Inventory and interest rates are quickly becoming key themes for the South Bay home market.
To start the year, many real estate pundits were predicting lower mortgage rates and rising inventory. The first two months of the year is not playing out according to that forecast.
Borrowing rates are going in the wrong direction. And that flood of new listings has not materialized…at least not yet.
Mortgage Rates, per St. Louis FRED
With the conclusion of February, it is time to check in on 30-year mortgage rates.
If you remember my blog from last month, the end of 2023 brought 30-year mortgage rates down to 6.61%, according to St. Louis FRED data.
At the end of January, rates were slightly higher and finished the month essentially flat at 6.63%.
Now with February numbers in, 30-year mortgage rates are going in the wrong direction finishing the month slightly under 7%, at an uncomfortable 6.94%. Yikes.
Of course, we are down from our peak of 7.79% in October of 2023, but this mortgage market is unsettling considering many agents and real estate pundits expected falling rates for 2024 that could fuel buying power and affordability.
The opposite has occurred. And while the year is young, this current interest rate trend is a major headwind for the home market.
Key February Inventory Levels
As mentioned in my blog last week, I was extra excited to dive into the inventory levels in our South Bay home marketplace.
Again, many experts predicted that home “for sale” inventory would rise in 2024. In my opinion, this is the key to this year’s market and something I plan to watch closely.
In January, the data was mixed with half of the six cities (that I cover in this weekly blog) seeing rising inventory and half of the cities seeing falling inventory.
Spoiler alert, the February inventory data is going in the wrong direction like interest rates. While not overly damaging, we saw three cities with declining inventory, one city with flat inventory and two cities with rising inventory.
Take a look at the numbers below:
Manhattan Beach Inventory – Flat 0%
- Feb 2024: 81 Listings
- Feb 2023: 81 Listings
Palos Verdes Estates Inventory – Up 38.7%
- Feb 2024: 43 Listings
- Feb 2023: 31 Listings
Redondo Beach Inventory – Down 17.2%
- Feb 2024: 77 Listings
- Feb 2023: 93 Listings
Rancho Palos Verdes – Up 15.5%
- Feb 2024: 67 Listings
- Feb 2023: 58 Listings
Rolling Hills Estates Inventory – Down 22.2%
- Feb 2024: 14 Listings
- Feb 2023: 18 Listings
Hermosa Beach Inventory – Down 16.3%
- Feb 2024: 36 Listings
- Feb 2023: 43 Listings
The latest inventory levels should be a bit disheartening for the entire marketplace as we really do need more homes on the market; however, I maintain we are still very early in the year.
That said, listings are down dramatically from last year in Redondo Beach, Rolling Hills Estates and Hermosa Beach. We are talking high teens to low 20 percentages lower, year-over-year.
And while the sample size is small with one month of numbers, many thought the inventory squeeze could not get much more challenging than 2023. It seems 2024 will continue to be challenging.
To make matters worse, Manhattan Beach is flat, which is better than down (like the previous month) but inventory is sorely needed here as well.
The only places with higher inventory levels are Rancho Palos Verdes and Palos Verdes Estates, which overly benefited from pandemic trends and are coming back to earth. Keep in mind, homes for sale are still breathtakingly lower compared to pre-pandemic inventory on The Hill.
So, while the Palos Verdes inventory is a good sign…it is not enough.
Final Thoughts
There is no cause for alarm here just two months in to a long twelve months in 2024. But… it could be better.
Mortgage interest rates approaching 7% again is a major disappointment for buyers and sellers, and rising rates are the exact opposite of what many anticipated for the new year.
And with no signs of a surge in inventory, the market will continue to be a challenging one to navigate.
The amazing thing about real estate is that trends can change on a dime and a raging spring market could be right around the corner this March.
Next month, I also plan to use a 3-month rolling average for inventory at the end of Q1 which will aggregate larger, more dependable data. That report will be telling.
For now, let’s hope for at least some easing with interest rates and a nice increase of newly listed homes to the market. We need these trending in the right direction as it is truly what is needed for a healthy South Bay home market.
Richard Haynes
DRE: 01779425
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The Richard Haynes Real Estate ShowA leader in South Bay real estate for the better part of a decade, Richard thrives as an advisor to his clients with over $248 million in sales as a broker or investment principal at his boutique agency, Haynes. Richard is known for his keen local market insights which have been featured in the L.A. Times, The Street, and Forbes, along with his weekly South Bay real estate blog. [read more]