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South Bay April Home Market Update: How Do The Numbers Look?

Richard Haynes
South Bay April Home Market Update How Do The Numbers Look

The April South Bay real estate data is here.

This information is far ahead of what the National Association of Realtors’ report gave last week on February data…which were numbers pre-pandemic shut down!

Hopefully, you can use this information to guide you when making real estate decisions.

In the early part of the month, I was encouraged that perhaps the statistics were not as bad as March.

I may have been wrong to give such encouragement because the April stats are still horrible.

It is impossible to know what all of it really means without a few more months’ worth of information as we progress forward in this new Coronavirus reality. For now, all I can say is proceed with caution on your real estate moves and be prepared to exercise patience.

Pending Sales, A Leading Indicator

If you have been reading my blog over the last month, then you know that I believe pending sales are going to be a leading indicator of where the market is headed during the time of COVID-19.

March pending sales were horrific year-over-year. Unfortunately, April pending sales are even worse.

Below is the pending sales data in our local markets from April 2020 versus April 2019:

The spring selling season is our local home market’s busiest time of year. April pending escrows represent future closings for the month of May and June, which really showcase the strength or weakness of the marketplace in any given year.

Seeing these pending sales numbers down between 75% and 80% is nothing short of catastrophic. Catastrophic not just for the local real estate industry and all of the jobs it supports, but if this continues, it will make valuation more and more of a guessing game. That is normally a recipe for lower prices.

It is probably tough for anyone to believe that these low numbers will continue over the long term, but even short term ugliness like this will have its effect on the market down the road, both economically and mentally for buyers and sellers.

Closed Sales, Starting to Reflect Reality

The closed sales are now starting to reflect the reality of how COVID-19 is affecting real estate transactions presently.

As mentioned in my April data last month, April pending sales were suggesting that sales were going to fall off a cliff.

And, it is happening…

All of the South Bay areas below already had lower year-over-year sales in March thanks to a boatload of cancellations. Each market experienced deeper declines than last month except for the Palos Verdes 90274 zip.

Here is closed sales data in our local markets from April 2020 versus April 2019:

The combination of significantly lower pending sales and closed sales does not necessarily mean prices will go down, but what if you are a seller and need to sell? You tend to cut your price to get a deal done quickly.

How long can sellers hold out in this slow market before cutting?

If price cuts come en masse to get deals done, then that is when we will see greater downward pressure on prices.

Sellers will need to hang on and root for a successful re-opening of the economy in a few weeks and pray for no re-infections to bring some much-needed confidence back to the home market.

Median Price, a Positive but Misleading

When it comes down to it, most people just want to know if prices are up or down.

Well, here is the data year-over-year on a rolling 12-month basis:

As you can see most of these areas are holding steady, if not up.

In fact, Manhattan Beach hit a new all-time high.

This is likely going to be misleading for obvious reasons, one being that it is trailing 12-months’ worth of data.

But again, if sales continue to slow for longer, it becomes harder for seller to hold out on their price if they have a shot clock.

Do not let the higher prices mislead you in an environment where most of the other real estate data is negative with an extremely weak economic backdrop.

Closed Volume, Points to Economic Pain

So, I haven’t discussed closed volume in the past, but I think it is worth bringing up this statistic because it has local economic effects that are much like the “Important Weekly News” that I have been sharing with each post.

This gives a glimpse into our local economy and how lower volume can affect revenues of other individuals and entities.

The lack of volume represents a host of issues, and I will cover three…

As real estate slows, and since it always tends to lag, it has an effect that can fuel an economy higher or drag it down much lower. These numbers suggest the latter will happen unless we can reverse course quickly.

Quick Notes and Other Important News

This blog was written before most of the important news that I like to follow was updated. So, I will touch briefly with a bit more April data and cover more news next week.

In the coming blogs, I will dig into unemployment, forbearance, possibly rent collections, along with some publicly traded companies. Also, I will touch on Warren Buffet’s thoughts, which will give us a glimpse further into the economy and how our local markets will be affected.

Conclusion

There is no real theme to wrap up here except for you to absorb the latest April data which is increasingly important.

Except for median prices, which I think is misleading, the April numbers are still horrible. They are far worse than March, but that might not be surprising to most.

With the hopes of reopening, the May and summer real estate results are huge for the market and its psychology.

If reinfection occurs and more shutdowns get put in place, I shudder to think about what can happen to the local real estate market and the overall economy.

If the virus subsides and confidence occurs, the market can come back slowly but surely, which will add a lot of confidence. A new discovery of a vaccine and the market will rocket higher.

I think the data suggests that is still prudent to pursue real estate with caution.

The Great Recession took two years to find a bottom and bumped along the bottom for two years after that. Our market will not go down over-night, it will take months, if not a year, and perhaps bump the bottom until a vaccine is in hand.

Be careful, watch the numbers, and at this moment, do not try to be a hero and stick your neck out too early!

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