As hard as it is to believe, we are just a few weeks away from saying goodbye to 2024! It’s amazing how quickly this year has flown by.
The end of the year always inspires a handful of annual blog posts, and one of my favorites is recapping my “Fearless Predictions” from early January. For those who have been following along for years, you know I make it a point to revisit my predictions—not just to keep myself honest, but also because there’s so much to learn from reflecting on what I got right (and not-so-right).
Sometimes, I hit the nail on the head. Other times… well, let’s just say I’m way off target. But that’s the fun—and challenge—of forecasting. Predicting the future is never 100% accurate, but I believe my 2024 predictions held up well!
For anyone new to the blog or curious to revisit my original predictions, check out my post from January 3, 2024: “South Bay Real Estate 2024: Fearless Predictions.” You can also explore past prediction posts by browsing the blog archives—just click on any January month from the past seven years.
Now, let’s dive into the recap and see how my fearless predictions played out!
Prediction #1 – South Bay Home Prices Rise Insignificantly
My Prediction: Prices will grow but at an uninspiring rate.
Results: In 2023, the Beach Cities to Palos Verdes all saw their home prices fall year-over-year. It was a tough 12 months for sure.
Many pundits predicted 2024 to be a strong comeback year for prices, sales, and falling interest rates. I remained more conservative, believing the South Bay’s market was so unaffordable that it would be tough for prices to climb significantly.
As a result, I called for growth between 0% – 5% which was uninspiring considering inflation is still above 2%.
These are the home price appreciation results:
• +3.2% – Rancho Palos Verdes
• +3.4% – Hermosa Beach
• +4.9% – Rolling Hills
• +6.6% – Redondo Beach
• +9.3% – Manhattan Beach
• +9.6% – Palos Verdes Estates
• +11.8% – Rolling Hills Estates
These are results of other South Bay markets:
• -0.5% – Lomita
• +4.1% – Torrance
• +4.7% – Gardena
• +5.7% – San Pedro
• +5.9% – Hawthorne
• +6.4% – Wilmington
• +6.6% – Inglewood
• +15.5% – El Segundo
As you can see above, I was in the ballpark, but my prediction proved to be too conservative with 0% – 5% growth. The more appropriate range would have been 3% – 7% growth, which is likely more in line with the professional predictions which were much more aggressive.
That all said, when you look at the breadth of South Bay markets, many had muted growth thanks to home buyers that depend on affordability and lower interest rates.
Speaking of which, let’s transition to my interest rate prediction results.
Prediction #2 – Mortgage Rates Fall but Remain Elevated
My Prediction: Conforming rates range from 6% – 6.5%, and jumbo rates range from 5.5% – 5.9%.
Results: Almost all residential home analysts from Zillow to Redfin to California Association of Realtors hung their hat on much lower interest rates than 2023.
I remained a skeptic.
With many projections solidly around 5% interest rates, I felt conforming loans would come down but remain elevated. And that jumbo loans would trend slightly lower than conforming due to their perceived safety as with high-net-worth borrowers.
Over the years, I have said predicting mortgage rates is a fool’s game…and almost always I am the fool. This year, however, I nailed it.
According to the St Louis FRED, 2023 rates ranged from 6.1% to 7.8%.
This year saw conforming rates range from 6.1% to 7.1% with an average rate right around 6.5%. That is right in-line with my projection.
What’s more, I had clients lock in jumbo rates at 5.75% for parts of the year, but to be fair, they are now higher to finish the year.
All in all, I feel great that this one came through which was not a consensus opinion at the time.
Prediction #3 – Home Inventory Remains Painfully Low
My Prediction: Low numbers of South Bay for-sale homes remain a challenge.
Results: This one was another correct projection even though the numbers below suggest otherwise without context. Read the numbers and then I will explain after…
These are active inventory numbers on the year:
• -8.3% – Hermosa Beach
• +7.1% – Manhattan Beach
• +14.0% – Palos Verdes Estates
• +18.6% – Redondo Beach
• +22.2% – Rolling Hills Estates
• +59.4% – Rancho Palos Verdes
Obviously, the percentage gains with for-sale homes jumped in 2024, but it does not tell the whole story. Regular readers know that 2022 – 2023 brought historically low home for sale by a country mile.
And while we are off the lows of 2022/2023 active inventory, all of the above markets remain at historically low levels of houses for sale in the South Bay relative to long term averages.
For instance, even though Rancho Palos Verdes saw a much-needed jump of almost 60% more inventory, the city is still well-below its historical inventory average from 2008 to 2020.
The same goes for all of the cities above with the exception of Manhattan Beach which is more in-line with its historical average (Manhattan Beach has outperformed and had a tight home market for the last decade).
All in all, the South Bay remains incredibly low on its supply relative to history. It is nice to see for-sale homes begin to rise but it needs to go much, much higher.
Prediction #4 – New Construction Homes Outperform
My Prediction: New construction inventory will remain constrained with solid demand.
Results: This one is tough to measure but I will do my best to find data to tell the story.
Assuming new construction is anything built after 2023, I pulled new constructions sales from Manhattan Beach to Palos Verdes.
In 2024, we saw 99 closed new construction transactions as of writing this blog. There are 15 in escrow and another 43 new homes currently on the MLS.
The major city players in new construction are Manhattan Beach and Redondo Beach.
Manhattan Beach made-up a whopping 33% of all new construction sales with the median price trending in the $4 million range. This is incredible demand for high-end housing in a small beach community.
Redondo Beach saw about 51% of the new construction sales.
And while many will argue there is an inventory glut of new construction is piling up (especially in North Redondo) with 20 active homes, there are 11 Redondo new construction listings under contract, which suggests less than two months of inventory during a traditionally slow season.
Developers see new homes gobbled up in Hermosa Beach and new construction is few and far between on The Hill.
All in all, new homes were built and they were bought in a timely manner, especially in the new construction hubs of RB and MB…and it does not seem to be slowing down.
Prediction #5 – Long-term Bet: Higher Rates – Forever
My Prediction: The days of “zero interest rate policy” (ZIRP) are over…
Results: This is obviously a long-term bet that will take years, if not a lifetime, to fully play out. That said, it does not look like we will come close to the ultra-low rates of sub 3% for a very long time. Experts seem to agree that those days are now long gone and may never return. We shall see!
Conclusion
I hope you enjoyed the recap of last year’s predictions.
It is a lot to read, so here are the highlights of my prediction results:
- South Bay Home Prices Rise Insignificantly 0% – 5%
- While a good chunk of South Bay market hit this range, many went higher.
- The right forecast would have been more in line with a 3% – 7%.
- Mortgage Rates Fall, but Remain Elevated
- Pretty much nailed this one on the head for conforming rates. Close on Jumbo.
- For the most part, guessing mortgage interest rates is pure luck.
- Home Inventory Remains Painfully Low
- From the beach to Palos Verdes, all market inventory remains below historical averages.
- Perhaps the one exception is Manhattan Beach, however, inventory is still low.
- New Construction Homes Outperform
- Developers produced new construction and buyers bought them.
- Even with current high inventory, velocity of sales keep inventory low.
- Long-term Bet: Higher Rates – Forever
- We will see!
All in all, I feel pretty good about getting close to most of my picks. My price forecast was incorrect, but for the most part, everything else was pretty accurate. I will take it!
As always, please look for my annual predictions blog to start the year. It should go live the week of January 6, 2025 and I hope you enjoy!