Summer is finally here! It has been a cold, wet and gloomy spring, but the post July 4th thaw is here. With the start of July and summer, it also means the end of the second quarter data!
The spring selling season is always important to our South Bay housing markets. And with the price trends lower to kick of Q1 of 2023–it is going to be interesting to explore if that trend continues.
Manhattan Beach is one of the strongest markets in the South Bay. It was in demand before the pandemic, surged during the pandemic, and continues to feel strong in the real estate agent community.
That said, it showed price weakness in Q4 of 2022 and Q1 of 2023. See the latest below:
- Manhattan Beach Q2 Median Prices: DOWN -9.9%
o Q2 of 2023: $2,837,500
o Q2 of 2022: $3,150,000
For the third quarter in a row, Manhattan Beach home prices are down. And again, nearly double digits like the previous two quarters:
- Manhattan Beach Rolling 12 Median Prices: DOWN -3.2%
o Ending Q2 2023: $3,000,000
o Ending Q2 2022: $3,100,000
To eliminate any quarter-to-quarter aberrations, I like to examine Rolling 12 numbers. This statistic shows prices down just 3.2% and the previous two reports on a Rolling 12 basis were both up just slightly.
So, depending on which metric you study, year-over-year quarters paint a double-digit decline three quarters in a row, while the Rolling 12 numbers appear to be flat.
- Manhattan Beach Q2 Closed Sales: DOWN -24.3%
o Q2 of 2023: 78 sales
o Q2 of 2022: 103 sales
And finally, closed sales are down again at a sizable clip, however, it is not nearly the almost 45% drop we saw in the previous quarter. Since interest rates really began to surge in Q2 of 2022, perhaps the market is beginning to level off and adjust to higher rates? Are lower sales the new normal for Manhattan Beach? And maybe beyond?
Palos Verdes Peninsula
The Palos Verdes Hill saw its amazing run fizzle last quarter with all four cities seeing declines year-over-year in Q1 as well as on a Rolling 12 basis. It looks to be a similar case with a few fluctuations:
- Palos Verdes Estates Q2 Median Prices: DOWN -16.4%
o Q2 of 2023: $2,550,000
o Q2 of 2022: $3,052,000
- Rancho Palos Verdes Q2 Median Prices: DOWN -0.2%
o Q2 of 2023: $1,827,500
o Q2 of 2022: $1,831,250
- Rolling Hills Estates Q2 Estates Median Prices: UP +13.7%
o Q2 of 2023: $1,700,000
o Q2 of 2022: $1,495,000
This is now two quarters in a row that Palos Verdes Estates has experienced double-digit price declines and it is accelerating. Rancho Palos Verdes is down two quarters in a row, but this Q2 read is essentially flat and not nearly the degree of Palos Verdes Estates.
And after a Q1 drop of over 50%, Rolling Hills Estates has now rebounded strongly, up double digits. As always noted, the numbers are still volatile in this city thanks to Rolling Hills Country Club and condo sales post-pandemic. It is hard to take away too much from numbers in this wide-ranging market:
- Palos Verdes Estates Rolling 12 Median Prices: DOWN -7.1%
o Ending Q2 2023: $2,556,000
o Ending Q2 2022: $2,750,000
- Rancho Palos Verdes Rolling 12 Median Prices: UP +1.5%
o Ending Q2 2023: $1,725,000
o Ending Q2 2022: $1,700,000
- Rolling Hills Estates Rolling 12 Median Prices: DOWN -20.0%
o Ending Q2 2023: $1,400,000
o Ending Q2 2022: $1,750,000
The Rolling 12 number seems to confirm the quarterly numbers. Palos Verdes Estates is trending downward, while Rancho Palos Verdes is flat. Rolling hills Estates is smoothing out, but still down 20%:
- Rolling Hills Rolling 12 Median Prices: UP +11.6%
o Ending Q2 2023: $4,450,000
o Ending Q2 2022: $3,988,000
After a tough 2022 of big price declines “Behind the Gates,” Rolling Hills real estate is rebounding, up 11.6% on a Rolling 12 basis.
This was the best performing market in South Bay during the pandemic but pulled back much earlier than other markets and continued to get hammered with rising interest rates. This home market will always be difficult to gauge due to so few homes sales each year:
- Palos Verdes Estates Q2 Closed Sales: DOWN -13.7%
o Q2 of 2023: 44 sales
o Q2 of 2022: 51 sales
- Rancho Palos Verdes Q2 Closed Sales: DOWN -30.1%
o Q2 of 2023: 102 sales
o Q2 of 2022: 146 sales
- Rolling Hills Estates Q2 Closed Sales: DOWN -15.8%
o Q2 of 2023: 32 sales
o Q2 of 2022: 38 sales
Just like Manhattan Beach, the Palos Verdes Peninsula saw significant drops in closed sales yet again. But it did see those drops get less severe and potentially confirm a “new normal” of slower sales due to unaffordability and squeezed inventory levels throughout much of the South Bay.
Just like Manhattan and Palos Verdes, Hermosa Beach has seen two previous quarters of decline. But hallelujah, Q2 has now reversed the trend for this tiny beach city.
- Hermosa Beach Q2 Median Prices: UP +12.6%
o Q2 of 2023: $2,450,000
o Q2 of 2022: $2,175,000
Hermosa Beach saw a nice bump over 12% whereas last quarter saw an 8.6% decline. The story is slightly different on the Rolling 12 below.
- Hermosa Beach Rolling 12 Median Prices: DOWN -1.4%
o Ending Q2 2023: $2,170,000
o Ending Q2 2022: $2,200,000
While the smoothed-out numbers are lower, this is essentially a flat result boding well for Hermosa Beach home values.
- Hermosa Beach Closed Sales: DOWN -19.0%
o Q2 of 2023: 47 sales
o Q2 of 2022: 58 sales
The Hermosa closed sales action is down just like almost every South Bay home market, but yet again, the decline is muted at 19% compared to the 46.3% decline in Q1.
And last up is the city of Redondo Beach that had a positive upside surprise in the 4th quarter but did in fact fall in Q1 by 7.9%. This quarter was down but at a muted pace. See below:
- Redondo Beach Q2 Median Prices: DOWN -5.3%
o Q2 of 2023: $1,434,000
o Q2 of 2022: $1,515,000
*Please note for simplicity purposes, these numbers do include parts of Hollywood Riviera (Torrance), but all comps contain Hollywood Riviera numbers so any movement is apples to apples comparisons
- Redondo Beach Rolling 12 Median Prices: UP +2.5%
o Ending Q2 2023: $1,415,000
o Ending Q2 2022: $1,380,000
The Rolling 12 numbers are up ever so slightly, essentially flat. This is a nice result considering last quarter was down and the Rolling 12 was up as well. Considering a full 12 months, Redondo Beach’s home market has stayed relatively healthy.
- Redondo Beach Closed Sales: DOWN -27.0%
o Q2 of 2023: 157 sales
o Q2 of 2022: 215 sales
And finally, sales are down just like all of the areas we have covered in this report. And yes, the closed sale drop is decelerating from 35.8% last quarter compared to 27% in this report.
This second quarter report is much easier to digest than previous numbers in the first quarters. Thanks to some confirming trends, we now have a clearer picture of where prices are going. Presently, some of the South Bay’s most expensive markets (Manhattan Beach and Palos Verdes Estates) are seeing continued quarterly median price declines with Manhattan Beach seeing its trend fall three quarters in a row and Palos Verdes Estates at two quarters back-to-back. The Rolling 12 numbers in these two areas are not as bad, but still on the decline.
The other remaining South Bay markets all are on a bumpy ride with either it being up or down in back-to-back quarters. But all in all, we see much weaker price numbers to start 2023 compared to 2022, and obviously much cooler compared to the boom in 2021.
And finally, it is crystal clear that closed sales are plummeting. After a collapse in sales across all cities in Q1, closed sales are still down across the board in a very big way, just not quite as huge as Q1.
All in all, the numbers do say the market is weaker when it comes to prices and sales. That fact cannot be refuted.
My conclusion to the Q2 quarterly numbers is quite frankly: I’m torn.
On one side, the numbers do not lie. Prices are down in a lot of South Bay home markets, and in some cases multiple quarters to confirm he downtrend.
On the opposite side, from an anecdotal standpoint, my buyers are having a heck of a time finding affordable properties due to sharply lower inventory options. See my latest blog on historically low inventory in May: “South Bay Home Inventory Squeeze.”
Are my rosy-eyed Realtor glasses giving our markets too much credit? Do the numbers not lie, and things are weaker than they seem? It is a tough call.
We must stay present to the weaker quarterly numbers, but my goodness, the battle out there for reasonably priced property is too real. The market may be at an inflection point…
Do higher rates eventually catch-up to the market and slow things down dramatically amidst so few sales and even fewer buyers able to afford prices? Or is the supply squeeze just too great and will linger for longer thanks to golden handcuffs that owners have with generationally low interest rates?
As always, only time will tell. I’ll report on Q3 numbers in just three months.