South Bay markets are ready for a breath of fresh with mortgage rates and home inventory levels beginning to drop and rise, respectfully.
During the first half of the year, high mortgage rates and low home inventory levels were a huge talking point for South Bay real estate.It looks that conversation might be shifting in the second half of the year.
Since May, mortgage rates have been steadily dropping and home inventory levels look to be increasing – finally. If you want to see my previous mortgage rate and inventory report earlier this year, then take a look here.
But there is no point in looking in the past, let’s explore the latest numbers and what they might mean for South Bay buyers and sellers.
Mortgage Data – St. Louis FRED
In the first half of 2024, 30-year fixed mortgage rates displayed a gradual upward trend. However, after peaking at 7.22% in May, the growth turned into a slow, but steady, decline.
Is it time to celebrate? Not quite yet…
The St. Louis FRED economic data, provided by the St. Louis Federal Reserve, reveals a greater upwards trend on 30-year fixed mortgages might finally be reversing course in the back half of 2024.
To start the year, the highest 30-year datapoint was 7.22% in May, but rates have rapidly reversed course with the lowest rate now around 6.35% here in September.
As mortgage rates drop, more home buyers may be more inclined to take the jump on purchasing a home which is needed if inventory rises. Speaking of inventory…
South Bay Q1 Home Inventory Levels
Increasing home inventory numbers are showing up in the data for South Bay real estate.
Inventory levels to kick off 2024 in Palos Verdes and surrounding beach cities have been sparse. In the first quarter of 2024, compared to 2023, we saw five out of the seven cities with declining homes inventory for sale. But, much like mortgage rates, the market is adjusting in the second half. Thanks to the MLS, we can see how things are beginning to shift.
Below is the August 2024 and August 2023 inventory data:
Manhattan Beach Inventory – Up 11.2%
August 2024: 99 Listings
August 2023: 89 Listings
Palos Verdes Estates Inventory – Down 8.0%
August 2024: 46 Listings
August 2023: 50 Listings
Redondo Beach – Up 39.3%
August 2024: 149 Listings
August 2023: 107 Listings
Rancho Palos Verdes – Up 72.2%
August 2024: 136 Listings
August 2023: 79 Listings
Rolling Hills Estates Inventory – Up 21.1%
August 2024: 23 Listings
August 2023: 19 Listings
Hermosa Beach Inventory – Up 29.3%
August 2024: 53 Listings
August 2023: 41 Listings
Rolling Hills Inventory – Up 200%
August 2024: 12 Listings
August 2023: 4 Listings
Six out of seven of these major South Bay cities saw dramatic surges. It is clear that August 2024 compared to August 2023 is seeing a significant higher jump in homes for sale.
Palos Verdes Estates is the sole city with declining inventory, declining 8% year over year.
Unlike Palos Verdes Estates, Rancho Palos Verdes continues to soar with the second highest August home inventory levels, up a whopping 72.2%. The city saw rising inventory in Q1 too, but not as significant as we see today.
The landslides facing the Palos Verdes Peninsula, which are mostly in RPV, could be a contributing factor but we don’t have the data to confirm.
While in other parts of the South Bay, like Hermosa and Redondo Beach, home inventory is finally looking better. Inventory is up 29% to 39% in those two beach cities which might be a sign of release for stretched home buyers.
Manhattan Beach’s uptick is also encouraging. Although it saw a declining rate in early 2024, it too is reversing course like many of our local cities.
The beginning of this year, home options for buyers were slim. Now, with rising home inventory, there is hope.
Conclusion
While rising inventory is just what the doctor ordered in our tight South Bay home market, it can be a doubled-edged sword.
Too much inventory rising quickly can affect prices to the downside, however, that seems like a far-fetched notion at the moment.
The same double-edged risks come with lower mortgage rates: 1) more affordability for buyers struggling to purchase today, 2) the risk of added competition with more people able to afford homes with lower rates.
All in all, I do not want to split hairs on the negative side of things. Our local home markets NEED more homes for sale inventory so this is a welcome change in the data. And if mortgage rates can steadily decline, that can’t hurt either