Millennials currently form the largest cohort of homebuyers, and have done so for about a decade. That means the places where millennials are looking are probably going to be the hottest spots overall. By looking at mortgage data, LendingTree analyzed the top metro areas where millennials are considering buying. Note that this doesn’t include full cash sales since it’s derived from mortgage data, and LendingTree only has access to mortgage data for users of their platform.
LendingTree found that millennials make up the largest share of homebuyers in all 50 of the largest metros, and are a majority in 37 of them. The top metro area is San Jose, CA with 63.57% of mortgage offers going to millennials. The remaining top 10 are Denver, CO; Boston, MA; Seattle, WA; Austin, TX; San Francisco, CA; New York, NY; San Diego, CA; Los Angeles, CA; and Washington, DC. Narrowly missing the top 10 is Pittsburgh, PA, only a hundredth of a percent below Washington, DC’s 56.35%. But really, millennials are buying everywhere — not a single metro has a millennial homebuyer share below 40%, the lowest being Las Vegas, NV at 41.92%.
The housing market has its ups and downs, but it’s a relatively resilient business. There’s almost always at least one reason for some segment of the population to sell, even if the economy is looking shaky. However, interest rates definitely aren’t one of them, since 93% of homeowners already have a mortgage interest rate below the current average. But again, that doesn’t mean there aren’t other reasons to sell.
There are plenty of reasons, in fact. The five most common reasons to sell right now only account for 62% of sales as a whole. Only one accounts for more than a fifth of sales, which is wanting to move closer to loved ones, the reason for 21% of sellers. There are two reasons cited by 11% of sellers each, retirement and the neighborhood becoming less desirable. Upsizing accounts for 10% of sales, and 9% say that the structure of the household changed.
With home prices having skyrocketed and now starting to slow, many homebuyers are curious whether it’s a good time to get a home equity loan. In a survey of 1000 homeowners by MeridianLink, 21% stated they were considering getting a home equity loan at some point during the year, compared to just 8% last year. However, a little under half — 48% — aren’t even confident they know what a home equity loan is, or definitely don’t know, which encompasses 13% of respondents. Rising prices have, in fact, increased total equity by 15.8%. But that’s not the only thing you need to know.
The most important factor to keep in mind is whether it’s actually a home equity loan you’re interested in, or the similar but distinct home equity line of credit (HELOC). The answer will depend what you need the funds for and how quickly you want to repay it. A home equity loan has a fixed interest rate that is locked when you take out the loan. They’re relatively safe if you have good credit, but with current interest rates being high, they’re most useful for short-term uses, such as funding home improvement projects with a solid return on investment. HELOCs, on the other hand, have a variable interest rate that is based on the benchmark rate. The benchmark rate is currently still increasing, but that should change in the not-too-distant future. Therefore, a HELOC can be useful if you want to take advantage of high equity now and aren’t particularly worried about paying it off any time soon.
You may be surprised to find that there are actually far more single women who own homes than single men who own homes. Given that the wage gap is still a persistent problem — women earn 83 cents per dollar that men earn, on average — it doesn’t seem like this would be the case. But single women own over 2 million more homes than single men. The trend exists nationwide; there are only two states where single men own more homes than single women, North Dakota and South Dakota. So what’s the reason for this?
There are a few different reasons. It’s true that there are, in fact, more women than men in the US, but this alone doesn’t account for the vast difference. A significant factor is life expectancy. It’s five years higher for women than men, 81 years versus 76 years, for a variety of reasons that we won’t get into here. The result of this is that many homes owned by women are owned by widows who outlived their late husbands. Another reason is that women are more motivated to find success, as a result of historical — and continuing — discrimination. They’re more likely to seek to purchase than rent, even if they’re equally able to afford it. This is especially true among younger women. There are also more college educated women than men, which may lead them to make better financial decisions.
You’re probably aware that the Federal Reserve has been repeatedly hiking up interest rates. The idea behind this anti-inflationary measure is that increasing interest rates will result in lower consumer spending, which will force prices down to recover demand. The Fed’s eighth and most recent benchmark rate increase was on February 1st, just a couple days ago. However, this increase was the lowest of the series — only 0.25 percentage points, compared to prior increases of 0.75 or 0.5 percentage points. This is because we’re starting to see the desired result, decreases in inflation. It’s not enough to stop cold turkey, but it’s enough to reduce the pressure on interest rates.
But what else has the increasing benchmark rate done, besides reduce inflation? Well, obviously it has increased interest rates. This includes credit card rates, auto loan rates, and some student loan rates. Up until recently, it has also included mortgage rates. But mortgage rates are only indirectly affected by the benchmark rate, and they’re actually starting to decrease now. Another rate indirectly affected by benchmark rates is the savings rate. You’ll start to earn more money from savings accounts and certificates of deposit. It’s important to note, though, that with inflation being as high as it is right now, it has already entirely negated the effect of this savings over time, so you’ll have to save for quite some time for it to matter.
Much of the slow progress of zoning reform can be attributed to Not-in-my-backyard advocates, or NIMBYs for short. This refers to the homeowners that are resistant to reform because they believe it will decrease their home’s value, thus reducing their future sale profit. One big target for NIMBYs is low-income housing. It’s true that low-income housing is probably less valuable itself than the NIMBYs’ homes; however, to assume that it would drag down the value of nearby homes is simply inaccurate.
In fact, the addition of low-income housing actually increases the value of mid- and high-tier housing within a half mile radius by about 4%. There are a few different reasons for this. First, low-income housing in mid- or high-income areas generally also translates to multi-family residences. Higher density housing means an uptick in population density, which also usually increases home values. In addition, new multi-family housing construction is most often replacing either tear-downs or vacant lots. The area’s average value would actually increase just with that new construction alone, without any change to nearby home values. Finally, in areas that are already experiencing price growth, low-income housing further accelerates it by increasing existing high demand in that area.
The housing shortage we’re currently experiencing has been attributed in large part to lack of construction. There’s a lot more to the story, though. First of all, the slow construction doesn’t even account for all of our housing shortage — there are other factors such as increasing population, a rapidly changing housing market, and vacant homes not for sale or rent. As far as construction, the problem isn’t merely a lack of it. It’s true that construction dropped significantly during the pandemic, but it’s mostly recovered now. The actual issue is that the homes being constructed are frequently not adding additional units.
The statistics you see when looking at construction starts account for all types of construction. However, much of the construction that’s occurring right now isn’t on vacant land. In 2021, 76% of builders reported that the number of available lots is low to very low. In California, a lot of this has to do with zoning laws. Many areas aren’t zoned for multi-family residences or even for residences at all. Even in areas that allow condos or apartment buildings, single-family residences (SFRs) are in higher demand in California. Building SFRs in the right place is also difficult. 28% of SFR construction is reliant on lots called infill sites. While these are vacant land, which is good, they’re in areas that already have a high density of housing and are less in need of additional construction. A further 20% of SFR construction starts come after teardowns, merely replacing one SFR with another SFR.
One of the statistics used to track health of the rental market is Fair Market Rent, or FMR. By the name alone, one might think FMR is a normative measure that suggests what rent prices should be. Of course, such a measurement would have to take into account construction costs and home prices, but it would also have to take into account the tenant’s income. As a renter, you may be looking for rent prices at or below FMR thinking anything above that is simply a bad deal. But is it actually fair to anyone? Is it even a normative measure at all?
The first question that needs to be answered, though, is: What really is FMR? Well, at its core, it’s a series of vague estimates. The Department of Housing and Urban Development (HUD) calculates FMR on a per-metro basis for five separate categories of homes based on number of bedrooms. Homes with more than 4 bedrooms are excluded entirely. In reality, though, only one category is actually calculated. This is the category for the average home size of 2 bedrooms. The median rent price of 2 bedroom homes, excluding outliers, is averaged over a multi-year period, then the value is multiplied by various ratios to determine FMR for homes of different bedroom counts. Note that this calculation doesn’t factor in either construction costs or income, just rent price, although the price itself generally is indirectly related to constructed costs. This means that if it’s fair to anyone at all, it can only possibly be whoever bought the home. So, no, looking for a rental at or below FMR has no bearing on whether it’s fair to the tenant.
Does FMR perhaps still have some use, though? Though it’s a multi-year average, it’s based on actual rent prices, so maybe it be used to estimate current rent values. It’s a decent assumption, but unfortunately, it’s not actually very good at estimating rent prices. If you’re looking at FMR when considering whether to move to an area, don’t be surprised if your actual rent is far different, especially for multi-bedroom homes. Multi-year averages can’t very easily take into account economic cycles, and broad examinations of metro areas can significantly skew the numbers. Another issue the calculation faces is the notion of rent control. Rent control doesn’t generally happen in an entire metro, so the prices of rent-controlled units are significantly more likely to be taken as outliers and completely dropped. Even if they aren’t dropped, they will skew the median.
For a specific example, let’s take the local area — the Los Angeles metro. This metro area is rather large, and includes multiple cities of highly varied income levels. Despite this, the FMR for the Los Angeles metro is actually lower in every single category than that of the City of Los Angeles. The LA metro FMR for a studio is $1631, quite a bit lower than than actual median rent price for a studio in Los Angeles of $2100, between mid-June and mid-December. The difference only gets larger the bigger the home. The metro’s FMR for 4 bedroom homes is $3377. But the actual median rent of a 4+ bedroom house in LA is $8995, over 2.5 times as much. Considering homes larger than 4 bedrooms to be outliers, as the FMR criteria do, doesn’t do much to help the case for FMR, as the actual median rent is still $7900. The disparity is even greater for higher income regions of the metro, such as the Beach Cities — Manhattan Beach, Hermosa Beach, Redondo Beach, and El Segundo — with a studio median of $2495 and a 4+ bedroom median of $9175. This suggests that high-income units are being excluded as outliers, which isn’t particularly useful if you’re looking to rent in a place such as Manhattan Beach.
Why is FMR lower even for smaller homes, though? Well, there may be a valid reason for that. The actual median data presented here is calculated using information from a Multiple Listing Service (MLS), which is a service used by real estate agents to upload and search listings. Because this is an agent service, only properties listed by an agent will appear in the list. For lower income rental properties, the owner is less likely to use an agent, because they may feel it’s not worth the expense with a small revenue. But the HUD can access that information, which could drag the median down for smaller homes. So, the FMR may be useful to a tenant planning to rent a low-income property. However, remember that the studio FMR isn’t directly assessed, but rather calculated as a ratio of 2-bedroom FMR, so if FMR is more consistent with real values for studio rentals, this is at least partially coincidental and could mean either the 2-bedroom FMR is low or the ratio is off. Moreover, off-market rentals do very little to explain any disparity for larger homes, and especially not such a large disparity.
Data from December 2022 shows us that home prices in California are unquestionably going back down. December 2022’s median home price of $774,580 was just barely below November 2022’s median price, only by 0.4%. This isn’t necessarily a trend, but what is a trend is that it’s 2.8% below prices at the end of 2021. Home prices are down in every major region of California, and across both single-family residences and condos. However, all regions except for the San Francisco Bay Area had at least one county experience price growth.
The far northern regions of California had the most notable shifts. Year-over-year, prices are down a whopping 41.8% in Lassen County. Granted, this isn’t a massive dollar value given that Lassen County is the least expensive county in the state, with a median home price of just $170,000 in December 2022. Even so, it was actually the third cheapest at the end of 2021 — both Del Norte County and Siskiyou County were cheaper in December 2021, but both actually experienced price growth this past year. In fact, Del Norte was the county that had the most significant price growth at 13.8%. Del Norte and Siskiyou counties both border Oregon, and Lassen County is just south of Modoc County, which also borders Oregon but is not included in the rankings.
Forbes has compiled a list of its top 10 California cities to live in, aggregating data from various different sources. Their methodology includes comparisons of population, median home price, cost of living, personal income per capita, unemployment, community well-being, and crime rate. The community well-being score is itself an aggregate score taken from the ShareCare Community Well-Being Index. Note that all of the criteria used by Forbes are objective measures focused on health and economic stability; they do not factor in self-reported happiness of residents. According to Forbes, the top 10 California cities to live in are Sacramento, San Diego, San Francisco, Los Angeles, San Jose, Vallejo, Oxnard, Modesto, Fresno, and Bakersfield.
It’s unclear whether Forbes considers high or low population to be preferable, but the measurement is still useful in calculating crime rate, which Forbes provides in raw numbers as opposed to in proportion to population. Forbes is also only reporting on violent crime; nonviolent crime is far more common. California has a rather high violent crime rate in general compared to the US average of approximately 0.4%. But San Diego, the #2 city in Forbes’ list, has a violent crime rate lower than the national average at 0.38%. The city with the lowest median home price is #10 on the list, Bakersfield, whose other primary attraction is also one of its most detested qualities — it’s a major business hub, and therefore also a major traffic hub. Interestingly, the top city, Sacramento, holds a rather middle-of-the-road position in all categories, instead of being particularly strong or weak in any one area.
Home sales volume tends to follow a similar seasonal pattern each year. It most often peaks in the middle of the year, falls off rapidly once winter arrives, and is at its lowest point the following January before restarting the cycle. The pandemic didn’t completely upset the pattern, but there were some noticeable shifts.
2020 could actually be described as having two cycles — one in the first quarter and one during the rest of the year. The first cycle peaked just before lockdowns in March, while the seasonal variance was on its upswing, before crashing down to the lowest point of the year in May. The peak of the second cycle was towards the end of the year. Home sales predictably shot up as the year entered June, but then continued their slight upward progression. The second cycle did reach bottom in January, as expected, but the low was significantly higher than prior years, as pent-up demand was still high.
The first half of 2021 seemed fairly normal. Home sales volume increased fairly steadily until the summer months. The peak was higher than normal, likely for the same reason the year started at a higher point. But the decline in the latter half of the year was quite a bit sharper than usual. The trough in January was lower than that in the beginning of the year, despite coming down from a higher point.
The shape of 2022 was rather odd. Like 2020, the peak was actually in March. But this time, it wasn’t because of a pandemic. It was the realization that we’re at the start of a downward cycle in the housing market overall. There was no steep increase just before June; it just continued to decline, though there was a minor upward bump later in the summer. The data is not yet available for December or January, but considering November’s home sales volume was already lower than the trough in January 2019 — the most recent trough of a normal cycle as well as the lowest value during a normal cycle in the past decade — and sales are continuing to decline, one can expect the numbers will be quite low.
If you’re just looking at the raw numbers, California looks pretty good as far as homeowners living free and clear, that is, having paid off their mortgage or never having had one. 2.4 million households belong to this category, third in the nation, just below Texas at 2.9 million and Florida and 2.5 million, and followed by New York at 1.7 million and Pennsylvania and 1.5 million.
This sounds great, until you realize that the top five most populous states are — you guessed it — California, Texas, Florida, New York, and Pennsylvania. While there are a lot of people living free and clear in California, as far as percentage of homeowners, it’s near the bottom of the barrel at just 32%. Only four states are faring worse, Colorado and Utah at 30%, Maryland at 28%, and D.C. at 24%. The top five states for share of free and clear homeowners are West Virginia at 53%, Mississippi at 51%, North Dakota and New Mexico at 47%, and Louisiana at 46%. However, Louisiana is the only one of these states in the top 25 of population. Compared to California, both Texas and Florida are actually doing very well, ranked at number 11 and 12 respectively in share of free and clear homeowners.
Financial technology company SmartAsset has used federal and local data to compile a list of what they consider the happiest cities in the US. SmartAsset ranked the largest 165 cities according to 13 different metrics, focusing on personal finance, well-being, and quality of life. Among the top 50 cities, 17 of them are in California, just slightly over a third.
Not only that, but California actually boasts the city with the number 1 spot, Sunnyvale. Five other California cities are in the top 10; these are Fremont at #4, Roseville at #7, San Jose at #8, Santa Clarita at #9, and Irvine at #10. Of course, since these are aggregate scores, the cities in the top 50 don’t necessarily perform well in every category. For example, even though Hayward, CA is ranked a rather respectable #17, it ranks among the lowest in finance related categories. The four top 10 cities not in California are Arlington, VA at #2; Bellevue, WA at #3; Frisco, TX at #5; and Plano, TX at #6.
A build-to-rent community is a community in which single-family homes are build solely for the purpose of renting them out. It isn’t a new concept, but it’s been under the radar for quite some time, comprising only 3% of the single-family residence (SFR) market. As just one of many changes in the type of demand brought in the wake of the pandemic, that number is now up to 12%.
Many people who transitioned to work-from-home needed more space for a home office. That meant looking for a larger home. For renters, that often wasn’t possible, since they were priced out of the homebuying market. But what if they could rent the type of home people normally would buy? In a build-to-rent community, they can. The SFRs in such communities have significantly more space than apartment units, and while they are certainly more expensive to rent than apartment units, rising home prices meant renters definitely couldn’t buy if they weren’t able to before. It’s definitely possible to find SFRs that are not in a build-to-rent community, but looking for such a community guarantees it, and also comes with community amenities.
According to a report from real estate brokerage Redfin, the share of home sales that were paid fully in cash reached 31.9% as of October 2022. This is the highest value since 2014. It’s been steadily increasing since April 2020 when it immediately plummeted down to 20.1% due to lockdowns, a record low. At the time, the general trend was downward, though the share of cash sales went up and down in cycles, and continues to do so. Now, the trendline is going back up.
There are actually a couple of different reasons for the shift, depending when you’re talking about. After the lockdowns, mortgage rates had a period of extreme lows, followed by extreme highs after federal intervention. Finally interest rates are starting to fall back down, but throughout all of this, the cash sale share was still trending generally upwards, albeit with some dips as usual. It’s not that mortgage rates don’t influence share of cash sales. They can actually influence it quite a bit, but at least since the pandemic, in the same direction for either extreme. In the first year since the pandemic, cash sale share shot up rapidly because low interest rates increased demand, which in turn increased the attractiveness of cash offers. Once interest rates skyrocketed during a time of already high prices, lower-income earners were effectively kicked out of the running entirely. This left wealthy buyers who, of course, didn’t want a high interest rate mortgage if they could avoid it, so they paid cash because they had the means to do so and it was the best financial decision for them.
The California Department of Insurance (CDI) has provided the latest update to their resources on the effect of wildfires on insurance. Statewide data on policy counts is now available for 2021, and county-level and zip code-level multi-year data has been updated to 2021, going back to 2015. You can also view archives of older statewide data up to 2015. In addition to policy counts, the CDI has compiled updated info on coverage limits, premiums, losses, and claims.
Also available are additional resources for those wanting to know their wildfire risk or looking for insurance. A report with a large amount of data, including but not limited to coverage amounts and losses for each zip code, is available for download under the “SB 824 Wildfire Risk Information” header of the CDI’s Rate Filings page. This data is from 2018-2019. There is also a list of insurance companies offering incentives for wildfire safety, last updated in November, as well as a searchable list of insurance companies and real estate agents that work with high-risk areas.
When the lockdowns hit, homeowners very quickly realized what their homes were lacking in terms of comfortably getting through the lockdown period. The result was a shift in which home features were most in demand. People began to favor more outdoor space so they weren’t stuck inside, home amenities, and variable living space, among other things. While the virus certainly hasn’t disappeared, lockdowns are no longer in effect, masks are no longer mandatory in most cases, and people are gathering together more. But the lockdown-era trend shifts continue to be apparent.
Backyards are a popular feature, with 22% of listings highlighting them. Patios and pools are also the focus of an increasing amount of marketing, with 13% of listings mentioning patios and 11% calling attention to the pool. Home gyms are also increasing in popularity. Of course, this doesn’t prove that buyers want more outdoor space and home amenities, but it does say that’s what agents think buyers are looking for. The same is true of multipurpose spaces. The ideal kitchen now includes a kitchen island, which has the flexibility to be used as a dining area, workspace, or entertainment table. It’s even extending to the way the home is organized — open-concept living had been popular for a while, but it’s now fallen out of favor as people realized they had no private or quiet spaces with everyone at home at the same time. The motivation for this shift is no longer present, but the experience seems to have changed peoples’ minds about open-concept living.
Home prices have begun their decline after a period of incredibly high prices. More regions of California are following suit. In October, 22 of the 51 tracked counties (California has 58 counties) recorded a decline in median sale price from the prior year. In November, this increased to 33 counties. Only two broad regions of California experienced price growth from the prior year, the Central Coast, with an increase of a mere 0.1%, and the Inland Empire, with a 2.1% increase. In all regions, prices are down from October to November. Prices are declining for both single-family residences and condos.
The largest changes from November 2021 to November 2022 occurred in Napa County, an increase of 29.4%, and Mariposa county, a decrease of 27.2%. The biggest positive and negative changes between October and November 2022 occurred in Tehama County, an increase of 10.8%, and Santa Barbara County, a decrease of 28.3%. Home prices are not the only thing declining. Home sales volume has also dropped precipitously since November 2021, decreasing in every single county except Mendocino County, which saw an increase of 4.5%. Mendocino is also one of the counties in which prices are still increasing. In most counties, the decrease in sales volume hovered around 40-50%, though some were higher or lower. The decrease reached as much as 68.9% in San Benito County, but was only 12.5% in Glenn County.
Unlike office spaces, the industrial sector wasn’t particularly negatively affected by the pandemic. People still needed warehouses and manufacturing sites, perhaps even more than before. Indeed, the vacancy rate actually started dropping since the lockdowns, the beginning of which was the peak point in recent years. In most areas of Southern California, the vacancy rate for industrial leases reached its lowest point in the first half of this year. Since then, vacancy rates are starting to edge back up, but are still far below the pre-pandemic peak.
In San Diego County, the industrial vacancy rate increased from 2.00% to 2.56% between Q2 of 2022 and Q3 of 2022. The peak was just above 5% in Q2 2020. In Los Angeles County, the increase was from 1.11% to 1.68%, with a peak of 3.17% at the start of the pandemic. Despite the Inland Empire’s very low vacancy rate of 0.88%, it’s actually higher than the Q1 and Q2 numbers. But it’s nothing compared to the pre-pandemic vacancy rate of 3.92%. Orange County is an exception — the industrial vacancy rate has actually continued to decrease, from 1.23% in Q2 2022 to 1.05% in Q3 2022. Its peak was also later, in Q3 2020, at which point it was 3.1%.
November saw the number of homes sold in the South Bay fall 12% from October totals. Sales volume has declined in seven of the eleven months on a month to month basis since the beginning of the year. Sales tipped up a modest 2% on Palos Verdes peninsula, while volume dropped 7% at the Harbor, 18% at the Beach and 24% in the Inland area.
Year over year sales look even more depressed with a 45% drop from 2021 sales across the South Bay. The Beach Cities led the plunge with a 50% fall, followed by the Harbor area at 46%. Palos Verdes and the Inland area brought up the rear with 35% and 41% respectively. The falloff in sales began with a 17% drop in January and has been increasingly negative since.
Because 2020 and 2021 were both significantly impacted by the coronavirus pandemic and the governmental response to it, 2019 is the most recent year with a normal business pattern. Comparing 2022 sales volume with 2019 provides the truest measure of the current recession. Overall, for the first 11 months of the year, the South Bay has experienced a 9% decline in sales compared to 2019.
Through the month of November, sales on the PV Hill have fared the best, showing a modest drop of 3% compared to the same time period in 2019. The Harbor and Inland areas which generally are entry level for the South Bay both fell back 8% for the same period. So far this year the Beach Area has suffered the largest declines with an 18% drop in number of sales versus 2019.
Annual Sales Dollars Off By $3.2 Billion
Comparing year-to-date sales of homes in the Los Angeles South Bay shows a drop in dollar value from 2021 to 2022 of over $3.2 billion. That represents an over-all decline of 22% in total dollars sold from the same 11-month period last year.
The Beach area has been the hardest hit so far with a drop of 34%. The PV Hill has dropped 29%, while the Harbor area has fallen 22%. The Inland area fared the best, only down 19% for the same 11 months.
On a month to month basis, the decline in sales accelerated from 7% in October to 18% in November. The Inland area which had flipped to a positive gain in October plummeted by 30% in November. Similarly the Beach which had been up 7% in October fell 25% in November. The Harbor and Hill areas were off by 8% and 11% respectively.
At this point year to date South Bay sales dollars for 2022 still exceed the total for 2019 by 22%. We expect the end of year numbers to be positive. However, with monthly sales figures shrinking by 30%-40%, we project 2023 to fall below 2019.
Median Price Shows Mixed Results
Statistically speaking, the Beach cities median price fell 8% from October to November. The reality is that the median in October was unusually high. Multiple sales of Strand property drove the median up 14% that month. The blue line on the chart below shows the one month blip and median prices dropping back to a steeper downward pace in November.
Palos Verdes was flat compared to the previous month. This is a rare event as one can see by the erratic yellow line on the chart. Because the physical area is smaller than the other geographical areas, the number of sales is smaller, and mathematically the sample size is smaller. Thus one or two outlier sales can create wide swings in the chart.
Similar to the Beach area, the median price dropped 7% in the Inland area. This decline follows two months of no change, preceded by three months of month over month negative median prices.
At the same time the Harbor area experienced a month to month increase of 2% in the median price. Researching this anomaly we discovered 11 new construction sales in Carson had been accumulated and posted simultaneously by the developer. It’s worth noting that Harbor area median prices have also been elevated to some extent by the new construction on Western Avenue in San Pedro.
From a year over year perspective, November median prices continued to fall in comparison to those of November 2021. The Harbor and PV Hill areas were down 5% and 2%, respectively. Median price in the Inland area dropped from positive 6% in October to negative .05% in November. The Beach cities remained positive with growth of 1% in November. That being in contrast to an unexpected growth of 20% last month caused by the sale of multiple Strand properties in Manhattan Beach.
Despite increasingly deep reductions in sales volume and in median price throughout this year, the median is still higher than it was in 2019. Palos Verdes home owners have fared the best with the current median price 40% above the November 2019 median. The Harbor area is still 34% higher and the Beach cities still maintain a 31% advantage. The Inland area has proven to be relatively stable throughout the pandemic and currently the median price is 27% above that of 2019 for the same 11 month period.
Year End Projection Updated
We’ve been comparing 2022 to 2019 all year because real estate sales during the height of the pandemic were so out of the ordinary, regular year over year comparisons yielded untenable results. The chart below depicts the current year total sales for the South Bay compared to sales from 2019.
Tracking the blue line, one can see where sales dropped below 2019 values in August, recovered in September, then slipped below again in October and November. Assuming the decline continues at the same rate, we are forecasting the December sales to drop another $75 million, or so.
The end of the year would then reflect accumulated sales of approximately $9.4 billion. That would mean 2022 total dollar sales come in at $1.4 billion above the $8 billion total dollar value sold in 2019. Across the South Bay that would be approximately an 18% increase.
Broken out by community, we forecast total dollars sold in the Beach cities to be 6% above 2019, followed by the Inland area with a 20% increase. Harbor comes in next with a 21% increase and the PV Hill with a 35% increase.
At a Glance
As 2022 draws to a close we find the final numbers for both sales volume and median price show the year to be rapidly declining from the final figures for 2021. However, the totals all remain positive. We expect December to continue the trend downward, though the year should end on a positive note.
With the number of units sold decreasing every month by 35% to 50%, and the median price now falling, 2023 should be firmly in the grip of the recession by mid-year.
Disclosures:
The areas are: Beach: comprises the cities of El Segundo, Manhattan Beach, Hermosa Beach and Redondo Beach; PV Hill: comprises the cities of Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills and Rolling Hills Estates; Harbor: comprises the cities of San Pedro, Long Beach, Wilmington, Harbor City and Carson; Inland: comprises the cities of Torrance, Gardena and Lomita.
