses, year over year figures will demonstrate the slide more clearly.
Comparing the first seven months of 2023 to both 2022 and 2019 (the most recent year of business not impacted by the pandemic) shows the drift of sales and prices. The number of homes sold fell 24% from 2022 (802 homes) to 2023 (607 homes), while it was down 35% from 2019 (930 homes). The Fed dropped mortgage interest rates to essentially zero during the pandemic to keep the general economy afloat, which resulted in rapid price escalation which ultimately made purchasing a home unaffordable for about 25% of potential buyers. Then to control the resulting inflation, the interest rates jumped up around the 7% mark, which further slowed the real estate market by “pricing out” another 10-15% of buyers. With fewer buyers and stagnating prices, sellers are reacting by pulling property off the market and delaying planned sales.
Median prices fell 4% from 2022 and are still 28% above the median price of Beach Cities homes in 2019.
Harbor Area Sales VolumePlummets
Sales volume in the Harbor area has held up better than the Beach, possibly because median price has taken a greater hit. On a monthly basis, 24% fewer homes were sold (269 in July versus 353 in June). Comparing July of 2023 to July of last year, only 18% fewer closed escrow (269 versus 329).
Generally being an entry level market, the Harbor area tends to react faster to changes in market condition. More upscale neighborhoods frequently “stick to the price” for a longer period of time when markets are declining. Month to month median price dropped 4% in July to $565K. For July of 2022 versus July of 2023, the median fell 5%, from $780K to $740K.
Year to date through July, sales volume was off 24% from last year. Median price was down 4% when compared to the same period in 2022. Looking back to 2019, the number of homes sold during the first seven months of 2023 dropped by 21%. Median price for the same time frame shows up at 32% higher than 2019. Given the median price dropped 4% over the past month (from $772K to $740K), it’s reasonable to project the Harbor area median will end the year near $600K, as it was in 2019.
PV Hill Shows Volatility
Month over month, the number of homes sold on the PV Hill fell from 79 units in June to 50 in July, a decline of 37%. At the same time, the median price dropped 10%, ending the month at $1.8M. This despite a high sale of $12.5M, up from the high of $10M in June.
Year to year, July volume dropped 6% from 53 units in 2022, while median price plummeted 18%, from last year’s $2.2M. Palos Verdes is a unique community with large homes on large lots, many of them highly custom. Combined with the small overall number of homes, these properties truly need to be assessed on an individual basis for realistic projections.
Comparing cumulative sales data for January through July, volume is down 23% and median price is down 17% versus last year. Going back to the stable year of 2019, the number of sales is down 16% while the median is up 34%.
Interestingly, if the Fed’s annual 2% inflation target is added to the years between 2019 and 2023, the median on the Hill would be $1.5M today, instead of $1.8M. Under those circumstances, it would only take a decline of $300K to erase all gain from the past three years. Not a comforting thought for anyone who purchased recently.
Inland Cities Most Stable
The Inland area typifies a classic “middle of the road” performance in the real estate world. Generally the homes are everyday family properties, the sales trends are at the middle of the current South Bay market, and everything seems to happen with minimum drama. So there is little surprise at the minimalist 19% decline in monthly sales volume, the lowest of the South Bay. Likewise there is no shock the Inland cities came in with the lowest monthly price decline, a mere 1% below June.
Similarly, the annual sales volume showed July of 2023 only 14% below last July and the median price just 1% below the same month a year ago.
Year to date for the first seven months of 2023 compared to 2022 looks much the same. The number of homes sold dropped by 22%, 799 in 2023 versus 1021 last year. The median price fell 2% to $868K from $883K. Looking back to the 2019 sales volume for the same time period, the Inland area is off by 18% for the current year. Much like the rest of the South Bay, the median price in 2023 ($868K) remains above that of 2019 ($662K) by 31%.
Home values have been increasing across the board in the US, and the percentage of homes valued at over $1 million seemed poised to hit a record in June of 2023, when the share reached 8.2%. That record wasn’t quite hit, as it actually belongs to the value of 8.6% in June of 2022.
The total value of the US housing market did hit an all-time record in June of 2023. The total was $46.8 trillion. For comparison, in June of 2022 — when the largest percentage were over $1 million — the total value was $46.6 trillion. This isn’t much lower, but it does show that either the top end is increasing in value, bringing the total value up, or there are more homes on the low end, bringing the share over $1 million down. Both of these are possibilities, since inventory is still low despite an increase in affordable living construction.
After the pandemic hit, once lockdowns were over, many people took the opportunity to move to a cheaper neighborhood. It seems like a financially sound decision. But that may or may not be the case. A large percentage of such migrants found it didn’t work out for them, and moved back. So what went wrong?
One near universal quality of cheaper areas is that they also have lower wages and less opportunity for economic advancement. Of course, in the post-pandemic era, many people were working from home, so this wasn’t drastically felt. Now that a fair share of them have transitioned back to full-time on-site work, the math just wasn’t working out. They either needed to commute longer — with gas prices being rather high — or look for a job in their new home. And it was difficult to find one. It’s also worth considering why it’s a cheap area. Is it a nearby low income neighborhood that suddenly has an influx of people? In that case, it may be about to get more expensive to live there. Is it an undesirable area? It’s probably undesirable for you as well.
It’s also important not to overlook quality of life. Cheaper neighborhoods will also have lower tax revenue, which in turn means fewer public services. The roads could be worse and there could be less public transportation. You may not have good schools nearby. The available health care is often also of lower quality. And no matter where you’re moving, you’re going to need to reestablish your social network. People frequently report feeling lonely or isolated in new areas, even when surrounded by people, because they simply don’t know anyone.
For quite a while, most buyers have been Millennials. This is predominately related to their age. The age range for the Millennial generation varies depending who you ask, but the National Association of Realtors (NAR) uses 24 to 42. This is considered to be the prime age range for first-time homebuyers as well as those moving from their starter home to their first permanent home. Because of this, Millennials have been the largest contingent of homebuyers. That’s no longer the case.
So who’s replacing them? One might expect it to be the generation just below them — it would make sense that as time goes on the younger generations fill the shoes of those before them. But the typical homebuyer has been around age 36, which is in the Millennial range, and much of Generation Z is still too young to own a home. It’s actually Baby Boomers making a comeback. The reason for this is economic, rather than generational. The current market is not well suited to homebuying. Those who are able to buy are generally those who can afford high-end homes. And one of the best ways to afford high-end homes is by having many more years of saving and building equity. Many Baby Boomers will have paid off their mortgage by now, and their homes would also be worth significantly more than they were when they were purchased. Half of Baby Boomers purchasing now are paying cash, something that Millennials without any equity are priced out of attempting.
You might think that once you’ve qualified for a mortgage loan, it’s locked in and you’re free to take on debt without affecting the home purchase. This is not the case. Lenders continue to look at your debt until the purchase is finalized, and taking on additional debt could increase your interest rate, or potentially even disqualify you from the loan.
You certainly don’t want to take additional loans during this process. This includes personal loans and lines of credit. Both can affect your credit score as well as your debt-to-income ratio, both of which lenders look at. Large purchases are also not advisable, especially if they’re paid in installments. This includes vehicles such as cars or boats, and may also include furniture or large appliances. Lenders also look for consistent employment. Even if you’re getting a pay increase by switching jobs, you probably shouldn’t do it just before finalizing a mortgage. At best, it delays the process, and getting paperwork in on time is very important, even if you’ve already locked in the rate.
There are many barriers to homeownership. Many of them are economic, and unfortunately no small percentage of them are the result of discrimination. But one very frequent barrier to homeownership is lack of understanding of the process. Plenty of people who can afford to buy don’t think they can, or don’t think they should, because of misconceptions about mortgages.
One myth that, despite repeated attempts by experts to clarify it, continues to plague prospective homebuyers is the 20% down payment requirement. There is actually no such requirement — it’s a suggestion. It’s a rather economically sound suggestion in many cases, but that doesn’t mean you can’t buy with a lower down payment. The reason it’s so heavily suggested is that not only does a higher down payment translate to reduced loan value and potentially a lower interest rate, but it also avoids private mortgage insurance (PMI). PMI is an additional cost that you won’t incur if your down payment is at least 20%. So a minimum of 20% down payment significantly reduces your overall monthly cost. These high monthly costs are perhaps what’s leading people to believe that renting is cheaper than buying. It can be, in the short term, but almost never is in the long term. But the reason it can be cheaper in the short term is not high mortgage costs; it’s actually the upfront cost of buying a home. Monthly rents usually go up at the same time house prices do, and are often fairly close to monthly mortgage payments. Moreover, buying a home builds equity and allows for resale, while there is no return on investment for renting. Another misperception that leads people to think they can’t get a mortgage is credit requirements. Lenders do look at your credit, but it doesn’t need to be perfect. Most people do not have perfect credit. As long as the lender believes you could reasonably pay back the mortgage, you can qualify with a credit rating as low as 500, though you may only qualify for mortgages with higher interest rates.
The misunderstanding doesn’t stop with whether or not one can qualify for a mortgage. Even once a prospective homebuyer gets to the stage of choosing a mortgage option, there is some confusion about which mortgage options are the best for you. Many people categorically refuse adjustable-rate mortgages (ARMs) and always pick the loan with the lowest interest rate. Neither of these are necessarily the right idea. Fixed-rate mortgages (FRMs) definitely offer stability and can be excellent for people who plan to keep their new home for a while or who are uncertain about their future. On the other hand, ARMs typically have a lower initial interest rate than FRMs. This means they can be more financially sound for people who don’t plan to own the home very long, or who are better positioned to take risks. A low interest rate is obviously a good thing, but it’s far from the only cost associated with getting a loan. If you need to pay PMI, that’s also a factor. But even if you don’t, there will always be closing costs, property taxes, homeowner’s insurance, and maintenance costs. Some of these depend on the price of the home, but some depend on the lender, so be sure to get a breakdown of all the costs before committing to a loan.
The traditional family unit in the US has historically been the nuclear family; that is, a household consisting of only parents and their non-adult children. While the reasons for this were initially economic, convention has popularized it as the socially correct thing to do. Recently, neither of these reasons hold water anymore. Thus, multigenerational households are increasing in popularity.
Both the Great Recession in the late 2000s and the lockdowns and recession following the Covid-19 pandemic resulted in adults, primarily young adults, moving back in with their parents. In many cases the young adults didn’t have children yet, but in some cases, they did. In this situation, the household would have three generations. The reasons for this shift were partly economic, but there are other benefits to multigenerational households. Having grandparents in the home makes childcare a lot simpler. Or if the elder generation can’t care for themselves, their children are right there to take care of them. Having multiple generations in a household can also improve the efficiency of household tasks, leaving more time for family bonding.
The Regional Early Action Planning (REAP) 2.0 program was enacted in 2021 in order to achieve housing and climate goals, including infill development and appropriately priced housing. REAP 2.0 received its first round of funding in July of this year, and has decided where to allocate its grants. Over $352 million was awarded in grants.
Of this amount, $30 million was given to Higher Impact Transformative (HIT) communities. HIT communities are those that have demonstrated a commitment to underserved communities. For this round of funding, that includes the City of Oakland, the City of Rancho Cordova, Tahoe Regional Planning Agency (TRPA), San Diego Association of Governments (SANDAG), and Bay Area Rapid Transit (BART).
The majority of the funding went to Metropolitan Planning Organizations (MPOs), some of which also serve HIT communities. TRPA and SANDAG received funding in both categories. Most of the funding going to MPOs was awarded to the Southern California Association of Governments (SCAG) at $237.41 million. The other MPOs that received funding were Association of Monterey Bay Area Governments (AMBAG), Madera County Transportation Commission (MCTC), Sacramento Area Council of Governments (SACOG), and Shasta Regional Transportation Agency.
Representative Maxine Waters recently introduced the Downpayment Toward Equity Act of 2023, intended to help disadvantaged groups afford their first home. The bill would provide financial assistance for down payments, closing costs, and the costs to reduce interest rates for first-generation homebuyers who have not bought a home within the past three years. This mainly affects Black and Latine communities and could benefit up to around 5 million prospective homebuyers. However, while probably good-intentioned, this effort is not without its flaws.
We’re currently coming out of a historic peak in home prices. Prices have started to fall now, but they’re not going to suddenly bottom out overnight. It’s going to take a while for home values to fall. Pushing homeownership aid now is not the right time, for anyone, even if it’s directed at helping disadvantaged groups. And the last time minorities experienced a surge in homeownership turned out terrible for them in the end, albeit under different circumstances. In that case, it was predatory subprime lending that left minorities on the hook for massive mortgages with negative equity after the subsequent economic collapse. Of course, it’s doubtful that Waters’ intentions are predatory, but her plan could perhaps be better timed around the state of the economy.
In this November’s election, the Justice for Renters Act will reach the ballot. This bill would repeal the Costa-Hawkins Rental Housing Act, which is a 1995 state law that prohibits rent control for certain properties. Repealing it would allow local city governments more freedom in making decisions on rent control. This isn’t the first attempt — similar bills were put on the ballot in 2018 and 2020, but neither passed.
That doesn’t necessarily indicate a lack of support, though. What has actually happened in the past is that those who benefit from a lack of rent control are both more vocal and wealthier. Of course, it should come as no surprise that landlords are typically wealthier than those renting from them, and therefore able to contribute more campaign funds. But you may not be aware that renters are less likely to vote, particularly because non-citizens are more likely to rent than buy. In addition, the share of renters in California is slightly smaller than the share of homeowners. Even if homeowners also includes non-landlords, homeowners generally aren’t negatively impacted by high rent prices. This time, though, rent prices have become so exorbitant that the bill has a higher chance of passing this year.
Last week, the Federal Reserve, commonly known as the Fed, increased the federal funds rate by 0.25 points. The federal funds rate now sits at 5.25%-5.5%, the largest value in 22 years. In addition, the Fed made a statement regarding “determining the extent of additional policy firming that will be appropriate.” Policy firming refers to rate increases.
Barclays, a multinational bank based out of the UK, also noted a change in the Fed’s language regarding this policy. A prior statement by the Fed referenced “the extent to which additional policy firming may be appropriate.” Their new statement is significantly more certain about the appropriateness of additional policy firming, leading Barclays to believe that the Fed plans additional rate increases. Barclays predicts this will probably happen in September or November, which are the next two times the Fed meets.
However, it’s important to realize that the federal funds rate is not the same as mortgage interest rates. In fact, they aren’t directly related at all. Mortgage interest rates do frequently increase when the federal funds rate increases, but there are additional factors at play. These include demand and economic outlook. Both of these are somewhat mixed. Demand is not particularly high, but neither is supply. Our economy is currently in a recovery cycle, so it’s looking up, but isn’t necessarily stable. So, it’s definitely a possibility that interest rates increase some more, but not a guarantee.
The skyrocketing home prices affected homes across the spectrum of affordability. The luxury home market didn’t take as much of a hit in terms of sales, since wealthy buyers can generally afford to buy even with prices being high. But that doesn’t mean their prices didn’t increase. Nationwide, the median sale price of luxury class homes rose to $1.2 million this year, which is a 4.6% increase from last year. This is actually over three times the percentage increase for non-luxury homes, which increased 1.5% to $340,000. Both of these are record median prices. However, prices aren’t increasing everywhere.
Four major cities across the West Coast experienced double-digit percentage drops in median luxury home value from last year to now. The largest decrease was in San Francisco, where it dropped 12.7% to $4.8 million. The other three were Seattle, Oakland, and San Jose. Seattle’s luxury prices dropped 12.3% to $2.5 million. In Oakland, they decreased 11.1% to $2.8 million. San Jose’s decreased 10.3% to $4.3 million. Besides very high prices despite rapidly declining prices, these four cities also share something else in common. All four of them are major West Coast hubs for the tech industry. The tech industry has recently been hit by layoffs and stock market declines, so this is perhaps not unexpected.
When considering whether to take on a home improvement project yourself or hire a contractor, what immediately comes to mind is cost savings. While this is a real benefit of DIY home improvement, it’s not the only one. So even if you don’t need to cut costs, don’t write off the idea immediately. There are other considerations that may sway you.
Besides cost savings, the most significant advantage is control. You can work on your own schedule; no need to clear your calendar for appointment times. Contractors usually get materials from the same source every time, so the quality and range of choice isn’t guaranteed. Some will let you purchase the materials, but if you do it all yourself, you know that option is available to you. Another benefit is skill development. Whether you’re a contractor yourself or just a regular person, DIY projects are an opportunity to expand your knowledge base and practice practical skills. Once you do your first DIY project, future projects will be much simpler for you, so you can potentially avoid calling a contractor at a later date as well. A less practical, but still noticeable, benefit of DIY work is personal satisfaction. It’s well established that seeing a project through yourself from beginning to end, no matter what type of project it is, is highly fulfilling. It’s a very good confidence booster.
The current housing market is in an interesting position. Mortgage interest rates are high, but home prices are starting to cool off. It raises the question of whether it’s a good time to buy. The advantage of buying now is that home prices, while expected to continue to drop, are the lowest they’ve been in quite a while. That means you may be able to get a home at a decent price without heavy competition, and start to build equity. The disadvantage is that you’re locking in a high interest rate.
That’s where refinancing comes in. While the price of a house can’t be renegotiated once the sale is finalized, your interest rate can. This is why buying with a high interest rate can be appealing if other conditions are favorable. But this is risky, because you never truly know how long rates will remain high. It could take a long time for interest rates to drop, and it’s even possible that by that time, home prices will also be lower. In this situation, not only did you essentially overpay for your home, but you’ve been stuck with a high interest rate for longer than anticipated. It’s also worth noting that if the current interest rates scare you enough to already be thinking of refinancing in the future before you’ve even bought the home, there’s a good chance it’s because you can’t truly comfortably afford the payments for any considerable length of time.
So should you consider buying now and refinancing later? What it ultimately comes down to is that it’s a risky time to buy, and it’s not entirely clear whether it’s worth the risk even if it pays off. What is clear is that if you can’t afford to task risks, you definitely shouldn’t. But if you can comfortably wait as long as you need to, it simply boils down to real estate as a long-term investment. In that case, it’s actually one of the lower risk types of investments, but that doesn’t negate the fact that the risk is higher than usual in the current climate. The actual answer will depend on the individual and on the future, but likely answers are either “no” or “probably not.” What are some alternatives, then? Waiting for mortgage rates to drop, or even just waiting for home prices to drop more, since that can’t be renegotiated. In the meantime, you can also consider upgrading your current home to increase its sale value for when you do buy.
The number of homes sold in the Los Angeles South Bay during the first six months of 2023 is the lowest sales volume for a first half in the past five years. Fewer homes have been sold since the new year than sold during the same period of the worst year of the pandemic.
The first half of 2023 has ended with 24% fewer sales than the same period in 2022, which was itself down 15% from 2021. The peak of the market was early 2021, when interest rates were among the lowest in history, exploding the number of potential buyers. The lowest sales volume was during 2020 when 3311 homes were sold, which was still greater than the 3221 sold the beginning of this year.
Median Price Begins Downturn
Coming right on the heels of the sales volume collapse is a drop in the median price. Prices today are down from where they were in 2022, which was the peak of the recent market. The chart below reflects the median price for the first and second quarters of the past five years. Typically, the first quarter is the slowest, with the number of sales increasing through the second quarter and then slowing again for the third and fourth quarters. Here the growth from Q1 to Q2 shows and we can see the change from year to year.
As always, bear in mind that the Palos Verdes Hill offers a comparatively small sample size, so a couple of significant sales can shift the plot lines dramatically on a chart. The chart above shows one such anomaly where PV the median price actually declines in the second quarter.
Looking across the years from 2019 all four areas show the same upward movement in median price until the second quarter of 2022. Then, comparing it to the second quarter of 2023, we can see the trend shifting downward. For example, the Beach Cities median fell from $1.82M in the second quarter of 2022 to $1.72M in the second quarter of 2023. The weakness in median prices is driven by increasingly steeper mortgage interest rates. Barring a change in market dynamics, anticipate this line turning into a steeper downslope for residential prices starting in winter of 2023/24.
When Is the Bottom?
The market is clearly taking a downward turn. Sales volume is off, median prices are turning down. Sellers are not putting properties on the market. Buyers aren’t buying. The few forecasters willing to make a guess this early are saying real estate won’t come back until 2025, possibly 2026. For those who are “waiting for the bottom of the market,” remember that by the time you read it in the headlines—you’re too late—the bottom is gone.
Beach Cities Sales Dropping Fast
Median prices at the Beach have fallen 5% from last June, coming in this year at $1.72M, an even $100,000 below June of 2022. Year to year sales for June are down 7% from last year, at 124 units compared to 133 in June of 2022.
Month over month statistics have been highly volatile since the beginnning of 2023. Interest rates and prices have changed erratically, making short term forecasts nearly impossible. Month to month sales volume has bounced in a range from 2% to 45%. In just six months, monthly median prices in the Beach Cities have ranged between -18% and 26%.
Year to date sales volume at the Beach is down 25% from last year and is off a full 35% from 2019.
The year to date median is down 3% compared to 2022, though it is still 32% above the median in 2019.
Despite market conditions, homes in the Beach Cities remain highly desirable. For June, 78% of sales transactions closed within 30 days of listing and sold for 2.61 % above asking price. Beach homes also offer a great deal of diversity. June sales showed a 19 million dollar range between the low sale at just over $500K and the high sale at $19.5M.
Harbor Area Home Sales and Prices Down
Year to year-same month sales in the Harbor area have been negative since the first of the year. Prices were still holding up in June of last year, but sales volume had been dropping through all of May and June. As a result, the number of homes sold dropped a mere 1% coming into June of 2023. That looks good until compared with the year to date decline of 24%.
Market conditions in the Harbor last year gradually changed from joy for rock bottom interest rates at the beginning of the year to caution as sales tapered off and sales figures stated taking a hit. Median prices for June of the current year have fallen 7% from the June 2022 median of $830K.
Until now, the Harbor area has shown mixed results in the month over month statistics. For June compared to May sales volume was up by 5% (353 versus 337), while median price was up 7% ($772K versus $720K). Like the Beach Cities, the Harbor Area is following a more normal upward swing from the winter doldrums into the spring selling season.
That upward swing is not expected to go very high or last very long. At 1710 homes sold, year to date sales volume from January through June is down 24% versus 2259 sold in 2022. Sales volume is likewise down 17% from 2071 during the same six months in 2019. The variance in monthly sales is expected to drop into the single digits starting in July.
Median prices are down 4% compared to 2022 though still up 33% versus 2019. (Note: Using The Federal Reserve’s “target inflation rate”of 2% annually would have put the Harbor area median price increase at a little over 8%. That implies an “excess growth” of about 25% in median price during the pandemic buying splurge. Much of that difference, if not all of it, is expected to disappear over the next 18 to 24 months.)
June sales detail shows 77% of sales closing escrow within 30 days. Buyers were still bidding up, with the sales price exceeding the list price by 2.61%. The highest sale recorded in June for the Harbor was $4.25M; while the lowest was $527.5K.
PV Peninsula Volume and Prices Mixed
Palos Verdes, contrasting May versus June of 2023 shows a 22% increase in the number of homes sold for a monthly total of 79. At the same time, the median price dropped by 13%, falling to $2M even. Expectations for month over month statistics include fewer sales and more aggressive price reductions as 2023 wears on. The summer and fall months are projected to have weaker home sales, both in volume and pricing, as interest rates increase and buyers and sellers who “must move” run out of options.
Year over year same month sales, showed a volume growth of 1% (one sale), accompanied by a 14% drop in median price from $2.3M. That 1% increase is the first time in 2023 that any of the areas has shown positive growth in the number of homes sold. As such, and knowing that the PV Hill is considerably smaller that the other areas we measure, readers are cautioned about the wide swings in PV statistics.
Sales volume for the first six months of 2023 is down 26% compared to 2022 (326 homes in 2023 versus 438 in 2022. Similarly, sales are down 9% from 2019 when sales of 358 homes were recorded. Median prices of $1.8M for the same period are down 13% from 2022 prices of $2.1M and up 36% from $1.3M in 2019.
Market time has remained good, with 75% of sales closing withing 30 days. Sellers have enjoyed selling prices 2.3% higher than asking prices, a trend expected to disappear before the end of summer. Once again showing the range of homes available in the South Bay, the high sale in PV was $10M while the low was $610K.
Inland Area Makes Strong Showing
Sales volume of 161 homes in the Inland Area for June was up 33% over sales of 121 in May. With 33% more activity came a 1% reduction in median price, which fell to $875K after reaching $880K in May.
Comparing June of this year to June of last year showed a volume decrease of 3% from 166 in 2022. Likewise, this June showed a median price decrease of 3% from last year’s $905K.
Year to date volume for the first six months was down 68%, for 669 units sold, versus 869 in 2022. Going back to 2019, the most recent “normal business year,” sales volume was down 21% from 799 sold in 2019.
Median price of Inland area homes for the same six month period showed at $863K, down 3% from $887K in 2022; and up 32% from $652K in 2019. Days on market remained under 30 for 82% of the Inland area homes sold in June. Buyers offered 2.6% above asking price. The high market sale was $2.2M while the low was $390K.
People get the recommendation to “go green” all the time. But how does one actually do that? Well, there are several ecologically friendly options that you can take advantage of when making home improvements. The benefits of natural light and recycling are well known, but some of there tips you may not be aware of.
Eco-friendly materials doesn’t necessarily mean recycled. Bamboo and cork are particularly sustainable, and cork can be re-used easily. Locally sourcing materials can also reduce environmental impact by reducing transportation emissions. Look within 500 miles of your home if possible. Unfortunately, neither bamboo nor cork oak grows natively in California, but you can still source the products from local businesses. If it’s an option, choose programmable thermostats, low-flow showerheads, faucets, and toilets, low-VOC (volatile organic compound) paints, and Energy Star rated appliances.
Obviously, when looking at a home appraisal, the appraiser is the expert. But appraisers are still human, and can make mistakes. Make sure to read over the appraisal report, especially if you feel the appraisal value is wrong. It’s possible the appraiser entered something incorrectly or there was a communication error.
If you review the report thoroughly, you may be able to find discrepancies even if you don’t know much about appraisals yourself. If you do, don’t be afraid to talk to the appraiser about it. Sometimes just pointing out a mistake can solve the problem. If you do need to argue your case, though, having thoroughly read the report can only benefit you. This lets you potentially gather enough evidence that the appraiser revises their appraisal.
If that doesn’t work, you may have to request a reappraisal from the lender. Though, you should note that not all lenders allow reappraisals, and even if they do, they won’t accept your request without sufficient evidence. If you can’t get a reappraisal — whether the lender doesn’t allow them or the request was denied — the next person to talk to is the other party in the transaction. Be open with them and discuss the situation so they understand why you want to renegotiate. If you’re the seller, you may need to adjust the purchase price, and if you’re the buyer, you may need to explore other financing options.
