Every year around this time I like to write about undervalued areas in the South Bay. There is no substantial evidence as to why these areas are undervalued. This blog post is just an active real estate agent making a gut call on areas that are lagging the rest of the market or are just plain cheap.
If you want to test my gut feelings, I will recap my blog post from last year on what areas offered value. For reference, check out last year’s value area blog here and also the recap of 2016 here.
Value for 2018
Finding value in the Beach Cities and Palos Verdes has proven to be difficult this year. Most sub-markets seem to be valued fairly or maybe even over-valued, while very few sub-markets have pulled back significantly.
With that said, there are always “value plays” where you can find a great deal. Let’s take the Manhattan Beach Tree Section for example. In the Tree Section you could buy a home that is a discount to that market. However, I do not see entire sub-markets offering value like I have in years past.
For this year’s post, I am only going to touch on one South Bay sub-market I feel confident in, as well as two Los Angeles sub-markets. Let’s take a look…
Palos Verdes – Silver Spur, MLS Area 176
The one and only sub-market within the Beach Cities and Palos Verdes I feel confident about is the Silver Spur sub-market.
This area, primarily in Rancho Palos Verdes, offers some of the most affordable homes on The Hill. Today, buyers can still find a good-sized home with three or four bedrooms on a 7,000 sq. ft. lot in the low $1 million range. Additionally, there are fixer homes starting under $1 million which is a rarity in today’s South Bay real estate market.
One of the biggest perks to this sub-market: Silver Spur Elementary School. Silver Spur is one of the best, if not the best, elementary schools in Palos Verdes. If you are one of the few homes in this sub-market that is not zoned for Silver Spur, then your kids will attend Montemalaga Elementary School…another great school located in a very pricey area of Palos Verdes with great neighborhood support.
Pairing affordable prices with top-flight schools gives the Silver Spur sub-market my top choice for 2018.
L.A. Submarket – Park Mesa Heights
Park Mesa Heights area is just like West Adams and Leimert Park six or seven years ago, which have been all the rage over the past few years. Both areas have appreciated over 50% over the past few years (over 100% in some cases in the past seven years) due to the Exposition Light Rail and the positive effects of transportation growth.
Now, when I write about Park Mesa Heights, I am also including the nicer View Heights neighborhood and the tougher Hyde Park area as well (refer to map). Park Mesa Heights surrounds the coming light rail stop at Crenshaw and Slauson. This light rail stop is going to be a boon for the area. Home flippers have already migrated to this area and are selling turnkey homes in View Heights for record numbers, this in turn, is starting to push values higher in tougher locations like Hyde Park.
Although this area still has a long way to go, you cannot miss on a home purchase here due to the affordability (prices in this area range from about $500,000 to $700,000). If you are patient, this area should have massive appreciation over the long term once the light rail is up and running. I, personally, have been investing in this area for years now, and I am very bullish over the long term.
L.A. Large Market – South L.A. (Formerly South Central L.A.)
As most of my readers know, I am bullish on affordable and low-income areas due to minimum wage increasing. South Los Angeles is a market that will benefit as a result of many residents being low-income and blue-collar workers.
On July 1st, minimum wage will increase from $12 per hour to $13.25 per hour. Although it does not seem like much, that is a 10% increase in wage growth, which is significant. Not only will rent become more affordable, but resident’s buying power will jump. With the combined minimum wage increase over the past two years, these earner’s salaries have jumped over 25%.
That wage jump is bullish, not only for owner-occupied homes, but also for landlords who are able to increase rents. There should be strong price growth in this area over the next 12 months if interest rates stay in check.
Recapping Value for 2017
How did the “gut” feelings turn out in 2017? Here is a recap of the blog from last year…
Redondo Beach El Nido east of Inglewood Avenue
El Nido (east of Inglewood Avenue) year over year sales climbed almost 130%! There were 16 sales in this small sub-mart versus seven sales in the year prior.
From June 2017 to June 2018, there were three homes that sold over $1 million. Before those sales, no home in this area had ever sold over $1 million. With stronger sales and new record highs, El Nido price increases are just around the corner.
South Hermosa Beach Sand Section Property
Year over year, South Hermosa Sand Section median prices climbed 7.8%. The median price jumped to $1.725 million from $1.6 million from June 2017 to June 2018.
This area has been under-valued for a long time and the numbers show that buyers are catching on. Sales grew to 39 sales over 36 sales the year prior. This price surge is the real deal.
Palos Verdes Estates Condos
Sales growth in Palos Verdes Estates (PVE) condos exploded 240% high year over year. From June 2016 to June 2017 there were only five PVE condo sales. There were a booming 17 sales this new period from June 2017 to June 2018.
The price growth was 5.3% year over year which is extremely impressive when you account for much more inventory from the year prior. That means with an astonishing 240% jump in condo sales, prices were still able to grow due to high demand. These affordable options for PVE certainly were highly desired by buyers.
Conclusion
Well, there you have it. If you took last year’s value area advice, you probably did very well on your real estate investments and are primed to continue into this year. Let’s see how the new value areas pan out in the next 12 months. See you next June!