There are a lot of moving parts to the home market nationally, and here locally in the South Bay.
If you are not full-time in real estate, it can be tough to keep up with everything. This week, I am going to share some updates to wrap-up July as it is the first month complete in an all important Q3 for the residential market.
Some of the big themes:
• Low inventory in the South Bay
• The Fed is driving mortgage rates to nose-bleed levels
• Effect on transaction and affordability
I also want to do a quick summary of some notable high and low sales in our local city marketplaces.
High/Low for South Bay Cities
This is not a full breakdown of every city, but more of an exercise to see market action. It is key info for real estate nerds like myself, but a lot of readers just love seeing the lowest/highest sales in their neighborhoods.
Manhattan Beach
High Sale:
1002 10th Street (hill section)
5-beds, 6-baths, 6,076 sq. ft., 9,000 sq. ft. lot
SOLD: $8,000,000 (off-market)
This was a brand-new construction home that was sold off-market. It is a BIG number, but not crazy at all for Manhattan’s prestigious Hill Section. At $1,316 per sq. ft., the sale seems very reasonable considering the lack of Hill Section new home inventory and how difficult/expensive it is to build brand new houses these days.
Low Sale:
1305 Faymont Avenue
2-beds, 1-bath, 884 sq. ft., 5,426 sq. ft lot
Sold $1,425,000
This small, old 2-bedroom home in Liberty Village is essentially the lowest land value you will see in the city of Manhattan Beach. Obviously, the number is lower due to the affordable Liberty Village location, but it also sets an important precedent for spec home builders and Liberty Village homeowners alike.
Palos Verdes Estates
High Sale:
952 Paseo La Cresta
5-beds, 6-baths, 6,000 sq. ft., 29,579 sq. ft. lot
Sold: $12,500,000
It is rare to see an eight-figure sale on the Palos Verdes peninsula. So, this is a big one.
Perched atop “New York Hill,” this property has awe-inspiring views that are right up there with some of the best in all of L.A. County. Paired with a fully rehabbed interior with a top local designer, the property sold quickly for such a high price point.
After asking $15 million, the sellers gave a 16% discount ($2.5 million) right away to get a deal done–a very prudent decision in my mind. To sell eight figures in Palos Verdes in just a months’ time is quite an achievement and a big comp for the luxury market in Palos Verdes.
Low Sale:
1636 Espinosa Circle
3-beds, 2-baths, 1,389 sq. ft., 6,294 sq. ft. lot
Sold: $1,725,000
The adorable Espinosa Circle pocket for years has been the most affordable entry-level market in all of Luanda Bay. This sale is no exception.
After asking far too much early in the listing period, the sellers chopped their price and ended up making a deal. This will be one of the lowest, move-in-ready sales you will see for the remainder of the year in Palos Verdes Estates, and it looks like a fair deal for both parties.
Redondo Beach
In Redondo Beach, we are just going to highlight the high sale in July:
801 Esplanade
4-beds, 3.5-baths, 2,300 sq. ft., 2,997 sq. ft. lot
Sold: $5,650,000
Another very quick transaction with a deal made in just one week.
It is hard not to fall in love with a west bluff-top Esplanade property. This newer vintage, built in 2007, is a great smaller home on The Esplanade and traded at a premium to the South Redondo marketplace–as it should. Just under $2,500 price per sq. ft. for a 16-year-old home with world-class L.A. County views is a nice one.
Rancho Palos Verdes
And finally, onto the most affordable Palos Verdes Peninsula city–Rancho Palos Verdes.
I will start with two high sales:
High Sale #1:
3367 Crownview Drive
4-beds, 4-baths, 3,791 sq. ft., 41,001 sq. ft. lot
Sold: $3,850,000 (off-market)
High Sale #2:
7372 Via Lorado
3-beds, 3-baths, 2,238 sq. ft., 10,882 sq. ft. lot
Sold: $3,122,000
Sale #1 is one of those “top of the hill” type sales that is rare. It was done quietly off-market and is a large sale considering it is close to $4 million in a PV Drive East market that does not see those every day.
Sale #2 was a West P.V. remodeled home with views. The competition was fierce as it sold $323,00 over-asking and $1,367/PPSF which is a large number for the area, not on Marguerite Drive. It is quite a result for homeowners around this home.
Low Sale:
29641 S. Western Avenue, #209
2-beds, 2-baths, 1,676 sq. ft.
Sold: $640,000
This condo is an old building and on the busy thoroughfare of Western Avenue.
There are certainly challenges to location, condition, etc., however, to land a 2-bed unit in the Palos Verdes school district for just $381 per sq. ft., that is almost an impossible price anywhere in the South Bay.
If someone works nearby or is local to the area, it is hard not to like the value of this purchase.
Inventory Check
All you hear from the news and Realtors are: “Inventory is so darn low.”
In other words, it just means that homes for sale are in short supply. There are just not enough homes on the market for the buyer demand.
I want to illustrate how July inventory (or “homes for sale”) is so tight, making it tough for buyers and supporting price amid 20-year high mortgage rates.
Please note these are year-over-year numbers (July 2023 compared to July 2022):
July Inventory Year-Over-Year
Manhattan Beach:
-17.8%
Palos Verdes Estates:
-1.9%
Redondo Beach:
-25.2%
Hermosa Beach:
0% (flat)
Rancho Palos Verdes:
-39.8%
Rolling Hills Estates:
-43.3%
These numbers are amazing.
Last year, all the talk was about a lack of homes for sale amid the pandemic real estate surge. This year it has gotten worse.
While the market seemed to peak in Q1 & Q2 of 2022, one would think surging interest rate might create fewer buyers and more supply. But, if you look at the number above for July of 2023 versus July of 2022, supply has continued to fall precipitously.
There will be no relief for South Bay buyers unless we see an increasing home supply.
Interest Rates & Affordability
As I am writing this post, it is getting longer and longer. But there are some big topics I want to cover to demonstrate the big picture in the home market and how it affects us here in the South Bay.
Since I don’t want to make this a novel, I am going to list some bullet points that I aim to write about in the coming weeks.
- Interest Rates
- This is such a MASSIVE topic
- I want to talk about 7% rates and their effect
- Talk interest rate buy downs (risk/reward)
- Where do we go from here?
- Affordability
- Sky-high interest rates, low supply, and expensive prices
- I believe this is one of the most important topics to consider
- We will have the CAR HAI numbers in the next few weeks
- Future demand/future supply/what is next?
Final Thoughts
The Fed is keeping mortgage interest rates high, and while it is forcing many buyers out of the purchase market, the amount of homes for sale are too low.
There is still a huge supply imbalance as shown in the inventory numbers this July across virtually all the South Bay Cities covered in this weekly blog.
Until interest rates come down, where sellers become less committed to their ultra-low mortgage rates, then I do not see a way to more supply in the near term.
I cannot wait to see the Housing Affordability Index numbers and share them with you soon as that will illustrate how tough it may (or may not) be for buyers to afford homes amid this high interest rate / high price home market.
I’ll have more to come over the next couple of weeks.
Please stay tuned to the blog, our August podcast episodes, and of course, my Instagram for helpful real estate tips and “Hidden Gem” eateries throughout the South Bay.
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]