The thick marine layer hugging our South Bay beaches the past two months might have some of you forgetting it’s summer and that might be a perfect metaphor for the current state of our local housing market.
If the South Bay housing market was a season, it is shaping up to be a cool, cool summer. The scorching hot market of the past two years is finally cooling off.
With the conclusion of July comes a nice batch of new numbers to study. While I typically do not write about numbers for just one month, I do think it is prudent to study and share this past July action. I have covered five cities with the three datasets below:
1. Rolling 12-month median price
3. Pending sales
Note: I left out Rolling Hills (too small) and Rolling Hills Estates (too volatile thanks to condos and Rolling Hills Country Club). Below, the data is in order from shifting (or softer) markets to more solid markets, according to the July numbers. All in all, I think it is reflective of what we are feeling in the market.
Key July Home Numbers
Before getting into the July data, remember from my quarterly reports — I believe inventory is what’s needed to slow this market.
The more inventory, the more competition for sellers, which means more leverage returning to buyers and thus, an effect on prices slowing their growth.
Median price is going to be a lagging number but it is still important, and pending sales show how different the market is from previous years.
Rancho Palos Verdes
First on the list is Rancho Palos Verdes (RPV), the Palos Verdes Peninsula’s most affordable city. It also looks to be the fastest shifting city (per the numbers) of the five cities covered this week.
Median Price: $1,700,000 (+13.5% record high)
Inventory: 90 listings (+15.4%)
(July 2019: 183 listings)
(December 2019: 94 listings)
The 12-month rolling median price for RPV is at a record high — spoiler alert, every single city on today’s list is at a record high which is why median prices are not reflective of the shift.
What you want to look at is inventory — it is up 15.4% compared to last July. We have not seen inventory levels climb year-over-year for quite some time. For perspective, you can see inventory is still lower than July 2019 (pre-pandemic comp) and even lower than December 2019 which is typically the slowest time in our South Bay market.
While inventory is higher, it is still strongly lower than before the pandemic. The next statistic is what I found to be most incredible.
Pending Sales: 19 (-70.8%)
Almost completed transactions are down an astonishing 70% compared to last year. Pending sales have only been lower twice in the past 10 years and those records were made in slower months of November and December, not summer.
Inventory is rising and deal-making is plummeting. Those two trends clearly show a shift happening in RPV.
Palos Verdes Estates
Not too dissimilar from RPV is its neighboring city of Palos Verdes Estates (PVE) where we are seeing a shift as well.
Median Price: $2,799,400 (+29.6% record high)
Inventory: 48 listings (+14.3%)
(July 2019: 103 listings)
(December 2019: 58 listings)
Again, another rolling 12-month record high prices but the big news here is that PVE’s inventory saw its July inventory rise close to the same pace as RPV when compared to last July’s inventory numbers.
While this is a positive shift to buyers, you can still see that inventory is lower compared to 2019 pre-pandemic July and typically the slowest time of year in December.
Pending Sales: 9 (-62.5%)
As you’ll see, there is another precipitous drop in pending sales. There are plenty of times Palos Verdes Estates has seen fewer pending transactions than nine, but this number is in the bottom part of the range.
Up next is the beach cities’ most affordable city of Redondo Beach with another record price, but you already knew that.
Median Price: $1,400,000 (+12.9% record high)
Inventory: 122 listings (-2.4%)
(July 2019: 169 listings)
(December 2019: 108 listings)
As you can see, inventory is not rising in Redondo Beach, however, it is slightly lower which gives buyers even fewer options than last July. It is still lower than pre-pandemic July of 2019 but slightly higher than December 2019.
Pending Sales: 33 (-62.1%)
The pending sales number has dropped in a similar manner to PVE and there has only been one other time in the past 10 years that Redondo has seen fewer. July in Redondo normally sees DOUBLE this amount.
All in all, inventory is stronger in Redondo than the hill, but there is still a hesitation in deal-making.
Little dependable Hermosa Beach is at a record high and still fewer choices as well.
Median Price: $2,225,000 (+14.1% record high)
Inventory: 45 listings (-15.1%)
(July 2019: 79 listings)
(December 2019: 42 listings)
Inventory has made a big drop compared to July of 2021 and is significantly lower than July of 2019. There is no let up here for buyers.
Pending Sales: 5 (-82.8%)
Shockingly, pending sales performed about as poorly as one could imagine. This is essentially the lowest number on record for Hermosa Beach — where pending sales rarely dip below 10 and are typically around 17.
That said, this city looks to be on sound footing thanks to squeezed inventory regardless of the slowing transactions.
Last but certainly not least, the South Bay’s most expensive city takes the most prestigious spot on the list as it is the strongest. per the July numbers.
Median Price: $3,175,000 (+7.8% record high)
Inventory: 77 listings (-21.4%)
(July 2019: 155 listings)
(December 2019: 97 listings)
Not only a record high median price but inventory is down over 21% and less than half back in July of 2019. That is impressive.
Pending Sales: 15 (-69.4%)
The pending sales number is way down like all of the cities discussed today and is reflective of typical numbers we normally see in the slow December months.
That said, if inventory stays low or continues to fall, then Manhattan Beach prices will have a lot of pressure to continue their strong ascent higher.
All in all, no markets covered in my weekly South Bay blog are seeing anything close to declines in prices. Appreciation is strong and the rise in inventory is quite frankly not enough to put a dent in prices — even if we are looking at median prices that are normally a lagging indicator.
While our markets are very healthy, it is crystal clear that there is a shift underway thanks to a major drop in pending sales throughout all five cities. Furthermore, the Palos Verdes Hill is seeing its inventory climb which is noteworthy.
If you listened to my latest podcast, I spoke about second home markets shifting as they were the major beneficiaries of the pandemic real estate boom of the past two years. That hot trend has cooled.
What South Bay market was the breadwinner of the firing hot pandemic home fervor? Palos Verdes.
It seems Palos Verdes’ shift is on now and moving faster than the beach, and that makes sense.
Redondo Beach is sitting in the middle with flat inventory, and Hermosa and Manhattan Beach are both on sound real estate footing as travel, dining, and going back to the office is returning.
Without question, I will continue to do these monthly reports in between quarters to see if we can spot the trend early to help you make the best real estate decisions here locally.
Here’s to the marine layer lifting and you getting to enjoy an amazing August and September.