More data means more context during these unprecedented times.
Last week I covered the month of June numbers. Now, we can take the completion of the second quarter and use bigger chunks of data to compare.
With perhaps some of the worst economic news since the Great Recession, if not the Great Depression, the 2020 second quarter occurred in an extremely challenging time for our country’s health and marketplaces.
Armed with a three-month tranche of data during COVID-19, I am going to use data from quarter two of 2020 to compare against quarter two of 2019 to help give even further insight into the home market beyond monthly moves.
This is year-over-year information represents “bad times” compared to “good times”…(or at least, “normal times”).
Manhattan Beach
Manhattan Beach had breathtaking pending sales drops that were down 79.1% in April, along with closed sales falling 47.7%.
How do the year-over-year quarterly median price numbers look? Very resilient.
- Manhattan Beach Median Prices: UP +1.24%
- Q2 2020: $2,530,000
- Q2 2019: $2,499,000
I have discussed in past blogs that 12-month rolling average median prices really do not mean much, but seeing quarter two of 2020 hold up in price compared to last year while being in a scary pandemic….now, that is resilience.
Sales were down in a big way across all our local markets, which was to be expected.
- Manhattan Beach Closed Sales: DOWN -38.66%
- Q2 2020: 73
- Q2 2019: 119
As you can see, prices held up even during incredibly low transaction volume in what is normally the busiest time of year for residential real estate.
Palos Verdes Peninsula
For this section, I am going to cover the four cities on the Palos Verdes Hill and leave out the unincorporated areas for simplicity.
Below are the year-over-year quarterly median price numbers for all four cities:
- Palos Verdes Estates Median Prices: DOWN -4.04%
- Q2 2020: $1,900,000
- Q2 2019: $1,980,000
- Rancho Palos Verdes Median Prices: DOWN -0.75%
- Q2 2020: $1,315,000
- Q2 2019: $1,325,000
- Rolling Hills Estates Median Prices: UP +7.48%
- Q2 2020: $1,365,000
- Q2 2019: $1,270,000
- Rolling Hills Median Prices: UP +10.13%
- Q2 2020: $3,050,000
- Q2 2019: $2,769,444
The Hill, in general, was fairly resilient as well in terms of price.
Rolling Hills Estates was up big. Wow.
Although a small sample size, Behind the Gates in Rolling Hills performed very well.
On the contrary, Rancho Palos Verdes was flat with the one sore spot being Palos Verdes Estates falling just over 4% in price.
Sales were down as expected, while being most pronounced in Palos Verdes Estates.
- Palos Verdes Estates Closed Sales: DOWN -50.00%
- Q2 2020: 23
- Q2 2019: 46
- Rancho Palos Verdes Closed Sales: DOWN -23.26%
- Q2 2020: 99
- Q2 2019: 129
- Rolling Hills Estates Closed Sales: DOWN -37.14%
- Q2 2020: 22
- Q2 2019: 35
- Rolling Hills Closed Sales: UP +75.00%
- Q2 2020: 7
- Q2 2019: 4
Palos Verdes Estates pricing weakness might be attributable to the 50% drop in sales. Whether owners decided to keep their large backyard estates amidst a pandemic or buyers were just slow to move on Palos Verdes Estates, the sales rate was a huge disappointment compared to the rest of the Hill.
Rancho Palos Verdes and Rolling Hills Estates both dropped as expected with Rolling Hills popping 75%. That said, Rolling Hills’ small sample size can show wild variations.
Hermosa Beach
Hermosa Beach had an excellent, excellent quarter. Pandemic or no pandemic, recession or expansion, Hermosa’s price jump was big by any measure with a 15.87% jump in quarter two when compared to the same quarter a year ago.
- Hermosa Beach Median Prices: UP +15.87%
- Q2 2020: $1,825,000
- Q2 2019: $1,575,000
To further emphasize the strength, Hermosa Beach experienced a muted drop in closed sales. Sales down just 12.77% is nothing to brag about, but relative to other cities in the South Bay, Hermosa crushed it.
- Hermosa Beach Closed Sales: DOWN -12.77%
- Q2 2020: 41
- Q2 2019: 47
One thing to note is that Hermosa saw its single-family home sales really drive its price growth.
Year-over-year home prices jumped to $1.825 million in quarter two of 2020 from $1.381 million in quarter two of 2019. Condos and town homes only rose about $43,000 to $1.543 million.
Redondo Beach
The largest city, by far, that I cover in my weekly blog is Redondo Beach.
The city as a whole was able to stay resilient as well, but there is a bit more nuance to it as you’ll read farther down in this post.
- Redondo Beach Median Prices: DOWN -2.31%
- Q2 2020: $1,100,000
- Q2 2019: $1,126,000
A drop of 2.31% is not devastating by any measure, but Redondo is teetering on an uncomfortable drop, much like the Palos Verdes Estates number.
Furthermore, Redondo has a much higher sales transaction numbers than Palos Verdes Estates so a dip over 2% is something to watch, especially when you see sales drop by almost 50% for a really big city.
- Redondo Beach Closed Sales: DOWN -49.80%
- Q2 2020: 125
- Q2 2019: 249
No question, that is a lot of lost sales for a city with a great mix of “affordable” housing (relative to the beach cities and Palos Verdes) and more expensive housing.
The big story here is a tale of two Redondo zip codes…
- 90277 South Redondo Median Prices: DOWN -3.31%
- Q2 2020: $1,170,000
- Q2 2019: $1,210,000
- 90278 North Redondo Median Prices: UP +1.92%
- Q2 2020: $1,060,000
- Q2 2019: $1,040,000
As it turns out, the more expensive sub-market of South Redondo drove much of the price decline, while the affordable North Redondo was up year-over-year for the second quarter.
It’s clear, at least concerning quarter two, South Redondo struggled while North Redondo performed well.
Conclusion
All in all, 2020 quarter two numbers versus the 2019 quarter two numbers were fabulous when considering the incredibly challenging health and economic circumstances.
The huge drop in sales is something the market will have to reconcile, but to see pricing come out relatively unscathed (and strongly higher in some spots) bodes well for the market heading into quarter three.
With comparable sales prices holding firm, along with the strong June data (see last week’s blog post here), the set-up for quarter three looks extremely strong.
To wrap it up, this is the summer quarter set-up:
- Prices have held firm.
- Buyers are coming back in droves (pent-up demand from “no-deal” April and May).
- Inventory is falling.
- All-time low interest rates.
- Government stimulus and support, not to mention forbearance, etc.
- Confidence is coming back and the stock market pushing record highs.
Many of you know I am not shy in making predictions…I think the third quarter will be extraordinarily strong.
There are going to be buyers returning who delayed purchase in April and May, even more buyers looking to get their own space in the new work-from-home environment, interest rates increasing buying power, and even fewer sellers willing to sell amidst a pandemic.
It is a prediction, but the third quarter has all the ingredients to be gangbusters, if the virus does not force a second shut down.
I think the most important question will be if this buoyant market can continue past the third quarter?
The data is still very choppy, there will be more volatility and dislocations, and uncertainty will remain until we near a vaccine.
That said, let us celebrate our resilient real estate markets!
Please, continue to be safe with your health and make thoughtful, long-term decisions when making your real estate moves.
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]