The South Bay is short on homes for sale.
And with Super Bowl and President’s Day weekend back-to-back, sellers have been reluctant to bring their homes to the MLS on weekends with distractions.
This has left many motivated buyers even more disappointed with low inventory levels and hoping, praying for more listings as we begin our winter thaw into the warming spring.
In simple economic terms, there is a major squeeze on supply which often drives product prices higher.
But if you read last week’s blog, you will understand that there is a historically small percentage of the California population that can afford homes amid record high prices and multi-decade high mortgage interest rates.
This supply squeeze paired with few buyers helps to explain why some homes receive multiple offers and others are selling for lower prices than last year by a larger margin.
Is a particular sub-market low on supply that attracts well-to-do buyers with deep pockets? Then get ready for multiple offers.
Is a particular sub-market low on supply that attracts buyers dependent on mortgages and interest rates? Then get ready for a tough listing potentially selling for lower than last year.
While the above two examples are not always the case, this can help explain recent mechanics of the 2023 home market here in the South Bay.
There are still a lot of burning bright spots in the South Bay home market.
That said, I want to focus on the weakening areas because just 12 months ago, there were no weaknesses anywhere. If we focus on the weaknesses, perhaps we can see where the entire market goes.
Either the weakness spreads everywhere creating a larger market slowdown, or, it stops in its tracks and then prices could be off to the races yet again.
Below, I am going to cover a home listings from Palos Verdes, Manhattan Beach, Redondo Beach, and Hermosa Beach…with focus on homes that have failed or might fail reaching peak market prices. Let’s get it started!
Lower Resale in Rancho Palos Verdes
First up is Rancho Palos Verdes, the first city that really started to show signs of slowing in the middle of 2022.
If you want to read my first post about the market dropping close to 10%, then please read the past blog on this disappointing Kings Harbor sale.
It seems the trend is continuing in RPV and now we do not need to speculate. There is now a home that sold in 2022, that has officially resold – and at a lower price than last year’s acquisition:
- 4-beds, 3-baths, 2,439 sq. ft.
- Sold: $2,000,000 (February 2022)
- Sold: $1,870,000 (February 2023)
This property was listed in December for $2,200,000 and quickly cut below its acquisition price to $1,999,000 before the end of the year.
A buyer smelled blood in the water and offered lower. The listing closed for a $130,000 discount almost exactly a year from the original purchase.
That is representative of a 6.5% drop in value for the home and the seller certainly lost over 11% on their investment when considering commissions and closing costs.
There is no better proof of a weakening RPV home market. And also second black eye for the Los Verdes submarket thanks to the Kings Harbor blog post referenced above.
Tree Section Listing Cutting Price
There is a gorgeous almost brand new Tree Section home that was acquired in 2022 and is back on the MLS here in 2023:
- 6-beds, 7-baths, 4,835 sq. ft.
- Sold: $5,985,000 (May 2022)
- Asking: $6,199,000
This spec home sold fast in the middle of 2022 for just a $10,000 discount to an all-cash buyer.
Not more than six months later, it was back on the market asking $6,299,000. After two months, the price was reduced by $100,000 and it still stands on the market today.
As white hot as the Tree Section has been during the pandemic and even through the last few months of the shifting market, this listing might show that buyers are unwilling to pay higher prices.
While the seller may lose after closing costs and commissions, the Tree Section is still supply constrained with few choices for buyers.
There is still a strong chance the seller can wait things out and hold their price, but if patience wears thin, this could be the first lower sale of 2023 in this highly desired pocket west of Sepulveda.
Redondo Beach Townhome Soft
A recent South Redondo townhome opened escrow, but not after a softer than expected listing journey that included a price cut:
- 3-beds, 2.5 baths, 1,808 sq. ft.
- In Escrow: $1,125,000
This listing came to market in January asking $1,199,000 before a February price cut of $74,000 which allowed it to make a deal a week later.
While we are unsure of where this one will close, it is interesting to look at its neighboring unit (Unit #3) that sold this past April:
110 S. Prospect Avenue, Unit 3
- 3-beds, 2.5-baths, 1,808 sq. ft.
- Sold: $1,310,000 (April 2022)
This past sale is a bullseye comparable being the neighboring unit with the exact same floor plan. The only differences were an updated kitchen and bathroom.
It listed at $1.25 million and sold quickly for $61,000 more. Wow!
Of course, an updated kitchen and bathroom are extremely valuable, however, in a small townhome are those updates worth almost $185,000 more? It really depends.
The point is there is a chance the current in escrow unit could close lower offering a potential discount of $200k or greater – allowing for the new buyers to fix-up the interior for less and potentially claim some equity if they believe the market can support another $1.3 million sale.
Eighteen months ago, a unit with a $1.3 million comp priced with a $100k discount would have been gobbled up by eager buyers fueled by low interest rates willing to fix the kitchen and bathrooms themselves.
In today’s market that is simply not the case.
Hermosa Sand Asking at a Loss
And finally, I am, revisiting an interesting Hermosa Sand Section listing that I wrote about in a January blog post:
- 4-beds, 4-baths, 4,247 sq. ft.
- Sold: $7,200,000 (October 2022)
- Canceled: $6,500,000 (January 2023)
- Asking: $$6,900,000 (February 2023)
A record south Hermosa walkstreet sale that was relisted by the buyer just a few months later. Not only was it relisted but cut its asking $700,000 below its acquisition.
The listing was eventually canceled after a short on-market period but was back on the MLS in February at the full price of $7.2 million – just last week it was cut to $6.9 million.
Obviously, this is a strange one all the way around. The tactics on the MLS do not do any favors for the seller to capture an optimal price and a cavalier luxury purchase could end up being a negative for the Hermosa Sand if high-end buyers get spooked by this transaction.
There is strength and weakness throughout the South Bay markets.
This week’s post shows that homes purchased in the last 12 months are at risk of selling for less or closing lower compared to its most recent comparable sales.
Is the sky falling? Absolutely not.
But now that the real estate narrative has changed, buyers expect better prices amid extremely expensive borrowing rates, especially if a home was purchased “at the peak of prices.”
Today, sellers need to list property at compelling asking prices and buyers need to be prudent when considering each and every listing.