South Bay May Home Market Update and Black Lives Matter

Before I begin with the May 2020 South Bay data, I would be remiss not to discuss the senseless killing of George Floyd and the Black Lives Matter movement.

It is abundantly clear that racism still exists today in our country and that major systemic problems put millions of people at a disadvantage because of the color of their skin.

This is not right, and it must change, now.

With the black community, I want to listen, I want to learn, and I want to do my part to speak up to help bring a more just world for people of color.

I share the same feelings that Tim Cook, the CEO of Apple, said this week: “To the Black community – we see you. You matter and your lives matter.”

This blog is my avenue for speaking up. I will not be silent and intend to further the conversation to hopefully bring positive change.

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May South Bay real estate data is here.

I believe this round of monthly numbers is noteworthy.

More deals in May are going to be made, and closed, with the pandemic and stay-at-home order as a factor, whereas April reflected more home sales that could have occurred before COVID-19 worries.

As for my assessment of May home action from a high level…the numbers are still really bad. But, they are not quite as bad as last month.

There is a chance to see better numbers next month as we begin to reopen.

As always, we need more time, more data, and for the market to naturally work itself out amidst the uncertainty.

Pending Sales, A Leading Indicator

Regular blog readers know that I believe pending sales are going to be a leading indicator of where the market is headed during these unprecedented times.

The decrease in April pending sales had to be about as worst-case scenario as anyone could have predicted for our local markets.

The four areas I cover in this blog had pending sales down between 74% and 80%. For reference, I have linked last month’s April data blog here.

It got better in May year-over-year, but it is still super ugly.

Let’s dive into pending sales first.

Pending Escrows

• Manhattan Beach
  • May 2020: 17
  • May 2019: 39
    • Percent Change: DOWN -56.4%

• Hermosa Beach
  • May 2020: 11
  • May 2019: 17
    • Percent Change: DOWN -35.3%

• Redondo Beach
  • May 2020: 31
  • May 2019: 97
    • Percent Change: DOWN -68.0%

• Palos Verdes 90274
  • May 2020: 10
  • May 2019: 36
    • Percent Change: DOWN -72.2%

• Palos Verdes 90275
  • May 2020: 20
  • May 2019: 53
    • Percent Change: DOWN -62.3%

Those numbers are horrific, but not as bad as last month. I called last month’s numbers “catastrophic,” so “horrific” is much better wording if you are in a lighter mood.

Perhaps, we can see “less bad” numbers in June to show an improving trend higher and potentially a market that is finding its footing.

It was hard to believe the April pending sales numbers could continue over the long-term, but we are still seeing short-term ugliness that will be almost impossible to avoid not affecting market prices down the road.

That said, let’s take the small grain of positive that it is not as bad as last month.

Closed Sales, Now Reflecting Reality

Last month, the beach cities got crushed, while Palos Verdes was resilient.

However, it now looks like Palos Verdes made it to the party a little late and is now down big. The beach cities improved their closed sales, except for the city of Manhattan Beach.

Here are the closed sales numbers year-over-year:

Closed Sales

• Manhattan Beach
  • May 2020: 20
  • May 2019: 46
    • Percent Change: DOWN -56.5%

• Hermosa Beach
  • May 2020: 10
  • May 2019: 12
    • Percent Change: DOWN -16.7%

• Redondo Beach
  • May 2020: 52
  • May 2019: 87
    • Percent Change: DOWN -40.2%

• Palos Verdes 90274
  • May 2020: 8
  • May 2019: 29
    • Percent Change: DOWN -72.4%

• Palos Verdes 90275
  • May 2020: 20
  • May 2019: 53
    • Percent Change: DOWN -62.3%

The volatility is wild, but that is to be expected.

You can make an argument that closed sales would be worse in April because there were probably many buyers that backed out due to nervousness with the stay-at-home order. But, why did Palos Verdes take longer to react? And, why did Redondo Beach improve, but Manhattan Beach did not?

I am becoming a broken record over here; it is still just too early to come up with a thesis.

I think when I have the June numbers, taking a stab at a a very loose thesis of where the market is going is possible. A pure, educated guess!

At that point, we will be able to see an April, May, and June trend that will show horrible sentiment in April to reopening optimism in June.

Further, we can then aggregate all three months together as 2020 second quarter data to compare to Q2 of 2019.

Having a three-month trend and quarterly year-over-year data will allow for a very, very shaky guess.

Median Price, Positively Misleading

Median price is not too valuable right now, but everyone wants to know the median price, so here it is!

Remember, median price is a rolling 12-months worth of data and is not an accurate real-time reflection of market price since there are about nine months worth of sales factored in before the pandemic:

Median Price

• Manhattan Beach
  • May 2020: $2,500,000
  • May 2019: $2,345,000
    • Percent Change: UP +6.6%

• Hermosa Beach
  • May 2020: $1,675,000
  • May 2019: $1,677,500
    • Percent Change: DOWN -0.1%

• Redondo Beach
  • May 2020: $1,105,000
  • May 2019: $1,095,000
    • Percent Change: UP +0.9%

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

• Palos Verdes 90275
  • May 2020: $1,245,000
  • May 2019: $1,229,500
    • Percent Change: UP +1.3%

As mentioned above with closed sales, after we collect the June numbers and have the full second quarter stats, we can compare median prices on a quarter-over-quarter basis.

That will be powerful and give us a glimpse into how prices are performing amidst the pandemic and economic recession.

Active Listings Come into Play

A new data-set worth sharing are active listings, also known as inventory.

You will read a lot of national publications that even amidst the drop in buyer demand, there has been a big drop in inventory. If the experts are saying that nationally, then I am sure it is true, but what I mostly care about is local inventory.

Inventory can be a tailwind or headwind, so it is nice to know which way the wind is blowing in each specific market.

Active Listings (Inventory)

• Manhattan Beach
  • May 2020: 147
  • May 2019: 145
    • Percent Change: UP +1.4%

• Hermosa Beach
  • May 2020: 73
  • May 2019: 68
    • Percent Change: UP +7.4%

• Redondo Beach
  • May 2020: 149
  • May 2019: 161
    • Percent Change: DOWN -7.5%

• Palos Verdes 90274
  • May 2020: 120
  • May 2019: 161
    • Percent Change: DOWN -25.5%

• Palos Verdes 90275
  • May 2020: 116
  • May 2019: 155
    • Percent Change: DOWN -25.2%

Now, for some commentary on the above numbers.

Manhattan Beach does not seem to have short supply relative to last year. And, if you include the 14 properties “on hold,” the active listings would be 161. That would be the highest level of inventory for the city since July 2011.

Hermosa Beach is also seeing a jump in inventory. If you exclude September of 2019, this is the highest level of inventory Hermosa has seen since July 2012.

Redondo Beach is seeing a slight constrain on inventory compared to the same month last year. If you include the seven properties “on hold,” active inventory is at 156 which is in-line with typical inventory levels we have seen over the past few years in the spring and summer months.

Palos Verdes 90274 inventory is down 25.5% and even with seven listings “on hold,” this is some of the lowest inventory for the month of May in the past five years.

Palos Verdes 90275 is down much like its neighboring zip code and has 12 properties “on hold.” This is within range of inventory levels seen over the past two years and a tad lower if looking over five years.

So, as you can see, inventory is local market specific.

Consider which market is applicable to you and factor in the potential headwind or tailwind.

I will share more commentary on inventory next month.

Quick Notes and Important News

Mortgage Purchase Applications

Mortgage purchase applications have come roaring back, according to the Mortgage Bankers Association.

I am not a believer in week-over-week improvement, but rather year-over-year improvement. Amazingly, California purchase applications were 5.5% HIGHER when compared to last year.

Wow! That is a heck of a reversal. The fact that we can be higher today than when we were in a super strong economy seen in 2019 is so encouraging. Hopefully, we can see this trend continue rather than a result of just pent-up demand.

This is potentially a major positive.

Unemployment and ADP Numbers

The negative news is that initial unemployment claims totaled another 1.877 million. It is slowly declining each week but remember, these initial claims continue to be huge record job losses compared to any period of time pre-COVID-19. Losses just keep coming.

The ADP private payroll report showed a decrease of 2.76 million jobs in May which is crazy high, but well below expectations of an 8.75 million decline.

This is a major bright spot.

Finally, experts widely expect the unemployment rate to hit around 19.5% in tomorrow’s Labor Department report.

This is not good.

The information is mixed. Without question, the ADP numbers are a massive positive, but is it an outlier? If the unemployment rate is lower than expected, initial claims continue to slow, and job growth potentially comes back during reopening, then there is reason to be positive.

For now, there is still reason for concern around unemployment which drives housing prices.

Conclusion

To recap, the May home numbers are not as bad as April, but man, they are still terrible.

With hopes of reopening in a big way this June, I think we can begin to formulate some idea of where the market is going thanks to three months of pandemic data. To take the second quarter and compare it to the second quarter of last year, that information will very valuable as well.

Continue to be patient and proceed with caution in your real estate moves.

Most important, our heart goes out to the Floyd family, the black community, along with any other individuals that have been discriminated against or who have lost loved ones due to systemic racism in our country.

May the fight continue for a more fair and just society.

I will work do my part to speak-up and share my support in Black Lives Matter with more conversation next week.

With love and hope, Richard.

DRE: 01779425

Photography Credit: Richard Podgurski Jr.

Instagram: @richardpodjr

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