South Bay Real Estate Quarterly Numbers Are Ugly…Again

It’s time to close out the quarter with some juicy numbers. This is a big Q1 report because the comps are incredibly difficult from last year.

In 2022, the first quarter was essentially the top of residential real estate markets as mortgage rates began to surge, ultimately slowing down the market locally, in our state, and across the country.

Q1 and Q2 of this year will have the toughest comps in recent memory and I will try to bring more clarity by also sharing the rolling 12-month median prices.

Additionally, I will explore closed sales during three different periods for you to try and gauge demand (or lack of supply) for homes and what might come in the future.

All in all, slowing sales in the South Bay are about as tough to understand as ever.

Are there fewer buyers now? Are there fewer sellers? Are rates keeping buyers on the sidelines? Are rates keeping sellers on the sidelines? Is limited supply supporting home prices? Is the economy slowing and hurting prices?

The answer is, it is probably a little bit of everything. I will dive into the numbers below and let you decipher things for yourself.

Manhattan Beach

Manhattan Beach seems to be up every single quarter. In my last report, Q4 year-over-year median prices were down 17.3% and this quarter that trend continues as you can see below.

• Manhattan Beach Q1 Median Prices: DOWN -10.0%
  • Q1 of 2023: $2,800,000
  • Q1 of 2022: $3,112,500

My gut reaction is that we have a lot of buyers for the $2.8 million price and higher, however, Manhattan Beach inventory is a fight in the median price range. That said, the ultra high end is not selling like crazy as it was in 2021 and 2022 and as a result having an effect on the numbers heading lower.

The rolling 12-month numbers help to smooth out the story a bit.

• Manhattan Beach Rolling 12 Median Prices: UP +1.4%
  • Ending Q1 2023: $3,060,000
  • Ending Q1 2022: $3,017,500

What is interesting is that last quarter the rolling 12 was up 3.4% and now another slow quarter has price growth decelerating to 1.4%.

• Manhattan Beach Q1 Closed Sales: DOWN -44.3%
  • Q1 of 2023: 39 sales
  • Q1 of 2022: 70 sales
  • Q1 of 2019: 77 sales (DOWN -49.4%)

Closed sales have seen an almost 45% drop which is a crash when it comes to sales.

This is essentially in-line with last quarter and all markets in the South Bay and beyond.

Normally, a precipitous drop in sales is an ominous sign, but inventory is still squeezed, and this is 50% fewer sales than 2019. So, we are far from a normal market pre-coronavirus.

All in all, the numbers are tough to unpack.

• Sales are down big, but inventory is squeezed.
• Prices are down, but against incredible comps.
• Rolling 12-month numbers are up, but they are decelerating.

Interesting times to say the least and many markets mirror the same tricky statistics.

Palos Verdes Peninsula

The Palos Verdes home market has been on a tear for the last 2.5 years.

While the three big cities on The Hill have performed incredibly well, Rolling Hills Estates saw its pricing fall in previous quarterly reports – Palos Verdes Estates and Rancho Palos Verdes staying flat or slightly higher.

That has now changed with Palos Verdes Estates and Rancho Palos Verdes seeing their Q1 median prices fall compared to Q1 of last year.

Below are 2023 Q1 prices vs. 2022 Q1 prices:

• Palos Verdes Estates Q1 Median Prices: DOWN -14.0%
  • Q1 of 2023: $2,686,086
  • Q1 of 2022: $3,125,000
• Rancho Palos Verdes Q1 Median Prices: DOWN -7.1%
  • Q1 of 2023: $1,560,000
  • Q1 of 2022: $1,680,000
• Rolling Hills Estates Q1 Estates Median Prices: DOWN -52.7%
  • Q1 of 2023: $1,276,000
  • Q1 of 2022: $2,700,000

Palos Verdes Estates has been on fire for years. That has now stopped dead in its tracks with a 14% reversal in price. Rancho Palos Verdes is also down.

Rolling Hills Estates is down massively. As mentioned in many past blogs, these numbers are skewed with Rolling Hills Country Club selling out of their high-priced luxury homes and more Rolling Hills Estates condo and townhome sellers coming out post coronavirus.

For Palos Verdes Estates, it is much like Manhattan Beach where there is a squeeze on median price homes and a lot fewer ultra-high-priced sales.

Rancho Palos Verdes is soft thanks to bifurcated submarkets where ”far away” homes are now out of demand thanks to people returning to the office.

And finally, Rolling Hills Estates’ numbers are still a little funky.

• Palos Verdes Estates Rolling 12 Median Prices: UP +5.5%
  • Ending Q1 2023: $2,729,500
  • Ending Q1 2022: $2,587,200
• Rancho Palos Verdes Rolling 12 Median Prices: UP +2.1%
  • Ending Q1 2023: $1,705,000
  • Ending Q1 2022: $1,670,000
• Rolling Hills Estates Rolling 12 Median Prices: DOWN -21.1%
  • Ending Q1 2023: $1,400,000
  • Ending Q1 2022: $1,775,000

As you can see, the rolling 12-month numbers smooth out the narrative with Palos Verdes Estates and Rancho Palos Verdes performing well and Rolling Hills Estates showing how the effects of Rolling Hills Country Club take some time to clear.

• Rolling Hills Rolling 12 Median Prices: DOWN -8.0%
  • Ending Q1 2023: $3,892,500
  • Ending Q1 2022: $4,232,000

Since Behind the Gates in Rolling Hills has so few sales, it is not fair to take a handful of sales.

Rolling 12-month numbers show an 8% price decrease with my last quarter report illustrating a 15% price decrease for full-year 2022 results.

Rolling Hills was one of the worst performing markets of the decade (2010 – 2019) but came out as the best performing market in 2020 and 2021.

Now that Coronavirus is in the rear-view mirror, the luxe gated city might be back to sluggish price growth for the foreseeable future.

Onto the sales numbers…

• Palos Verdes Estates Q1 Closed Sales: DOWN 38.1%
  • Q1 of 2023: 26 sales
  • Q1 of 2022: 42 sales
  • Q1 of 2019: 29 sales (DOWN 10.3%)
• Rancho Palos Verdes Q1 Closed Sales: DOWN 30.4%
  • Q1 of 2023: 80 sales
  • Q1 of 2022: 115 sales
  • Q1 of 2019: 83 sales (DOWN 3.61%)
• Rolling Hills Estates Q1 Closed Sales: DOWN -55.6%
  • Q1 of 2023: 16 sales
  • Q1 of 2022: 36 sales
  • Q1 of 2019: 27 sales (DOWN -40.7%)

Just like Manhattan Beach, sales are down, down, down no matter how you slice it in Palos Verdes.

It is truly a breath-taking collapse in sales.

This is more an impact on Realtors’ commissions, escrow companies, title insurers, and any other business that is supported by real estate transactions.

For now, with the exception of “far away” submarkets (Mira Catalina, Rolling Hills, PV Drive East), the hill is relying on low inventory just like Manhattan Beach to support prices.

Hermosa Beach

Hermosa Beach was the slow and steady market that was always consistently climbing, even during the early days of the Coronavirus pandemic.

Last quarter, Hermosa saw its first decline and again, in Q1, that trend has continued.

• Hermosa Beach Q1 Median Prices: DOWN -8.6%
  • Q1 of 2023: $1,965,500
  • Q1 of 2022: $2,150,500

All good things come to an end, and it seems even Hermosa Beach is not immune to low inventory and surging mortgage rates.

• Hermosa Beach Rolling 12 Median Prices: DOWN -3.9%
  • Ending Q1 2023: $2,115,300
  • Ending Q1 2022: $2,200,000

Rolling 12-month price declines are accelerating. Last quarter we saw it slightly down 1.8% and as you can see, it is now close to a 4% decline. There are some darn tough comps out there.

• Hermosa Beach Closed Sales: DOWN -46.3%
  • Q1 of 2023: 22 sales
  • Q1 of 2022: 41 sales
  • Q1 of 2019: 34 sales (DOWN 35.3%)

Finally, just like Manhattan Beach and Palos Verdes, sales are collapsing and down in a big way from Q1 of 2019.

This makes things really tough to read.

Redondo Beach

Onto our last city of the post, and while the Redondo housing market was a delightfully positive surprise upside last quarter, unfortunately the quarterly number is now down.

• Redondo Beach Q1 Median Prices: DOWN -7.9%
  • Q1 of 2023: $1,275,000
  • Q1 of 2022: $1,385,000

As great as the fourth quarter was for Redondo Beach, it seems the overall South Bay market tides are too strong. Year-over-year, prices were nearly down 8%.

***Please note, for simplicity purposes, these numbers do include parts of Hollywood Riviera (Torrance) but all the comps contain Hollywood Riviera numbers so the jump is not artificially juiced.***

• Redondo Beach Rolling 12 Median Prices: UP +6.7%
  • Ending Q1 2023: $1,430,000
  • Ending Q1 2022: $1,340,000

The rolling 12-month numbers are still up, but they are decelerating. If the other cities are any other indicator, then we will likely see this number go negative in the next quarter or two.

• Redondo Beach Closed Sales: DOWN -35.8%
  • Q1 of 2023: 97 sales
  • Q1 of 2022: 151 sales
  • Q1 of 2019: 178 sales (DOWN 45.5%)

And lastly, sales are collapsing just like everywhere else…need I say more?

Major Take-Aways

There is a lot to digest in this report. One thing is for sure – after two quarters there is a shift in our South Bay home markets. Prices are falling but the comparisons are up against some of the strongest comps ever.

So while lower sales can be attributed to a weakening buyer pool thanks to high mortgage rates, low sales can also be attributed to few homes for sale and wealthy home owners unwilling to trade their locked in 3% mortgage rates.

It is still too early to tell which side might win out.

At some point, high interest rates for years will finally take their toll on the market. As long as inventory stays constrained, low supply with outsized demand will support prices.

Conclusion

All in all, from a numbers perspective, this was the second quarter in a row with really ugly numbers.

But there is more nuance to the story than just numbers.

We have buyers struggling to land the right homes in their budget, but at the same time, we have nervous sellers that may get a lower price than their neighbor six months ago.

It is a fascinating dynamic that is almost impossible to predict what the future holds.

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