Inventory remains tight and homes are moving at a fast clip. You have one weekend to see properties before offers are due, reviewed and accepted typically at the beginning of the week.
Inventory remains tight and homes are moving at a fast clip. You have one weekend to see properties before offers are due, reviewed and accepted typically at the beginning of the week.
Over the past few months, we have seen an increase of homes on the market in Redondo Beach. Properties are sitting for a longer amount of time. There aren’t as many buyers clamoring over listings, creating bidding wars. And sellers are accepting offers that a year ago they wouldn’t have looked twice at, including contingent offers. All of these factors reflect the slow down that has been expected and seemed imminent, and quite frankly inevitable.
There is definitely a change in the air. Buyers are having an attitude adjustment. They aren’t exhibiting the anxiety that was the driving force behind the real estate market these last five years. Now, they seem to be taking their time and are not rushing to make an offer on a property the minute they see it.
This all seems to indicate that we are on a “turn” in the market. We’re shifting from a seller’s market to supposedly a balanced market where neither buyer or seller has the upper hand. Last go round, we skipped the balanced market altogether. We went from the buyer’s market (2010 – 2012) right into a seller’s market. This time I think it will be a slower transition.
Rising interest rates will also contribute to this market slowdown. Buyers may take pause as they adjust to new rates. If the rates climb high enough, it should put downward pressure on pricing as well which should ultimately propel housing inventory even higher.
If this is a true balanced market, then there will be more negotiating and more concessions. Buyers won’t have to go above and beyond to get a deal done, but sellers will still get a fair price for their homes. I will continue to monitor the market and keep you apprised of any more changes in housing inventory and the health of the market.
Here is a market update for the three Beach Cities, Redondo Beach, Manhattan Beach, and Hermosa Beach. The month of September had more inventory than any month in the past five years (excluding the summer months of 2016). September also had the lowest volume in sales as compared to any month in the past few years.
This slow down – of more properties sitting on the market and less properties being sold – can be explained by a few changes in the marketplace. First, buyers don’t have the same urgency to make a purchase. They have demonstrated more patience and are less likely to make an offer on a property that is less desirable. They are no longer submitting offers on every or any property they see. They are taking their time. Second, some sellers have priced their homes too high. With buyers coming to their senses, sellers can’t put outrageous price tags on properties any longer and expect them to sell immediately. Third, the market has been hit with properties that are less than desirable. These homes, that are impacted negatively by location or some other odd property feature, sit longer on the market as well.
What does this mean or buyers and sellers?
Buyers have an opportunity to get a good deal. They can afford to negotiate harder and demand more terms of a sellers. Case in point, more contingent offers are getting accepted. During the height of the market, a contingent offer was dead in the water. There were too many all cash or high down payment offers in play that a seller didn’t have to entertain a buyer who has to sell something first before they can buy.
Sellers need to make sure their homes are show-ready in order to garner as much money as possible for their properties. Buyers must have a strong emotional response to a property in order for them to make a strong offer. Sellers also should employ the proper pricing strategy or risk sitting on the market.
If you have any questions about this market update or need assistance buying or selling real estate, you can reach me at 310.428.8804
If you ask agents in the South Bay what’s going on with the market, you get some puzzled looks.
The market that was red hot, all of a sudden is not. And it’s hard to put a finger on what is happening, whether it’s an anomaly or a sign of a downtrend or if we’re just plateauing.
I personally think we’re stuttering, but it may be indicative of a few environmental and economic conditions that may be temporary.
1. The volatility of the stock market was undeniably sobering. Whether people lost money or were just fearful that they were going to lose money, it put a damper on buyer mentality. Buyers may have pulled back, as they do, when they don’t feel flush with cash. As the market settles down, this feeling goes away and buyers may resume their hunger for purchasing real estate.
2. We all know that a great part of the southern California market has been propelled by Chinese money. And as of late, the exchange rate has shifted in favor of the USD. Costing them 10% more, the Chinese buyers seem to have pulled off from their purchasing frenzy… for now. On top of this, and maybe more importantly, the Chinese government has put new caps on the amount of yuan that can be withdrawn outside their country.
3. And finally, it’s hot. I mean it’s really hot. I go so far as saying, it’s “Africa hot”. I believe that the heat wave that has hit Los Angeles and the Beach Cities has an impact on real estate. And why not? We know that horrific winters on the east coast put a halt to the market there. It’s been so hot here in the South Bay… Hermosa, Redondo and Manhattan Beach have been experiencing weather in the high 80s which is normally unheard of at the beach. And people don’t know how to cope with it. There’s very little A/C, very little reprieve. I think to some extent people have actually been beaten by the heat. So there’s little motivation to go shopping for a home when all you want to do is stick your head under the faucet… which is not even kosher in the drought that we’re having.
So we’ll see in the coming months which direction the stock market and the temperature take. And we’ll see if this is just a hiccup or a sign of a slowdown to come.
A couple of new listings that came on the market this week in North Redondo Beach have set price tags that are pushing the envelope. It will be a great litmus test to see if the market is in deed still climbing at a steady pace as we move into the heart of 2014.
2022 Warfield Ave, #1 is a corner, detached townhome. These corner units are extremely popular because they feel like single families with their own, private driveway and what feels like a defined space, separate from your neighbor who shares the lot with you. The townhome on Warfield has a lot of space. The floor plan is not cookie cutter, and the kitchen has been updated. On the other hand, there is carpet throughout instead of hardwood (albeit, new carpet), and the bathrooms are original. This is a 1990 build. No other corner townhomes, built from 1988-1995 with less than 2600 sq feet have sold for more than $836,000, according to the MLS. This was the sales price for 2509 Phelan Lane which sold in October 2013. However, 2023 Nelson Ave, also a corner 1990 build, went into escrow after 12 Days on Market with an asking price of $899,000. This townhome also has an updated kitchen, but bathrooms.
Then we have 2114 Huntington Lane, #A. This is a detached front townhome that was built in 1990 as well. It has the older floor plan with the living room, family room, formal dining room and breakfast nook. The bathrooms haven’t been updated in this one either. The kitchen has granite counters, and laminate floors were installed throughout the downstairs. The home does have a nice feel. It gets good light. The seller is asking $849,000. The last attached townhome that sold with similar condition and square footage was 1908 Havemeyer Lane, #A which sold for $830,000 in June 2013.
The trend is becoming clear. Buyers are spending more money and getting less. If you want to buy a newer townhome or one with an upgraded kitchen and bathrooms, you will be easily pushing $900,000. Case in point, 2517 Huntington Lane, #A is a 2005 built, detached townhome. It shows very well with some nice upgrades. However, it’s only two blocks from Inglewood Avenue. This property still got 7 offers, at least a few of them were over the asking price of $899,000.
If inventory stays as tight as it has been, prices will continue to rise. What you could buy for $905,000 today could be $935,000 a few months down the road.
Once this listings close, I will circle back around to this analysis and confirm if the trend is still moving on up.
2013 proved to be a good year for real estate. Listings received multiple offers, prices increased rapidly, buyers got historically low interest rates.
Here are some specifics for the North Redondo Beach Area 151:
A total of 184 homes sold this year.
176 of the sales were on the MLS.
8 of the sales were off market and/or pocket listings.
The average Days on Market was 51.
The average List Price was $725,000.
The average Sold Price was $722,150.
There were a total of 14 short sales and 2 REOs.
2013 was a strong market. Many homeowners gained equity in their homes due to rising prices. The number of distressed sales decreased immensely from the two years prior when they represented approximately 15% of the market. Prices continued to climb and buyers continued to pay those prices.
Highest Priced Single Family Residence
2210 Robinson Street: 5 bedroom new construction with 3,078 sq. feet.
The record is still held by 2615 160th Street which sold for $1,500,000 in 2011. This was an off-market sale which may not accurately represent market value at that time. The next highest sale was 2110 Ruhland Ave which sold for $1,450,000 in 2008.
Highest Priced Townhome
1931 Nelson Ave, #B: 4 bedroom with 3,580 sq. feet. Built in 2005.
The record is held by 2023 Dufour Ave which sold for $1,275,000 in 2007.
The pace at which prices are climbing has slowed down, but inventory is still low. For the most part, sellers are getting their asking prices and a little more. As homeowners gain equity, we may see more inventory hit the market in 2014. But until then, there’s enough demand to continue to bolster prices.
If you’re a seller, the lack of competition makes this a great time to sell. With few choices, you can garner more money for your property.
As a buyer, you should be as aggressive as possible. Buyers are competing with each other because inventory is low, making it very easy to chase the market up. For example, if you were buying a 4 bedroom town home built in the 90s in North Redondo in the beginning of 2013, you would pay approximately $775,000. Now, a similar town home would sell in the mid $800s. A newer townhome typically sold for mid to high $800s a year ago. Now, they are selling for low to mid $900s and closer to $1,oo0,000 for the larger ones.
If you’re interested in seeing the general trend in prices, here’s the latest from DQ News, comparing prices from October 2013 to October 2012 in the South Bay:
Average Sales Price
City October 2013 October 2012 Increase
Hermosa Beach $1,399,000 $835,000 67.54%
Manhattan Beach $1,386,000 $1,137,500 21.85%
Redondo Beach $747,500 $700,000 6.79%
Redondo Beach had 70 transactions in October, the highest number of the three Beach Cities. Manhattan Beach had 40 and Hermosa had 24.
The trend appears to still be going up. Inventory is still low, and there’s enough demand to continue to push prices up. I don’t think we’re going to see the frenzied pace that we saw in the beginning of 2013, but there will be plenty of activity.
The real estate industry could be tapered by the new Qualified Mortgage standards (effective as of January 10th) which require a borrower’s debt to income ratio to be no more than 43%. Of course, this could just mean that the big lenders are going to continue to grab the lion share of the business since they are less impacted by the QM guidelines; they can hold on to their loans rather than selling them on the secondary market which is dictated by Fannie and Freddie.
Qualified Mortgage (QM) standards kicked in as of January 10, 2014. Under the Dodd Frank Reform Act, lenders will need to meet more stringent guidelines in order to fall under the QM safe harbor, be protected from liability. Otherwise, they may be held liable for selling a loan that a borrower can’t afford. One of the major points of QM is that the borrower can’t have their total debt exceed 43% of their total income. There are many borrowers who purchased homes last week that exceeded the 43% Debt to Income ratio. Today, they would not be able to get the same loan.
In my opinion, these new rules under QM are going to shrink the lending landscape even more. Smaller lenders may get out of the mortgage business altogether because it may prove to be too risky for them. It’s the big lenders who will benefit from these new rules. Many of them plan not to adhere to these rules because they can keep the loans in their own portfolios rather than sell them in the secondary market. And now they will have less competition and larger share of the business.
We will see how this all plays out in the coming weeks and months. But if you’re looking to buy a home and your debt (including the mortgage) exceeds 43% of your income, then you will probably be doing business with one of the big lenders like Wells Fargo, Bank of America, and Chase. Wells Fargo, for instance, will still go up to 50% debt to income ratio.
North Redondo Homes Sales August 2013
Seventeen homes sold in August 2013 in Area 151 in North Redondo. This is 2 less than the number of homes sold in July, and 4 homes less than sold one year ago in August 2012. In most cases, it has continued to be a sellers’ market although buyers still have the advantage of buying homes at prices below the peak of the bubble and at low interest rates.
New construction is still a good buy considering you can spend the same (and even more money, in some cases) and get a town home that is up to 7 years old. Most homes are still selling quickly… many within the first week. And this translates into offers coming in immediately followed by a couple of days of negotiations before an offer is accepted.
One of the sales that really surprised me is 2144 Perry Ave. It’s a single family that had an addition. It does have a lot of square footage, but there is only a one car garage and it’s lacking in the quality department. this one sold for $1,115,000. This surprised me and many of my colleagues, but it showed that buyers are still feeling that desperation to get in the market and ultimately willing to pay a premium.
Address Sq Ft. Lot Year B/B DOM Sold Price Original List Diff
2219 Curtis Ave, #C * 1,060 7,499 1975 2/2 7 $464,000 $499,000 -7%
1900 Voorhees Ave, #B * 1,471 1987 2/3 6 $553,000 $495,000 +12%
2512 Gates Ave, #B * 1,610 7,526 1999 4/3 48 $667,500 $663,999 +.5%
2811 Barkley Lane 1,064 5,872 1947 3/1 21 $669,000 $669,000
2225 Mathews Ave, #C * 1,718 14,687 2000 3/3 8 $700,000 $649,000 +8%
2223 Voorhees Ave, #B * 1,955 7,504 1981 3/3 8 $708,000 $700,000 +1%
2415 Thomas Ave 1,590 6,550 1945 4/2 49 $722,150 $724,900 -.4%
1918 Ruhland Ave, #B * 2,477 7,513 1987 3/3 0 $725,000 $725,000
1921 Nelson Ave, #A * 2,054 7,480 1990 4/3 56 $750,000 $775,000 -3%
2116 Plant Ave, #A * 2,050 6,655 1989 3/3 5 $817,500 $799,000 +2%
2205 Nelson Ave, #B * 2,387 7,495 1986 3/3 34 $820,000 $769,000 +6.5%
1913 Nelson Ave 2,180 1959 4/3 49 $828,000 $859,000 -3.5%
2003 Curtis Ave, #A * 2,085 7,501 1990 4/3 9 $830,000 $779,000 +6.5%
1914 Ernest Ave, #A * 2,300 7,500 2004 4/3 1 $910,000 $910,000
2109 Plant Ave, #B * 2,357 7,504 2006 4/3 11 $930,000 $929,000
2021 Gates Ave, #B * 2,508 7,481 2013 4/4 1 $959,000 $959,000
2204 Plant Ave, #A * 2,500 6,645 2007 4/3 6 $959,900 $959,900
2144 Perry Ave 3,134 7,509 1947 5/4 14 $1,115,000 $1,150,000 -3%
Typically when Realtors talk about “chasing the market”, we are referring to a seller who has priced his home to high. The property sits on the market for some time without offers, and then the seller decides to reduce the price. This new price may have been attractive when the house was first listed, but now the market has changed – prices have dropped further, and even though the property is sporting a new, lower price, it’s ultimately still overpriced. This can happen again and again… price reduction, wait, price reduction, wait… but with each price reduction the seller never seems to catch up with the changing market, and he ultimately chases the market down hill. This trend is what drives Realtors to recommend to their sellers to price the home right at the beginning. They may be asking for less than what they would like to get for their home, but it will be more money than what they will ultimately make if they start too high.
But these days “chasing the market” can also be applied to buyers. There has been such high demand in so many markets with extremely low inventory that competition has spiraled out of control. Buyers lament that they went $20, 30, 40 thousand over the asking price and they still didn’t get the house. And after missing out on property after property, they learn their lesson. On the next listing, they come in like gangbusters, make the offer of the century, and blow everyone else out of the water. Ultimately, each home that is sold sets a new benchmark. And the next listing can start at the new level and go up from there. The sooner a buyer gets super aggressive the better, because she will secure her home and get out of the race while prices continue to go up. The buyers that continue to hem and haw and make conservative offers will chase the market up and possibly price themselves out of the market or pay a great deal more money than they would have had to pay just a few months prior.
As a Realtor, I don’t enjoy having the conversation with my buyer clients that they need to make an offer over the asking price. I’m much happier when my clients feel like we did a good job negotiating and they got a good deal. But not all markets work that way. And when you find yourself in a market that has rising prices, the sooner you are aggressive, the better.
Redondo Beach, CA 90278
For instance in North Redondo, the price of a 4 bedroom, upgraded town home was selling in the mid to high $800,000s at the end of 2012 and into early 2013. They are currently selling for low to mid $900,000s, and in a couple of cases close to $1,000,000. It’s a big price swing in a short amount of time. If a buyer was aggressive back in January, he could have purchased 2109 Huntington Lane, #B for $829,000 or new construction at 1905 Plant Ave, # B for $859,000. (These are sold prices.) In the past 6 weeks, buyers have paid $998,000 for 1906 Morgan Lane, #B, $960,000 for 2208 Warfield Ave, #B, and $950,000 for 2118 Pullman Lane, #B.
The key to buyers “chasing the market” is that at any time it can stop. Once buyers decide enough is enough and they feel prices are too high, they will pull back and prices will come back down again. But until then, the competition is stiff and sellers are in the driver’s seat. And for once they are not the ones chasing the market.