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Fourth Quarter Numbers Show Continued Price Growth & Low Supply

Richard Haynes
Pacific Manhattan

If you can believe it, 2021 is in the rear-view mirror.

But, my blog is not ready to ditch 2021 just yet! We have Q4 numbers to cover. The latest numbers are a big deal to keep a pulse on our South Bay real estate markets.

My quarterly blogs from a year ago touched on how Q1 and Q2 numbers in 2021 would have “easy comps.” That was thanks to the Coronavirus impacting our markets in a big way at the start of 2020. The true test would be Q3 and Q4 of 2021.

Q3 numbers were very exciting to cover because it was a comparison period with tougher comps. Of course, our South Bay markets passed with flying colors demonstrating strong price growth in all cities.

One note to mention, normally at the end of the year I will take ALL price and sales data for the entire year and compare it to the previous year. That is not happening for this report.

Why you ask?

The answer is simple, Q1 and Q2 of 2020 were easy comps. If I were to take the entire year, you know it will have strong numbers based on easy comps for the first half of 2020. The 4th quarter of 2020 was a much stronger time, so if 4th quarter numbers in 2021 can beat year-over-year, then you know this is one heck of a real estate market.

Let’s get it started.

Manhattan Beach

Manhattan Beach continues its strength in the 4th quarter of 2021 when compared to the same quarter last year. It is not a record median price but there have been some big sales numbers.

Below are median prices for the Manhattan Beach home market:

The 13% appreciation is not as strong as the 16% we saw in the 3rd quarter number, but it is still an amazingly strong clip considering how expensive the market is getting.

Inventory is miniscule in this coveted beach town and there is a lot of cash chasing too few homes.

For the second straight quarter, sales are down in Manhattan Beach. Normally, a harbinger of weakness, the slowing sales are a illustration of supply/demand imbalances with a lack of housing inventory.

Right now, there is not much to make of this and realize that slowing sales are going to be a theme throughout this post.

Palos Verdes Peninsula

The Palos Verdes Peninsula put up another great quarter thanks to it meeting most pandemic requirements for buyers.

Below are 2021 Q4 prices versus 2020 Q4 prices:

If you thought Palos Verdes Estates could not get any hotter than Q3 being up 14%, and 26% on a rolling 12-month average, then you will be shocked. Palos Verdes Estates was up an astounding 35% on price, which was almost a $700,000 gain.

Rancho Palos Verdes, standing as the most affordable market on The Hill, continued its blistering pace up almost 20% with a $270,000 jump in price.

Behind the Gates in Rolling Hills hit a whopping 54% price increase. It is an amazing number; however, the numbers can be volatile due to the low volume of sales in this market. A better indicator is the 12-month rolling average which is up 31.3%…still astounding as Rolling Hills has been the single best performing market since the pandemic recovery.

Lastly, Rolling Hills Estates saw prices rise by just 3.4% year-over-year for the quarter. Rolling Hills Estates has been the most disappointing marketplace seeing deceleration in price growth sequentially over the past couple of quarters. Much of this has to do with the luxury development at Rolling Hills Country Club selling out and winding down their sales.

Now onto closed sale in Palos Verdes:

As you can see, just like Manhattan Beach, sales were down across the board in Palos Verdes. Quite simply, the lack of willing sellers to add to inventory is keeping any sort of sales surge down.

In just about any other time, this would be a red flag. For now, I believe it is an indication that prices will be squeezed higher.

Hermosa Beach

The tiny city of Hermosa Beach continues to keep up its amazing appreciation.

I have harped on the fact that Hermosa not even once saw a negative growth in price when the pandemic hit. Its resilience was by far the best in the South Bay and to see it grow by another 24% in a heavy condo market is quite a feat.

Hermosa bucked the trend of slower sales:

Incredibly, sales were up in Hermosa last quarter and this quarter again! This town just simply will not stop when it comes to solid price growth and delivering inventory for ready and willing buyers.

Redondo Beach

The huge real estate market of Redondo Beach performed well yet again.

As always there are numbers for the entire city, and then I divide sales data between North and South Redondo, for further context.

While this was not the 20% growth Redondo saw in Q3, a double-digit number year-over-year on tougher comps is still incredibly powerful.

Now onto closed sales for Redondo:

Not all cities can be Hermosa…Redondo, just like Manhattan Beach and Palos Verdes, fell victim to slowing sales thanks to historically low inventory levels.

For those that care about performance between North and South Redondo, see below:

South Redondo decelerated on price growth but still saw double digits.

The exact same can be said of North Redondo deceleration from last quarter, but almost 13% appreciation in this affordable part of the city is a great number.

Conclusion

The South Bay home market continues its amazing run with incredible price appreciation.

With tougher comps, price growth is decelerating but it is hardly a worry. The Q4 numbers in 2020 were insanely strong and to see 2021’s Q4 still grow, for the most part, in double digits means we have a market that is about as strong as ever.

Even with a slight tick up in interest rates, sales are slowing not because of a weakening market, but due to historically low supply. In fact, if we see any surge in sales, that could be a clue that sellers are beginning to meet demand and prices might begin to plateau.

I cannot wait to see if our local South Bay market can continue to keep up its torrid pace next quarter. If you read my 2022 “Fearless Predictions” you know I am very bullish on the market (which is rare for me).

The market can change at a moment’s notice, but rest assured I will be watching and reporting to you in real time.

Check back for 2022 Q1 numbers coming in early April.

Have an excellent weekend!

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