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    South Bay June Home Market Update: How Do the Numbers Look?

    July 2, 2020

    By: Richard Haynes
    South Bay June Home Market Update

    June South Bay real estate home numbers are in.

    With every new month, the data feels like it is even more critical as we all try to navigate volatile markets and unprecedented times in our country.

    Not only are we at the end of the month, but we are at the end of the second quarter. For the blog this week, I will just be covering the June numbers. Later this month, I will have a breakdown of the second quarter and a larger tranche of data as well.

    For reference, I have included past blog posts covering data for April and May. You can find the April numbers here and the May numbers here.

    The month of June was filled with optimism for South Bay real estate. Local real estate agents saw more deals being done, the national news was optimistic on re-opening, and the stock market was on a tear.

    Here at Manhattan Pacific Realty, we all felt the momentum picking-up steam. We had more buyers calling to start or re-start their home search, along with sellers more willing to list their home and test the market amid a pandemic.

    June felt like the start of our busy spring season that was put on hold thanks to COVID-19.

    So do the numbers reflect that notion?

    Let’s take a look…

    Pending Sales, A Leading Indicator

    Pending sales have always been a leading indicator for me and they will continue to be a big factor in seeing where the market is headed.

    That said, going forward, you will see a little more weight being placed on closed sales as we head into future months. I will expand more on this in a bit.

    Pending Sales

    • Manhattan Beach
      • June 2020: 25
      • June 2019: 37
        • Percent Change: DOWN -32.4%

    • Hermosa Beach
      • June 2020: 11
      • June 2019: 19
        • Percent Change: DOWN -42.1%

    • Redondo Beach
      • June 2020: 55
      • June 2019: 68
        • Percent Change: DOWN -19.1%

    • Palos Verdes 90274
      • June 2020: 16
      • June 2019: 38
        • Percent Change: DOWN -57.9%

    • Palos Verdes 90275
      • June 2020: 21
      • June 2019: 41
        • Percent Change: DOWN -48.8%

    As a reminder, the pending sales data above reflects the data from June of this year compared to June of last year. And, as you can see, we are still down significantly year-over-year.

    These numbers are disappointing compared to what many agents have reported that this June has felt like the busiest June in a very long time (including myself). With more deals happening, there is reason to consider why the pending numbers are still not adding up?

    The hidden reason to disappointing pending sales is likely twofold:

    • First, pending sales are up from the doldrums of April and May, which is a big positive. But, is it human nature to feel busier than ever when agents basically went on a mini-vacation for April and most of May?

    • Secondly, what I believe is the main factor, is that the pending sales numbers are slightly skewed based on how the MLS calculates pending sales and changing agent behavior thanks to COVID-19.

    To further my second point, the MLS has two “in escrow” designations:

    1. Pending
    2. Active Under Contract

    When a listing gets marked as “Pending,” it gets taken off public websites like Zillow and stops accumulating days on market.

    When a listing gets marks a home as “Active Under Contract,” the listing stays on public websites like Zillow and continues to be actively marketed while still accumulating days on market.

    In a nutshell, the MLS data only considers pending sales as those marked as ‘pending,’ while ‘active under contract’ listings stay as active inventory.

    So, here is where it gets tricky with the data…

    In today’s uncertain economic and real estate market, I have seen more agents, including myself, mark ‘active under contract’ instead of ‘pending’ in order to continue marketing the property despite being in escrow.

    In fact, for a listing I had last month we took the property from ‘active’ to ‘active under contract’ to ‘closed.’ Even when the escrow went non-contingent, I kept the home ‘active under contract’ because, well…you really never know what can happen last minute in times like these.

    So technically, that sale was an “active listing” that skipped pending and went straight to “sold.”

    Now, this is not something new and agents have had the choice between ‘pending’ and ‘active under contract’ for a few years now. Thanks to COVID-19, there is now a stronger propensity for agents to mark ‘active under contract’ which seems to be making the pending sales numbers a bit misleading.

    Not to mention, active listings will be misleading too.

    If we were to count just half of the ‘active under contract’ escrows to the pending sale numbers, then “pending sales” would be firmly higher year-over-year except for the Palos Verdes 90274 zip area.

    This is where the pandemic is changing everyone’s behavior (shopping, home seller, agent MLS markings) and throwing off numbers to make the market even more challenging to decipher.

    Closed Sales, Better than Last Month

    Closed sales are much better than last month, but still choppy.

    Closed Sales

    • Manhattan Beach
      • June 2020: 29
      • June 2019: 29
        • Percent Change: NONE

    • Hermosa Beach
      • June 2020: 18
      • June 2019: 15
        • Percent Change: UP +20.0%

    • Redondo Beach
      • June 2020: 47
      • June 2019: 90
        • Percent Change: DOWN -47.8%

    • Palos Verdes 90274
      • June 2020: 19
      • June 2019: 30
        • Percent Change: DOWN -36.7%

    • Palos Verdes 90275
      • June 2020: 41
      • June 2019: 41
        • Percent Change: NONE

    As you can see Manhattan Beach and the Palos Verdes’ 90275 zip had the same amount of deals close as last June. Hermosa Beach saw a 20% increase in closed sales compared to last year, while the Palos Verdes’ 90274 zip and Redondo Beach are still struggling.

    So, that is great news to see some recoveries in closed sales for these local markets. That all said, June still did not have closed sales numbers that matched the standard busy spring season of past years.

    That is to be expected as closed sales will lag stronger pending sales, especially since June was really the first month we saw momentum pick back up in our local South Bay markets.

    Like I said, the numbers are tricky.

    As referenced above, with the ‘pending’ and ‘active under contract’ escrows going higher, July has potential to show a huge surge in closed sales numbers because of all the (hidden) activity that took place in June.

    Median Price…Who Cares?

    As you can see by the subtitle, I could give two hoots about median price for each area! But, I will still include since these numbers are a fan favorite.

    Median Price

    • Manhattan Beach
      • June 2020: $2,475,000
      • June 2019: $2,350,000
        • Percent Change: UP +5.3%

    • Hermosa Beach
      • June 2020: $1,685,000
      • June 2019: $1,655,000
        • Percent Change: UP +1.8%

    • Redondo Beach
      • June 2020: $1,100,000
      • June 2019: $1,085,000
        • Percent Change: UP +1.4%

    • Palos Verdes 90274
      • June 2020: $1,604,500
      • June 2019: $1,700,000
        • Percent Change: DOWN -5.6%

    • Palos Verdes 90275
      • June 2020: $1,250,000
      • June 2019: $1,235,000
        • Percent Change: UP +1.2%

    The above data is a 12-month rolling average that is just not reflective of our current market. Right now, there are just too many dislocations occurring.

    Some houses are going to sell well below what they would have sold for last year and others are going to break all-time records.

    Until we can smooth out the numbers, which will take about a year or two, the bigger median price data is not worth too much.

    In today’s market, it is important to focus on current local comps for each specific property to find its true value…like always really!

    Median price on a 12-month rolling basis is not going to help anyone figure out the market.

    Active Listings, Deceptively Squeezed

    I really want to bring the attention back to what was discussed above when diving into active listing numbers. As I stated previously, ‘active under contract’ listings comes into play big time here. So, let’s dive in.

    Active Listings

    • Manhattan Beach
      • June 2020: 156
      • June 2019: 148
        • Percent Change: UP +5.4%

    • Hermosa Beach
      • June 2020: 72
      • June 2019: 75
        • Percent Change: DOWN -4.0%

    • Redondo Beach
      • June 2020: 168
      • June 2019: 167
        • Percent Change: UP +0.6%

    • Palos Verdes 90274
      • June 2020: 133
      • June 2019: 173
        • Percent Change: DOWN -23.1%

    • Palos Verdes 90275
      • June 2020: 133
      • June 2019: 176
        • Percent Change: DOWN -24.4%

    The Beach Cities are about right where they normally are this time of year, while Palos Verdes is down about 24% with inventory.

    Remember, ‘active under contract’ in escrow listings are considered active inventory on our MLS monthly data tracking.

    If we took out just half of the ‘active under contract’ from active numbers, then all inventory would be squeezed by double-digit percentages and Palos Verdes would feel a squeeze of about 30% compared to last year.

    So, although the numbers look normal by the beach, listings are in fact squeezed a lot more than the numbers show.

    Inventory is lower than normal across the board.

    Big Conclusion(s)

    I had a difficult run this time around when concluding my thoughts on the above data, as this was one of the weirdest-feeling data-sets in some time.

    Trying to decipher the numbers is getting more and more difficult.

    Pending Sales

    Agents, including myself, reported a gangbusters June for deal-making.

    The pending sales numbers do not reflect that notion, but pandemic risk is causing more agents to go ‘active under contract’ in hopes of soliciting back-up offers if things go wrong with their current escrow.

    The pending sales numbers are better than last month and better than last year if you consider the amount of home ‘active under contract,’ however, they are not shattering any busy spring season records.

    This leads me to believe agent reports are better than the pending numbers say, but not extraordinary due to the human element of “feeling” like you are busier then ever after coming back from rock bottom just last month.

    Closed Sales

    Pending sales are still a leading indicator in many circumstances.

    Thanks to the volatile data and market dislocations, closed sales next month are going to confirm a comeback…or not.

    This is a horrible metaphor, but pending sales right now are much like Coronavirus tests versus deaths that have been highly politicized.

    **I am not trying to make a political statement or be insensitive at all. Instead, I am trying to find the best comparison to help decipher the home data above.

    You can argue that COVID-19 infections are going up or down because we have more testing or less testing, but the true measurement of the pandemic increasing or decreasing are deaths.

    In the metaphor, pending sales are the “tests” and closed sales are the real result that are tough to argue.

    We need to see outperformance year-over-year in July’s closed sales to confirm the strong June deal activity.

    I think it will happen.

    Wrapping it Up

    All in all, June was a great month for our local home markets.

    Deal making is most certainly up, even though the bar was not set high from previous months.

    Inventory is around normal levels, and it is likely lower than the numbers suggest. The South Bay is beginning to a feel an inventory squeeze and the pent-up demand is definitely real.

    If July closed sales confirm the jump in June activity, pending sales continue to get better, and inventory remains steady or goes lower, then it is off to the races.

    That is all contingent upon risk factors from COVID-19, walking back re-opening, and the stock market.

    Numbers are still very choppy, and we are not in a better place than 2019, but the signs are a whole lot better than the past two months.

    There are a lot of reasons to be optimistic if the market can keep up this momentum.

    I hope everyone has a fun and safe Fourth of July holiday!

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