Tag: statistics

South Bay High End Market Hits Wall

On the heels of an encouraging October real estate market, November saw the South Bay market plummet into the red. Compared to last month the number of homes sold fell by nearly 30%, while the median price collapsed at the Beach and on the Hill. At the same time, the Inland and Harbor areas showed modest growth in median price, posting a 2% gain in both areas.

This was a surprising downturn following across the board sales growth in the October market, accompanied by generally positive price appreciation.

Looking at year over year, same month sales provides a slightly more positive result. Both the Beach and the Hill show the number of homes sold down by 3% and 13% respectively. The Harbor area maintained sales growth of 2% while the Inland area increased by 4%. Both areas were off substantially from the 20-30% increases of October.

Year over year median prices were equally depressed. The Beach and the Hill, the high end of the South Bay market, both lost ground in the single digits. The Harbor and Inland areas, which make up the bulk of sales in the South Bay, grew at 4% and 5% respectively.

It’s too early to attribute this shift to the election results because most of the transactions closing escrow in November would have been negotiated in October. If anything, the decline reflects nervous anticipation leading up to the election. December sales will provide a much more definitive indication of how the public has reacted to the election results.

For right now we know that current sales volumes are running about 10% below December of 2023. And, we know that December last year was lower than December 2019 by 30%. Back at the end of October conditions seemed to be improving, but today it would seem we are still trying to climb out of the Covid trough.

Beach: Sales Off 35% for November

The number of homes sold in the Beach Cities dropped from 127 in October to 83 in November showing a 35% decline for the month. At the same time the median sales price dropped from $1.9M in October to $1.65M in November for a loss of 13%.

On an annual basis sales volume was off by 3% compared to last November, while the median price was flat.

Year to date, 1,059 Beach homes have been sold compared to 1007 during the first 11 months of 2023. This is a 5% increase in the number of homes sold. The median price rose 7% from $1,675,000 last year to $1,787,500 year to date.

Harbor: Sales Fall 26% in November

Harbor area home sales plunged 26% from October, dropping to 256 units from 345 sold last month. At the same time the median price climbed 2%, to $787,500 from $775,000.

On the flip side, same month, last year sales moved the opposite direction, rising 2% this year compared to 252 homes sold in November of 2023. The median price this November was up 4% over the $760,500 recorded in November of last year.

With only one month remaining in the year, the Harbor area displays modest increases in both the number of homes sold so far this year and the median price of those homes. Annual sales have reached 3,160 to date, 3% higher than last year’s 3,076. Median prices for the year have climbed from $740,000 last year to $780,000 this year.

Hill: Market Drops 39% for the Month

Home sales on the Palos Verde Peninsula dove down 39% from October to November, wiping out all but 1% of last month’s gain. As mentioned in the October issue, during the last quarter of 2023 mortgage interest rates were hitting around 8%, which drove the South Bay market to a standstill. The fact 2024 sales volume is falling below 2023 is a concerning matter. Interest rates are once again pushing up against 8%, which has been an impenetrable barrier in recent years. While the number of homes sold dropped precipitously, the median price came in with only a 6% decline, falling from $1,914,500,in October to $1,805,000 in November.

Comparing November of 2023 to November this year turned up a steep fall again. This year brought a sales volume decrease of 13% accompanied by another 7% drop in the median price.

As 2024 heads for closure, the dramatic swings of earlier in the year are mellowing out. Through November, the 597 sales on the Hill have settled in at just 1% above last year. Similarly, the median price, which has ranged from an increase of 26% to a decrease of 15% throughout the year, is coming in at 3%, or $1,927,500.

Inland: Home Sales Collapse by 22%

November sales of 111 homes in the Inland area totaled a 22% drop from the 143 sold in October, rounding out a total decline of 28% for South Bay real estate this month versus last month. Despite the fall in month to month sales volume, the Inland area enjoyed a 2% increase in median price over October.

Same month last year sales increased by 4%, moving up from 107 units in 2023. At $895,000, the median price for November Inland area homes was up by 5% over the $851,000 of last year.

Looking at year to date sales volume of 1,313 shows a mere 1% increase over January-November of 2023 when 1,302 homes sold. Median price fared higher, with a 3% jump from $867,500 to $895,000 this year.

Beach=Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo
Harbor=Carson, Long Beach, San Pedro, Wilmington, Harbor City
PV Hill=Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates
Inland=Torrance, Lomita, Gardena

Photo by CURTIS HYSTAD on Unsplash

South Bay Real Estate Leveling Off

It looks like the real estate market is finally climbing out of the Covid trough. Each passing month this year has shown red ink, mostly on sales volume, and a lot on median price as well. October brought some relief in that the number of homes sold is up in every area, and median prices are only down in half the South Bay.

The number of South Bay homes changing hands has varied considerably since 2019. Sales staggered briefly after the spring shutdown in 2020, then recovered mid-year as the interest rate continued down. Rock bottom interest rates pulled in buyers and homes flew off the market with bidding wars. In the final quarter of 2022 sales plummeted and the buying spree ended.

YearHomes Sold
20197,100
20208,581
202110,279
20227,616
20236,481
2024proj6,636

If this is indeed the beginning of a normal real estate market again, it’s possible to see reaching the pre-pandemic sales volume in 2025, but more likely in 2026.

The median price is another story. Interest rates were hovering around 3.5% in spring of 2020. The Federal Reserve opened the money spigot to keep the economy flowing while everyone was locked down. For about 15 months mortgage interest rates were below 3%. Historical data sourced from Freddie Mac shows that rates dropped below 4% starting in June of 2019 and lasting until March of 2022. Nearly three years of sub 4% rates makes the current +/-7% a significant deterrent to buying a new home or trading up.

During that period, buyers took advantage of the low rates to boost their offering prices for homes, creating a sellers’ market and bidding wars. The median price sky-rocketed in 2021 and continued through the first of the next year. In summer of 2022, median prices started falling and dropped until late in 2023. Across the board, median prices have been modestly positive since the beginning of 2024.

Certainly it’s all relative, and the market is adjusting, both on the side of higher prices and higher interest rates. But, with today’s median prices roughly 40% above 2019, the number of buyers who can qualify for the necessary loan is way down. A 2024 Q3 estimate from the California Association of Realtors shows only 15% of households in Los Angeles County can afford the median priced home. That compares to 56% in 2012, which leaves a lot of buyers on the sidelines.

The election is over and the incoming administration is clearly pro-corporate. Over the next couple months the dynamics of the shifting markets will become clearer. By the new year we should have a better understanding of the impact to our local real estate. As of October, declines are leveling off and sales are starting to pick up.

Beach: YTD Sales Up 6%, Prices Up 7%

The number of homes sold in the Beach cities increased by 11% in October, rising from 114 in September to 127. The median price of Beach properties went up from $1,790,000 to $1,900,000, a 6% jump in monthly figures.

Annually, October this year showed a whopping 61% increase in sales over October of 2023, climbing to 127 homes this year versus 79 last year. Over the same one year span, the median price rose 19%.

In view of the huge increase, it’s important to note that October of 2023 is the month mortgage interest rates started toying with 8%, which the buying public simply wasn’t accepting. While lenders and the Fed worked to lower rates, real estate was “in the tank” for last quarter of the year. After the beginning of 2025 the year over year percentages should level out.

January through October, the number of homes sold this year hit 976, 6% more than were sold in the same time period of 2023. Median price at the Beach climbed to $1,788,750 for a 7% increase over last year.

Harbor: YTD Sales Up 3%, Prices Up 4%

October sales in the Harbor area came in at 345 homes for a 9% increase over September. The median price was $775,000, up 2% from the prior month.

Looking at year over year for the same month, this October showed a 29% improvement over the 267 homes sold last year. As noted earlier, home sales took a significant drop in the last quarter of 2023 due to mortgage interest rate hikes. The year over year median price was a much more reasonable 3% increase.

For the first ten months of the year, sales volume has gone up by 3%, to a total of 2,904 homes sold. Over the same period, the median price has jumped up 5% to $778,500.

Hill: YTD Sales Up 2%, Prices Up 5%

On the PV Peninsula, October sales outpaced September by 40%, coming in with 66 homes sold versus 47 the preceding month. It’s important to remember that the Palos Verdes market is the smallest of the South Bay, so a handful of transactions can make a huge difference in either, the sales volume or the median price. The steep increase in sales was accompanied by a more modest increase of 13% in median price, ending the month at $1,914,000.

Comparing October to the same month last year reveals a 5% boost to the number of homes sold. On the other hand, the median price took a fall, dropping by 2%.

Year to date, home sales on the Hill have increased 2%, from 544 in 2023 to 557 this year. For the same ten months, the median price went up 5% to $1,938,750.

Inland: YTD Sales Up 1%, Prices Up 2%

Home sales in the Inland area have been stable, with an increase of 12% in the number of transactions, from 128 properties sold in September to 143 in October. A 1% drop in the median price from last month to this brought the median down from $882,500 to $875,000.

Annual sales in October of this year ended 23% higher than October of 2023. The median price, going the opposite direction, fell 5% from $917,000 last year.

Continuing the relatively modest numbers, the Inland area has risen 1% in the number of homes sold year to date, The 1202 sales reported so far, compare to 1195 sold in 2023. Similarly, the median price is up 2%, having risen from $871,250 last year to $891,245 this year.

Beach=Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo
Harbor=Carson, Long Beach, San Pedro, Wilmington, Harbor City
PV Hill=Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates
Inland=Torrance, Lomita, Gardena

Photo by Corey Buckley on Unsplash

Why Is California So Much More Expensive Than Most Of The US?

California has always been an expensive place to live, and it’s only getting more and more expensive. The median home price is about 2.5 times higher than the national average, and 11 times the median income. Of course, prices are trending upwards across the nation. Appreciation over time is normal, and has accelerated in the wake of the 2020 pandemic. But these things affect everyone — so why is California specifically so much more expensive?

It’s not just as simple as having higher desirability, although that is certainly the case. The primary issue is a lack of affordable housing. There are multiple reasons for this. California may be the third largest state by area, but it also has the highest population of any state. It’s not among the densest, but it is rather sprawling. There’s just not a lot of open land to build on, particularly land that fits all the various zoning restrictions that are in dire need of updating. However, updating zoning laws is getting pushback from residents. Construction costs are also up. While construction companies typically would rather build multifamily residences, they have to build what’s in demand — which is mainly single-family residences.

In addition, because purchasing a home is so expensive, landlords are better served continuing to rent out their homes and units rather than attempting to sell, even though selling would decrease home prices. This is exacerbated by property tax laws in California. Prop 13 limits the rate at which property taxes can increase until a property exchanges ownership. Therefore, people who have owned a home for a long time can pay very little in property taxes, reducing the likelihood of any sort of market activity.

Photo by Paul Hanaoka on Unsplash

More: https://calmatters.org/explainers/housing-costs-high-california/

South Bay Housing Prices Up, Sales Down

Median prices for real estate around the Los Angeles South Bay have risen over 40% since 2019, the year before the corona-virus pandemic. Comparing the median prices and sales activity for the first half of 2024 shows increases approaching 50% for the five year period in all areas across the South Bay.

Over the same time period, sales volume has plummeted by 22%, falling from 4,022 in 2019 to 3,149 in 2024. The Beach cities have been particularly hard hit with a 34% drop in the number of homes sold during the first six months of the year.

Looking at 2024 versus 2023 shows a similar pattern with median prices up nearly 10% from the first half of last year. The Beach area showed the lowest increases, coming in at 5% above the 2023 median.

Sales volume was off by 2% across the area with the only positive being the Beach at a mere 1% above 2023 numbers. As the 2024 year has progressed, the number of sales has declined in total. Simultaneously, more and more parts of the South Bay have fallen into negative growth.

As of the end of June, 2024 sales figures for all areas were negative in comparison to June of 2023. While the number of homes sold has consistently declined through the first half of the year, median prices have been equally persistent at increasing over last year. Most experts are attributing the increasing prices and decreasing sales to the shift from an ultra-low mortgage interest rate during the pandemic, to a comparatively high rate currently.

When rates were at the lowest, many homeowners took advantage of the opportunity to refinance at the incredible rates. Those folks are now in a position where they would incur a painful increase in monthly living costs if they were to move. That has resulted in about a 40% reduction in the number of homes typically available on the Multiple Listing Services (MLSs).

At the same time, the increased mortgage interest rates have pushed a significant number of potential sellers out of the market because they no longer qualify for the loan they would need to trade up to a larger or newer home. That reduced the available inventory of resale homes even further and became another contributing factor to the bidding wars among the few buyers still in the market.

Beach: Down 18% in Sales May to June

Monthly sales volume fell from 110 units in May to 90 homes in June, for an 18% drop. Median price jumped 10% in one month to end at $1,917,500.

Year over year, the number of homes sold declined from 124 in June of last year to 90 this year for a loss of 27%. Median price for the Beach climbed 11% over the year.

Year to date for the first half of 2024 versus the first six months of 2023 shows a modest increase of 1% in sales volume along with a increase of 5% in median price.

Harbor: June Median Price Off by 6%

The Harbor area was the outlier for June. While month over month sales collapsed and pricing jumped for the other three areas, Harbor sales of 342 homes boosted sales by 19%, coming in well above the 288 homes sold in May. Meanwhile, median price went the other direction, dropping from $848K in May to $799,900 in June, for a decline of 6%.

Year over year statistics went the opposite direction, following the rest of the South Bay. Sales volume fell by 3%, dropping from 124 in 2023 to 90 in June of this year. Meanwhile the median price was up 4% for the year, rising from $772,000 last June to nearly $800,000 this year.

The first six months of 2024 brought a year to date sales drop of 4%. The median price in the same period climbed 9%.

Short term changes, as from month to month, have been unpredictable since the pandemic. Looking at the longer term, there is consistency in the declining sales volume and increasing median price. With 2024 a presidential election year, it will be interesting to see how long this direction holds.

Hill: Year Over Year Sales Fell 24%

With a reputation for wildly shifting statistics, the Palos Verdes Peninsula came in with relatively modest decline of 9% from May sales. Similarly, the increase in median price was very tempered at only 3%.

The sales volume for same month last year was anything but mild. June of 2023 reported 79 homes sold versus 60 homes in June of 2024. That’s a 24% drop in volume from last year. While a fourth of the 2023 sales disappeared, the median price eked out a 1% increase, going from $2,000,000 last June to $2,912,500 in June of 2024.

In what is becoming a familiar trend, the year to date sales volume is down 2%, and the median price for the first six months of the year is up 7%.

Inland: June 2024 Sales Drop 24% From 2023

The Inland area showed the smallest month to month change of the South Bay. The 4% drop in sales volume from 128 homes sold in May to 123 in June was minor. Likewise the 1% increase in median price from $945,000 to $955,000.

Like the Hill, the Inland area had a radical drop in sales from June of 2023 to June of 2024. Falling from 161 homes sold last June to 123 sold this June resulted in a 24% drop in transactions. Median price in the same period rose 9%, from $875,000 to $955,000.

Interestingly, there has been no statistically significant change in the sales volume for the first six months of the 2023 and 2024 years. It actually increased by three units from 669 homes sold in 2023 to 672 homes sold in the first half of 2024. For the same time periods, the median price climbed by 6%.

Beach=Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo
Harbor=Carson, Long Beach, San Pedro, Wilmington, Harbor City
PV Hill=Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates
Inland=Torrance, Lomita, Gardena

Photo Montemalaga Sunset by Carl Clark

South Bay Median Prices Still Climbing

South Bay median home prices are continuing to climb! May versus April showed increases as high as 9% for the month. Comparing May of this year to last May gave increases as high as 18% for the year. Year to date statistics for the first five months of the year came in with increases as high as 11%. Looking at the same five month period from five years ago shows median prices have climbed by nearly 45%.

Mortgage interest rates have roughly doubled from two years ago. The Federal Reserve Bank kept raising rates, hoping to drive inflation down. Unfortunately, it doesn’t seem to be working in the real estate world.

So far this year the interest rate increases have only modestly slowed purchases in month to month data. The number of homes sold in April was 10% higher than in March. May shows a 2% increase in the number of homes sold compared to April. Year over year sales volume shows a greater impact, with an 8% drop from May of 2023 to May this year. Most of that decline was lost this year as home sales for the year to date are up 1% from last year.

Once again looking back five years shows sales are off by 22% across the board from pre-pandemic sales volume. All while median prices are up 45%! But, there are very few homes on the market, and the shortage of inventory is driving price increases, contrary to the Fed goal of slowing inflation.

So why are there so few homes for sale today compared to 2019? And why are prices climbing in the face of mortgage interest rates that have doubled?

One possible factor: During the pandemic mortgage interest rates were at and below 3%. A significant number of existing mortgages were refinanced during the 18 months of the pandemic. Another 17% of currently existing mortgages were purchases at those rates. In summary, about 50% of the current mortgage market is now holding a note with an interest rate that is a fraction of today’s rates. There is essentially no reason for those folks to ever move.

Since about 80% of California homeowners carry a mortgage, and about half of those have an historically low interest rate, about 40% of homeowners have an incentive to stay where they are now, rather than trade up, as would be normal. Given the financial benefits, those homeowners are not likely to put their home on the market and increase the inventory thereby relieving some of the supply and demand imbalance.

Forty percent is a huge piece of the available housing stock to be removed from the market in a time of a housing shortage. Work-related re-locations would have once smoothed this out, but the “work from home” movement has also contributing to the slowing real estate market. The current outlook is for several years of low inventory, further exacerbating the increase in housing costs.

Eventually the inflation of housing prices will come under control and annual increases will get down to something less than 6%. There’ll be no attempt to “dial back” the inflation and return to a prior point in time. So the short term question is, “How do we adjust to the new reality of higher prices, fewer homeowners, and more renters?”

Beach: Anticipate Fewer Sales & Higher Prices

Monthly statistics have been misleading in recent months in all the areas. May activity at the Beach is a great example of the disparities. Compared to April, 7% fewer homes were sold in May with no change in the median price. Contrast that with the annual numbers where sales in May of this year are down 9% from 2023 but the median prices are up 9%.

By looking at data for the year to date, the sporadic ups and downs can be smoothed a bit. This shows a more complete picture of what the market is doing in comparison to last year. In summary, the first five months of the year show a 10% growth in sales for the Beach cities, accompanied by a 6% increase in the median price.

Early projections for June indicate an annual decline from the same month last year sales of over 15% and a price increase of nearly 20% in the Beach area. If these preliminary estimates hold true, there will be some serious hand-wringing among the financial community.

Harbor: More of the Same

Like the Beach area, month to month statistics for the Harbor area have been very volatile this year. The number of sales in May climbed 8%, after falling 4% in April. May’s median price was up 9% following a 1% increase for April.

Year over year, sales volume was down 15% compared to May of last year, while the median price jumped 18%. This follows the general trend of declining sales and increasing prices. Theoretically, the declining sales will induce sellers to reduce their asking price, which will then translate to a reduction in the current inflation rate.

With the year to date sales volume dropping by 5% the interest rate increases would appear to be working. But the increase in median price by 8% for the first five months of 2024 throws cold water on the idea that inflation in real estate is going away.

More of the same is projected for June with a drop of 15% in sales and an increase of 5.5% in median price.

Hill: Sales Volume and Median Prices Up

Only 66 homes sold on the PV peninsula in May, compared to 64 in April, so the 3% increase in sales volume is not terribly consequential. Likewise the 1% growth in median price from $1.93M to $1.95M.

As mentioned in previous articles, activity levels on the Hill are small, so it only takes a minor change to look statistically important. For example, 65 home sales in May of 2023 versus 66 in May of 2024 is only one more home sold, but represents a 2% growth in volume. Even more so, the $2.3M median price from May of 2023, which is an exceptionally high monthly median price in PV under any circumstances, makes the 15% decline to $1.95M look huge in 2024.

In reality, the May median price is actually higher than the year to date median of $1.93M and higher than all but the March median of $1.98M. January through May sales volume is up 4% and the median price is up 11%, very much like the rest of the South Bay.

June sales are projected to decline slightly with a modestly elevated median price.

Inland: Sales Up and Prices Up

From April to May the number of homes sold in the Inland area declined by 5%, much as the Beach area sales volume transacted. Unlike the Beach and PV, where median prices ended barely positive, the median increased by 7% in the Inland area. That hefty increase mirrored the Harbor area lift of 9% month over month in the median price.

A 6% increase in the volume of homes sold and a 7% rise in the median price from May of 2023 to this May deviated from the other areas. It displayed a stronger than expected sales volume, especially considering the Beach and Harbor areas were deeply negative. At the same time the median price showed a slower increase than either the Beach or the Harbor.

Year to date for the first five months of 2024, the Inland area showed an increase of 8% in the number of homes sold, and a solid 6% increase in the median price. All in all, an investment in one of the inland cities would have been a good performer in May.

That investment is projected to still be sound in June, with a small decrease in the number of homes sold and a similar increase in the median price.

Beach=Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo
Harbor=Carson, Long Beach, San Pedro, Wilmington, Harbor City
PV Hill=Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates
Inland=Torrance, Lomita, Gardena

Photo by Tim Cook on Unsplash

January Home Sales Down, Prices Up

Across the Los Angeles South Bay the number of homes sold in January was down compared to December—way down. For the same time period median prices are mixed with most sales either flat or down.

Looking at sales volume in January versus January of last year, shows big increases in activity. However, that serves more to show how slow the real estate market was at the beginning of 2023, than how good it is today. Median prices were likewise up for most areas when compared to the same month last year.

From a historical perspective, looking back at 2019, still the most recent “normal” business year for real estate, we see sales volume overall remains 21% below that benchmark. Median prices, which shot up during the pandemic have stubbornly stayed up. As of January, median prices range from 25-30% above the 2% inflation factor the Federal Reserve targets.

The combination of inflated prices and mortgage interest rates testing the 7% level has created a stagnant market place. Typically a presidential election year would bring rosy news about a growing economy and low interest rates. At this point there’s only one month of data, not enough to make any forecasts, but 2024 is off to a slow start.

Beach: Sales Off 46%

Month to month sales volume in the Beach cities collapsed by 46% in January. After back to back increases in the number of homes sold for November and December, the huge drop was unexpected. Juxtaposed against the 13% increase in median price, it demonstrates the current market dynamic.

The only actual buyers are people who have no choice but to move, despite the low inventory and high interest rates. At the same time, most sellers are stalling because they don’t want to be sitting on the market for weeks. And, because most sellers are also buyers, they’re waiting for a better market with more homes available and lower interest rates for their replacement purchase. As a result, the number of available homes listed on the MLS is further depressed.

This has brought about a rare phenomenon, the “off-market” sale. Both buyers and sellers are actively looking for deals that can be consummated without the competitive environment of the Multiple Listing Service (MLS). Buyers love the fact there are no bidding wars. Sellers are glad to sell at asking price without endless open houses and dozens of showings. The properties usually end up on the MLS as history, but not as competition. How long this trend will last depends on the economy over the next few months.

The market at the Beach has clearly improved since last year. Sales from January of 2024 have climbed 30% compared to January of 2023. At the same time, median price has moved up 7%. Of course, as mentioned earlier, last January was far from a good market in real estate.

Given the turmoil of recent years, one is compelled to look back at 2019, before the pandemic with it’s rock-bottom interest rates and sky-rocketing prices. Using that metric, January sales this year fell 34% below January of 2019. Median price this January was 43% higher than it was in January of 2019. Clearly “normal” is still a long way off.

Harbor: Sales Off 13%

Month to month statistics from the Harbor area demonstrate a truism. Pointing the way toward stability in the market, many of January’s home sales came with a reduced price. The median price dropped 4%, rather than increasing as it did in the Beach cities. Those price reductions appealed to buyers and the number of transactions increased considerably. Correspondingly, the sales volume only dropped 13% as opposed to a 46% drop at the Beach.

Harbor area sales for January 2024 ended with 9% more transactions than the same month lin 2023 in an unsurprising response to the market collapse of last winter. Also on the positive side, median prices for Harbor area homes increased by 7%.

Pre-pandemic residential sales for January 2024 was mixed in comparison to January of 2019. Sales volume was off, with 16% fewer homes sold in 2024. At the same time, median prices were up 44%.

Hill: Sales Off 16%

November and December of last year looked like a bad thing was turning good, and then January 2024 came along. Home sales on the Hill suffered less than at the Beach or Inland, but a 16% drop in sales volume in an already moribund market hurt. Median prices on the Hill hit that “sweet spot” with no change up or down.

Compared to January of 2023 the number of home sales on the Hill went stratospheric climbing 50% for the month. Of course, having read this far you know last winter was a low spot in the market. Combine that with the comparatively small number of sales on the Palos Verdes Peninsula and it’s easy to have outsize percentages. While sales volume was up 50%, median prices climbed a more modest 8%.

January 2024 versus January 2019 in home sales on the Hill showed an solid improvement. The number of homes sold increased by 27%, in contrast to falling sales in the Harbor and Beach areas. With the number of home sales up, a 37% increase in the median price is a welcome addition.

Inland: Sales Off 36%

Home sales in the Inland area closely followed those at the Beach in January. Similarly, the month ended with a calamitous 36% drop in the number of homes sold—down to 67 homes from over 100 in both November and December. Likewise, the median price came in with an 11% increase, slightly less than at the Beach. This shows the effect of “sticky prices” where a lot of sales don’t happen because the sellers are resistant to lower offers and buyers are balking at higher prices.

On a year over year basis, January 2024 showed 8% growth in the number of sales compared to last January. Median prices continued following the long downward slide of 2023 and dropped another 6%.

Comparing the Inland sales to 2019, the most recent stable year, the number of homes sold has dropped by 39% leaving a lot of room for recovery. The median price has climbed 40% over that five years, roughly 27% greater than the “ideal inflation” sought by the Federal Reserve.

Beach=Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo

Harbor=Carson, Long Beach, San Pedro, Wilmington, Harbor City

PV Hill=Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates

Inland=Torrance, Lomita, Gardena

Photo by T Narr on Unsplash

How Generational Preferences Affect The Real Estate Market

If you’re planning to sell your home, or just want to be informed about current trends, you may want to know about present day homebuyers’ preferences. The problem is that looking at general trends only tells you about the largest cohorts of homebuyers, which are Millennials and Baby Boomers. Not only do these two groups have vastly different preferences between each other, it also ignores Gen X and the admittedly small group of Gen Z homebuyers.

Knowing the demographic makeup of your region can help you to understand what the people in your area are looking for. Alternatively, knowing what other cohorts desire can help tailor your choices to attract people to your home. There are certain things you cannot change, such as the walkability or access to public transportation in your neighborhood and presence of nearby parks or schools. However, if you know which types of people are looking for the sort of things that exist where you are, you can base your decisions about things you can change based on that group’s preferences.

Currently, Baby Boomers are not in the business of buying large, fancy homes. They’re looking to downsize, or remodel a home to suit their personal needs. They also generally want a healthcare facility nearby, since their age can lead to medical complications. Gen X is looking for a mix of business, family care, and leisure. Many Gen X people are working and also spend time caring for their aging parents, which leads them to want either nearby parks or recreational facilities to improve their work-life balance, or a suburban or rural lifestyle if they work from home. Millennials are the largest cohort of potential homebuyers, but they also can’t currently afford expensive homes. Rising housing costs mean Millennials are currently transitioning from renting to their starter homes, since many of them have had their initial homeownership plans delayed. As for what they’re looking for, they’re big on technology and sustainability, and prefer easy access to employment hubs via either walkability or public transportation. The group of Gen Z homebuyers that are actually able to afford a home have probably not been much affected by delays, so their digital native and eco-friendly identity is even more pronounced than in Millennials. They prioritize energy efficient homes, smart technology, and cultural diversity.

Photo by Nathan Dumlao on Unsplash

2023 South Bay Real Estate: Fail

By every measure South Bay real estate failed last year. The volume was down from the prior year in every residential area, the median price fell from 2022 heights everywhere, and the double whammy of crashing sales and falling prices brought the total revenue down from 2022. Judging from early reports the same is true across most of the state.

Part of the story doesn’t read so poorly though. As we look back across the year, the second of half of 2023 was far better than the first half of the year. This in two respects: first, the month-over-month statistics for sales volume have improved. The median price is still falling, but that’s to be expected if we’re going to see a sales volume increase concurrent with continued high interest rates. The market is going to demand that some of the “overly enthusiastic” price increases come back down.

Second, the year-over-year decline in median price is slowing—not reversing—slowing. Roughly speaking, the number of homes sold for less than 2022 prices improved from 83% in the first half of the year to 45% in the second half of 2023. That signifies an approaching balance in the market. Buyers are still holding back, but some sellers are coming forth to meet them.

2024 South Bay Real Estate: Better Days Ahead

We expect to see continued slippage in the median price, accompanied by increased sales volume. The Los Angeles South Bay is somewhat insulated from the vagaries of national and international events, but 2024 is facing an active political climate. The continuing wars around the planet would be enough to rattle economic markets here. This year sellers and buyers also have to factor in a contentious national election.

While the Federal Reserve System is officially apolitical, history has shown a tendency for improved economic conditions during election years. The final quarter of 2023 saw a softening of the wild swings in home sales volume and pricing. With less than 10 months until the presidential elections we anticipate continued easing of interest rates and increased sales activity. Median prices have fallen by about 2% across the South Bay in 2023 and probably won’t drop a lot more in 2024.

Sales volume fell by 15% across the South Bay in 2023. Nearly all of that drop was in the first half of the year. The new year is expected to be positive with growth in sales across the board.

Beach: Strong Sales On Weak Prices

Comparing December to November, the number of homes sold at the Beach was up 13%. That increase in sales is on top of a 9% increase in November, a dramatic turnaround from the 27% drop in October. On the other hand, the month to month median price fell 5% in December.

December of 2023 was similarly mixed when compared to December of 2022. Year over year saw sales volume increase a staggering 39%. Looking back shows December of last year as the absolute slowest month of the year for home sales at the Beach. The median price plummeting by 10% certainly helped generate those December 2023 sales.

Year to date numbers, comparing all 12 months, showed the number of home sales off by 11%. At the same time the median price was down 4% for the year. Much of the annual decline in sales volume occurred in the first half of 2023, when monthly drops of 25%-35% put the brakes on prices. Beach area median prices have taken steep falls since February 2023. It may take a couple more months before the first stimulating news on the interest rate front, but it would appear we’re looking at the “bottom of the market” now. Regardless of whether you’re a buyer or a seller, this is time to reassess your options.

Harbor: Positive Across the Board

December versus November of 2023 saw sales volume go up 1%. During that time the median price went up 2%. Harbor area homes sales dropped precipitously through the third quarter when they suddenly found strength and were positve in the single digits for the last quarter. Monthly declines in median price have been the order until the final quarter when median prices appear to have leveled out.

Looking from the annual perspective, home sales in December 2023 were up 3% over the last month of 2022. Using the same comparison, median prices were up 13%. This suggests the Harbor area may already be seeing improved stability.

Summarizing 2022 versus 2023 for the Harbor area, overall home sales volume dropped 17% for the year. Looking from a longer term perspective, sales have fallen 26% from the ‘pre-Covid benchmark year’ of 2019. From 2022 to 2023 the median price fell 2%. Again over the longer term, median prices in the Harbor area are up 31% over 2019.

Hill: Median Price Down – Sales Up

December home sales increased on the Hill by 9% over November levels. For the same mnthly period, median prices were down 9%. This pattern is expected to shift over the first quarter of 2024 as prices stabilize and interest rates decline to allow more potential purchasers to enter the market.

Compared to December of 2022, December 2023 came in with sales of 22% more homes and a median price increase of 5%. A solid year over year growth for the Hill.

Taking a step back and looking at the full year, sales volume fell 17% from 2022. At the same time, median price fell only 1%.

Inland: Sales and Prices Still Sliding

The last month of the year brought no relief for the Inland area. The number of homes sold continued to decline with sales down 2% compared to November. The median price was down for the second month, this time 5% for the month.

Looking at the same month last year, gives year over year sales volume down 2%,and a median price that’s down 2%. The final quarter of the year has been a rough adjustment period for the Inland area.

In the broader year over year view, the Inland area again fell, with sales volume down 11%. Median price was flat for the period with a tendency toward negative. It’s a transitional period which should resolve into a firmer picture by the spring of the year.

Beach=Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo
Harbor=Carson, Long Beach, San Pedro, Wilmington, Harbor City
PV Hill=Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates
Inland=Torrance, Lomita, Gardena

Photo by frank mckenna on Unsplash

Palos Verdes Homes Top the South Bay Market

Home sales on the Palos Verdes Peninsula chalked up an impressive set of statistics in October. Comparing the October 2023 sales to October of last year showed a stunning 26% increase in sales volume beside an equally impressive 11% increase in median price. At the opposite end of the spectrum the Beach Cities October sales volume fell 19% from 2022, while the median price dropped 14%.

Elsewhere across the Los Angeles South Bay volume and prices were mixed with the general trend leaning toward decreased number of homes sold and prices struggling to stay level with last month while often slipping below.

Year To Date Sales Continue to Drop

In between the highs and the lows real estate activity in the South Bay has been mixed for the months of August through October. While many commentators are cautiously hopeful, it must be noted that year to date comparisons continue to show significant declines in the number of homes sold, with an average drop of 18% from 2022 for the first 10 months of the year. Likewise, median prices are falling for the January through October time frame. For example, median prices on the Hill were up in October, but have fallen 4% year to date compared to last year. Similarly the Beach area median is down 3% and the Harbor area is off 2%.

Sales volume is clearly down. By this time in 2022 sales were at 6700 units versus 5500 this year. Many buyers have been “priced out of the market” and many sellers are resisting the idea of “prices going backward.” The result has been a lot of deals not being made.

Year to date, the deals that have been consummated are still generally at median prices above last year, however the most recent three months have shown at least half of sold homes required price reductions to make the sale. With winter setting in, we expect continued reductions in both the volume of sales and in the prices of sold homes.

Home Sales at the Beach Hit a Wall

Throughout the year real estate in the Beach Cities has maintained spotty growth. Sometimes median prices improved, sometimes sales volume. But, October brought a wall of red ink for the Beach. Month over month sales volume plummeted by 27%, while the median price dropped 5% from September when it was flat at $1.7M.

Year over year transaction volume dropped 19% from September of 2022. The median price fell 14% for the same period.

Looking at the year to date statistics showed more declines with sales volume for the first 10 months of 2023 coming in 16% below that of 2022. At the same time, the median price was off by 3%.

In prior downturns the Beach area has been among the last to respond to market negativity and one of the first to recover. If the pattern repeats, sales at the Beach will continue to show predominately negative numbers for the late fall and winter months. Most chroniclers project a return to positive market conditions in late 2025 or early 2026 in general.

Harbor Volume and Prices Turn Upward

Home sales in the Harbor area moved from all negative last month to mostly positive this month. Sales volume on a monthly basis jumped from 24% down in September to a 7% increase in October. Similarly, the month to month median price went from -1% to +1% in October.

Annually, the number of homes sold in the Harbor area increased by 6%, a significant change from having fallen 26% in September. The median price came in at $750K, up by 7%.

That’s only the second time this year the Harbor area median price has come up into the positive range when compared to 2022. Overall, the year to date median sits at $739K, 2% below last year’s number of $756K. Sales volume for the Harbor is off 20% year to date. The number of homes sold for the first 10 months is 2824, compared to 3535 in 2022.

Palos Verdes Homes Star in October Sales

Home sales on the Hill came in at 63 homes sold with a median price of just under $2M. Month over month that represented a 13% growth in sales volume and no measurable change in the median price.

On an annual basis October sales were up 26% over the same month in 2022. This year’s median price was up by 11% over last October.

While these numbers reflect impressive growth it’s important to remember that the number of transactions on the Palos Verdes peninsula is quite small, which results in some dramatic percentile shifts. For example, the annual percentage of change in the median price so far this year has ranged from a low of -29% to a high of 17%. By comparison, the Harbor area where monthly transactions number in the hundreds, has an annual range from a low of -11% to a high of 7%.

On a year to date basis, the Hill showed a more common face with the January through October sales volume down by 20% from 2022. During the same time frame median prices fell by 4%.

Inland Area Sales Volume Down, Prices Up

In a surprising turn of events, the Inland area has shown an increased median price for both the monthly and for the annual sales figures. The median price came in at $917K this October, which was 2% above the September median. On an annual basis, the median was up by 7% over the $860K of October 2022.

With 116 units sold for the month of October this year, the sales volume was 11% lower than it was this September. The monthly decline was even greater than the drop of 9% for the year over year comparison to last October.

Year to date, the Inland area has outperformed the balance of the South Bay on median price and on sales volume. For January through October there is no discernible change to the median price from 2022 to 2023. In the same time frame the sales dropped by 14%, the smallest decline of the local areas.

Beach=Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo
Harbor=Carson, Long Beach, San Pedro, Wilmington, Harbor City
PV Hill=Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates
Inland=Torrance, Lomita, Gardena

Photo by Julianne Takes Photos on Unsplash

Over A Third Of Homebuyers Paying Cash

In September, the share of homebuyers paying all cash was 34.1%. This is the highest it has been since the beginning of 2014, and an increase of 4.6% from September 2022. However, this doesn’t mean homes are more affordable; in fact, it’s the opposite.

While it’s true that a significantly higher share of buyers are paying all cash, there are much fewer sales overall. Total sales decreased by 23% over the past year. Compare this to a decrease of only 11% for all cash sales. Cash sales aren’t going up, rather sales overall are going down, and cash buyers are less affected.

The reason for this is high interest rates, since cash buyers don’t care what the interest rate is for a mortgage loan they aren’t getting. Interest rates fluctuate up and down on a daily basis, but rarely change by much at a time. But in this case, they hit a two decade high in September at 7.2 and then continued an upward trend into October, almost reaching 8%. As of last week, they had started to drop back down. Despite this decrease, with how erratic rates can be, that isn’t a sure sign that rates are now trending downward.

Photo by Andres Siimon on Unsplash

More: https://www.redfin.com/news/all-cash-homebuyers-september-2023/

South Bay Real Estate Struggles to Stay Afloat

The summer selling period for real estate in the South Bay showed mixed results for August and September. July was down across the board, but both the volume of sales and the median price was able to rebound in some areas. Notably, the Beach Cities come out of the third quarter with median prices up by 2% over last August, and up by 3% over September of 2022. That growth wasn’t enough to make up for earlier this year when median prices were down by as much as 17% in year over year sales.

Year To Date Prices Down Across the South Bay

Comparing the first nine months of 2022 to the same period in 2023 shows median prices at the Beach down 2%, the Harbor down 2%, the Hill down 8% and the Inland area down 1%. Similarly, the number of homes sold dropped at the Beach by 15%, the Harbor by 22%, the Hill by 23% and the Inland area by 14%. On average across the South Bay sales volume was off by 20%.

To some extent this validates the supply versus demand theory. With interest rates above 7%, many potential sellers (who are simultaneously buyers elsewhere) have simply changed their plans. They’ll wait for interest rates to abate before trying to move. The California Association of Realtors reports that the number of homes sold across the State has fallen for 27 consecutive months. Locally, a couple of neighborhoods have shown year over year improvement a couple of times, but overall, the last time sales volume was positive across the South Bay was September of 2021, 24 months ago.

Because there are so few homes available for buyers in a must move situation, those buyers are forced to buy despite high interest rates and despite elevated prices. Mortgage interest rates are currently testing the 8% number, and are expected to stay there into 2024. Most forecasts expect the number of sales to drop even further, possibly offset by an increase in renters and a corresponding increase in rental prices.

Things don’t happen very fast in the real estate market. We mentioned earlier that sales have been declining here for 24 months already. But, prices are still up and interest rates are still climbing. Currently, we expect to see a shift in the pattern this winter. As time goes on, more and more sellers will surrender to the inevitable and lower their asking price. Coupled with an increasing number of short sales and foreclosures, that will create the key metric the Federal Reserve is looking for to quell inflation. Most pundits are suggesting 2025-2026 for the bottom of the current down-trend and the beginning of a recovery.

A Home or a House?

Are you buying a home? Are you looking for a neighborhood that matches your personality? Are you looking for schools for your children? And nearby businesses for your family needs? That’s a home. If you’re looking at the appreciation rate for the zip code and how much you can leverage, that’s a house. The difference becomes important when the real estate market is rocky. When you’re buying a home, you’re looking at time over generations. Percentages on a loan mean little then because the property can be refinanced many times before it belongs to the family.

Are you looking for a house? Are you measuring the appreciation and the cost to income ratio? Are you looking for a distress sale and a rock-bottom price. Now is the time to put your cash away. Make no mistake—cash will be required! That’s not to say you can’t finance part of your investment, but count on having “skin in the game.” Your lender will require it. Over the next twelve months, accumulate as much cash as possible, and make your broker your best friend. You want a constant finger on where good deals are happening and you want to be one of the first on the scene. The “bottom of the market” is a hypothetical point. Your best deal can be anywhere in the area and any time in the downturn. It just has to meet your investment requirements!

Beach Cities Holding Strong Over 2022

The median price of homes sold in the Beach Cities was flat for August and September, following a 2% drop in July. Coming in at just under $1.7M the month over month price has been mostly down for the first three quarters of the year. Following a similar pattern, the month to month sales volume has fallen after a strong start in early spring.

In year to year comparison, both August and September have shown a modest improvement over the same months last year. Median prices were up 2% in August and 3% in September. This improvement comes on the tail of four straight month of declining median prices. Supporting the growth in median price, sales volume was up 23% in August and 20% in September. The positive numbers at the Beach are a welcome respite following 21 months of falling volume.

Looking at year to date 2023 versus 2022, median prices are down 2% and sales volume is down 15%.

Harbor Volume and Prices Slipping

September found home sales in the Harbor area fell in all measures. On a month to month basis, sales volume dropped 24%. At the same time, median prices fell 1% below the August median.

Year over year showed the number of homes sold down by 26% and the median price down by 3% from September of last year.

Year to date for the first three quarters of 2023 sales volume was off by 22% while median prices dropped 2%.

This is a pattern we expect to see repeated again and again during the coming two years. First the sales volume declines steeply, and median prices begin a downward trend. Then as the sales volume continues to decline, sellers begin to panic and the few active buyers tighten up on the terms of their offers. The cycle typically continues until falling commodity prices and weak employment numbers convince the Federal Reserve inflation is under control. Then it will start lowering the interest rate and allow markets to float free again.

Palos Verdes Transactions Volatile

The PV Peninsula came through September with positive numbers for the month, though the annual and year to date numbers suffered some slippage. Sales volume for September came in 14% above August and the median price was a respectable 15% above the prior month.

Compared to September of last year, home sales on the Hill fell by 7%. That decline was countered by a 5% increase in median price over the same month in 2022.

Like the rest of the South Bay, PV suffered downturns in the year to date statistics. The first three quarters of 2023 ended with a 23% downward slide in home sales volume, accompanied by an 8% fall in median price.

Inland Area Sales Volume Mixed, Prices Up

The Inland area performed surprisingly well in September. Home sales in the Inland area typically mirror those in the Harbor area. Last month brought a surprise when the median price climbed 6% above August. This positive note came despite a 12% drop in sales volume.

September of 2023 compared to September of 2022 brought even more surprise with a 5% increase in median price as well as a 17% jump in sales volume.

Year to date activity for the first nine months of 2023 compared to the same time frame in 2022 fell in line with the rest of the South Bay, Sales volume fell by 14% and median price by 1%.

Beach=Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo
Harbor=Carson, Long Beach, San Pedro, Wilmington, Harbor City
PV Hill=Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates
Inland=Torrance, Lomita, Gardena

Photo by Oliver Cole on Unsplash

Local Real Estate Meets the Inflation Fight

In August the South Bay real estate market showed some slowing of what has seemed a continuing slide into negative numbers. Closed transactions showed a partial recovery from the July report of declining sales and declining values, across both the past month and the past year.

August showed positive growth over July in sales volume except for transactions on PV Hill. Median prices compared to July were down except at the Harbor.

Annual statistics were similarly mixed with notable increases in sales at the Beach and Inland areas. Median prices compared to August of last year with modest increases in the Beach Cities and Harbor Area.

Beach Cities Show Strength in August

Sales volume at the Beach seemed surprisingly strong, however a look back in history reveals weaker than normal sales in July of this year and August of last year. The 127 units closed in August was much more in line with expectations, than the 91 sold in July or the 103 sold in August of 2022. Sales in a normal year would come in at about 125-135 units, showing that the Beach Cities are currently close to a normal number of transactions for the month.

Median prices came in negative compared to July, though less than a 1% drop. Last year’s weak sales led to an increase of 2% in median price this August, despite an overall downtrend for the year. Hypothetically, assuming the Federal Reserve policy of 2% growth, median price at the Beach should have been about $1.62M in August. As the market stabilizes from the pandemic, the median has steadily dropped from a high of $1.76M in April to the August actual of $1.67M..

Year to date transactions showed a continuing decline in sales volume (-19%) and median price (-4%) versus 2022. Likewise, sales volume was off 31% compared to the baseline year 2019. Median price is still coming in positive compared to the baseline, up 28% from 2019.

August Harbor Area Sales Climb

Looking at August versus July of this year shows Harbor area sales volume up a healthy 22%. While the month over month numbers are positive, sales are off 8% compared to the same month last year. For perspective, note that in 2019, the last normal year of business, there were 436 homes sold compared to 328 this August. Using that reference point, monthly sales are off by 25%.

Median price for last month was $751K, up 1% from July and up 4% over August of last year. Going back to 2019, the median was $575K, giving the current median price an increase of 32% over our baseline year. At the same time, the high median for this year was in June at $772K, and the lowest was $675K in February.

Year to date, the number of homes sold at the Harbor is down 22% from last year and likewise 22% from 2019.That decline in sales volume is driven by the increased median price which is up 32% compared to the first eight months of 2019. Being generally an entry level market, the Harbor area has shown a drop in sales every month of this year. Likewise, the year over year median price has dropped every month until August.

Palos Verdes Volume and Prices Drop

Sales and median prices were mixed everywhere in South Bay except for the PV Hill. All the statistics for August went down on the Hill. Month over month saw a drop in sales of 2% and decline in median price of 6%. Both are modest changes by comparison to most of the South Bay, but are indicative of the direction of the market in general.

Looking at August of last year compared to August of 2023 shows a dramatic decline of 36% in sales volume. Closed escrows dropped from 77 units last year to 49 this year. Annually, median prices dropped 6%, the largest drop of the four areas.

It’s important to note that in 2019, which being the most recent ‘normal’ year of business, August saw 90 units sold on the Palos Verdes peninsula. Monthly sales volume has dropped off by nearly 50% from the reference year.

Year to date through August shows sales volume down 25% from last year, with median prices falling by 10% over the eight month period. Comparing to 2019 year to date volume is off 21%, while median price comes in at 32% above the 2019 figure.

The disparity created during the pandemic is gradually leveling out as the year goes on. Palos Verdes median prices have fallen six out of eight months this year. The same has been true of the balance of homes sold in the South Bay.

Sales Up, Prices Down for Inland Area

From July to August transactions in the Inland area climbed 15%. Simultaneously, median prices fell by 2% for the month. January kicked off the year with a 16% increase in the median price. February saw that pricing promptly reverse and fall 14%. Since then sales volume has gradually dropped each month and median prices have shifted into a pattern of decline.

Year over year pricing numbers are nearly identical with a 15% jump in median price for January, followed by dropping prices every month since. Similarly, most of 2023 has seen falling sales for homes in the Inland area. So far, August has been the only month with growth in closed transactions.

Year to date statistics compared to 2022 have been much the same with the number of homes sold dropping by 17% and the median price down 2%. In keeping with the rest of the South Bay, comparisons to 2019 reflect sales falling 18% while the median price remains 32% above what it was before the pandemic.

Where Is the Real Estate Market Going?

The number of homes being sold has consistently fallen this year. Likewise, the median price of sold homes has generally been falling since the beginning of the year. The driver behind this has clearly been mortgage interest rates rising from under 3% to over 7% in a matter of months. The Federal Reserve managers have been very upfront about continuing these rates into the foreseeable future.

Most estimates state that about one third of potential buyers can no longer afford to continue with their purchase plans. We see a continued decline in the median price, as sellers find it impossible to sell at the price points reached during the pandemic. When ‘’time on market’ increases without a sale, sellers who ‘must sell’ will gradually lower prices.

Polls are showing those who aren’t compelled to sell are finding it hard to let go of mortgage interest rates below 5%. This reluctance, combined with the sliding median prices, will contribute to more stagnation in the market.

Photo by Carl Clark

How Long Does The Home-Selling Process Take?

The average time it takes to sell a home from listing with an agent to closing the sale is about 90 days. Many factors affect how long it takes to sell a home. These elements can include market conditions, buyer financing, the time of year, and the prep time to get a home ready for marketing.

A home that is in good condition, has good curb appeal, and is in a good location will attract buyers more quickly. Competitively pricing a home is key to having a reasonable time on the market. A cash buyer and one who is willing to buy a home in as-is condition can expedite the closing time.

Once an offer is accepted, the average closing time will be 30 to 45 days. The buyer’s loan is processed during this time along with the lender obtaining an appraisal. Property inspections also occur during the closing process. The title and escrow companies will then coordinate the signing of all the final documents, collect the buyer’s closing funds and finalize the settlement statements so the transaction can close.

Photo by Gaining Visuals on Unsplash

Market Stalled By High Interest Rates

As of August 2023, interest rates are somewhere around 7%, possibly higher. While this isn’t astronomically high — they have historically been over 10% — it’s too high for current homeowners to want to exchange their homes. This is because 92% of current homeowners with a mortgage have an interest rate below 6%. Almost a quarter even have locked in an interest rate below 3%.

High home prices are actually somewhat helping current homeowners, since the price boost increases their equity. Prices have increased 14% in the past two years, which results in approximately $86,000 in equity over that time period. However, this may not be enough to offset the increased mortgage costs, especially for those with very low interest rates. Assuming a mortgage of $500,000 and a current interest rate of 3%, a new purchase with the same loan amount would result in a $1,200 increase in mortgage payments per month.

Normally, when demand is low like this, supply is high. This isn’t the case right now. Previously, we would have been able to blame declining construction due to increased construction costs. That’s no longer the case, though, as construction has largely, though not completely, recovered. It may even be simple lack of demand that is the final obstacle to a full recovery for construction. To see the real problem, remember which group we’re talking about — current homeowners. These are the same people who would be selling to buy a new home. If they’re not willing to buy in the current mortgage climate, they’re not selling either.

Photo by Adrian N on Unsplash

More: https://journal.firsttuesday.us/todays-homeowners-are-stuck-on-yesterdays-rates/91951/

Home Financing Options For Struggling Teachers

The share of teachers able to afford homes near where they teach is dwindling rapidly. This year, teachers can afford only 12% of homes within 20 miles of their schools. This is a decrease from 17% last year. In 2019, before the pandemic, they could afford 30% of homes in their school’s area. Fortunately, there are options to help teachers.

The Department of Housing and Urban Development (HUD) is sponsoring a program called Good Neighbor Next Door, which sells homes in revitalized areas to certain government workers at half the listing price. This program is available to pre-K through 12 teachers as well as law enforcement officers and firefighters. Some of Fannie Mae’s programs, while not specifically aimed at teachers, have qualifications that teachers frequently are able to meet.

In addition to federal programs, there are also state and private programs to help teachers. California created the School Teacher and Employee program back in 2018. This specific program is discontinued, but is now folded into their MyHome program, opening it up to more people. The private program Homes for Heroes provides a 0.7% rebate on home purchases made through the organization’s specialists. It is available to firefighters, EMS, law enforcement, military, healthcare professionals, and teachers.

Photo by Kenny Eliason on Unsplash

More: https://finance.yahoo.com/news/teachers-are-struggling-to-buy-homes–heres-where-to-turn-for-help-202043847.html

Low Inventory Drives Up Share Of Expensive Homes

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.

Photo by Miikka A. on Unsplash

More: https://markets.businessinsider.com/news/commodities/housing-market-outlook-home-prices-value-million-inventory-finance-mortgage-2023-8

Millennials Are No Longer The Largest Contingent Of Homebuyers

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.

Photo by Wade Austin Ellis on Unsplash

More: https://www.realtor.com/news/trends/millennials-are-losing-the-home-buying-edge-to-baby-boomers/

Another Federal Funds Rate Increase Expected This Fall

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.

Photo by Etienne Martin on Unsplash

More: https://www.usatoday.com/story/money/2023/07/26/fed-interest-rate-hike-live-updates/70463418007/

West Coast Luxury Home Prices Are Dropping

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.

Photo by Daniel Barnes on Unsplash

More: https://investors.redfin.com/news-events/press-releases/detail/946/luxury-home-prices-post-double-digit-drops-in-the-bay-area

2023 Home Sales Volume Below Pre-Covid Levels!

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.

Photo by Sebastien Gabriel on Unsplash