Every January I write my fearless predictions for the South Bay real estate market in the upcoming year. As the year comes to an end, I like to hold myself accountable and show readers how my predictions actually turned out. If you want to refresh your memory, check out my predictions for 2018 here. Let’s see how I did…
Prediction Recap: Mortgage Rates Will Rise Moderately
Prediction: I predict a rise of about 0.25% with a maximum jump of 0.5% before The Fed would step in to get rates under control.
Recap: I was a little off, but, by year end, I could be close depending on where rates end up.
According to FRED (Federal Reserve Economic Data), on January 4th, 2018, the average 30-year fixed mortgage rate in the United States was 3.95%. As of December 20th, 2018, the 30-year rate is at 4.62%
Shockingly, rates climbed as high as 4.94% in November, representing almost a full percent higher than where we started the year. There is no doubt, this was the main contributor to slowing home sales throughout the country. I did not think the Fed would let it go that far!
Prediction Recap: Tax Reform Hurts South Bay Beach Properties, Helps Inland Homes
Prediction: Tax reform will hurt the luxury real estate market and certainly property by the beach in the South Bay…I believe the elimination of second home deductions will have a negative demand and price impact on MB and HB Sand Sections, the Redondo Beach Esplanade, and Palos Verdes Bluff properties.
Recap: I think I nailed this one as the Manhattan Beach Sand Section is the poster child of luxury property and expensive second homes, not to mention the other beach areas are soft or getting softer.
Manhattan Beach Sand Section median price is down by 6.8 percent YTD (year-to-date) compared to last year’s YTD.
Using the same metric, South Redondo West of PCH (including the Esplanade) is down 3.7 percent.
Hermosa Beach Sand Section prices were up due to some aberrations, but sales were softening down 4.5 percent.
There are normally not enough sales on the Palos Verdes Bluffs to make a clear determinant, but there hasn’t been one sale this year.
Prediction Recap: Palos Verdes – A Tale of Two Markets
Prediction: Summary: High-end property prices soften, while affordable properties floor continues to increase.
Recap: I was half right on this one! Affordable prices are continuing to grow, but I missed softness in the high-end homes.
Affordable homes in Palos Verdes continued their march upwards in 2018 and the floor continues to go higher in this area.
This year there were 14 sales in Palos Verdes for $5 million and over compared to last year’s 10 sales. Additionally, median price was up to $6.3 million compared to $6.1 million last year.
Prediction Recap: Low Income Market Prices will Explode Higher
Prediction: Low income home and income property values will explode higher….
Recap: Nailed this one!
In South Los Angeles, single-family home prices are up roughly 11%, while income property values are up roughly 10%.
In Hawthorne, single-family home prices are up roughly 15%, while income property values are up roughly 15%.
In Lawndale, single-family home prices are up roughly 8%, while income property values are up roughly 12%.
In Inglewood, single-family home prices are up roughly 12%, while income property values are up roughly 7%.
Prediction Recap: When will the Real Estate Market Correct?
Prediction: …mild California price correction in real estate and I believe it will occur in late 2019 or even 2020…
Recap: There is no right or wrong answer for this one as there is still time.
Interest rates are hurting the market, as shown by slowing sales. If interest rates continue to rise and sales continue to soften, I believe we will see a minor correction in late 2019 or 2020 between five and 15 percent.
Prediction Recap: Long term Bet – 3-D Printed Buildings in Less Than 10 Years
Prediction: Look for 3-D printing in the Los Angeles area to become the norm in the next 25 to 30 years.
Recap: Again, there is no right or wrong answer here. I think this became a bigger possibility this year. According to local area contractors, they saw their building costs rise by 20 percent. And with the recent fires, they feel prices will only continue higher due to labor shortages. That being said, we NEED 3-D printing as soon as possible!
Well, there you have it. I had some wins and some losses, but overall was able to predict softness by the beach and surging prices in low income property. Hope you were able to profit from this. Look out for my fearless predictions for 2019 in early January! Wishing everyone a happy holiday.
Richard Haynes
DRE: 01779425
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The Richard Haynes Real Estate ShowA leader in South Bay real estate for the better part of a decade, Richard thrives as an advisor to his clients with over $248 million in sales as a broker or investment principal at his boutique agency, Haynes. Richard is known for his keen local market insights which have been featured in the L.A. Times, The Street, and Forbes, along with his weekly South Bay real estate blog. [read more]