Beach Cities Real Estate Update November 2020

WINTER IS COMING

During a year that has been far from normal, we may now be entering a period, at least as far as Real Estate goes, when the market starts to move as we would historically expect it to. By that I mean a bit of a slowdown over the holidays that starts to regain steam again after the Super Bowl early next year. Or maybe not. This is still 2020.

The rapid price acceleration that we experienced over the summer and early fall has tapered off with properties now trading within fairly well defined ranges. So even though recent sales have been very strong, don’t expect to see prices increasing as quickly and dramatically.

And while there are still far more buyers in the market now than available listings for sale, and mortgage interest rates remain at all time lows, clearly some buyers are justing saying now to overpriced or undesirable properties. More on that later.

Let’s take a look at October sales 2016-2020 in the Beach Cities.

October Beach Cities Sales 5 Year Comparison

With the exception of Hermosa Beach 2016, October sales have crushed the previous October highs over the last 5 years. Looking ahead to November, last year there were 43 sales in Manhattan Beach, 20 in Hermosa and 72 in Redondo.

Currently, there are 55 listings in escrow in Manhattan, 24 in Hermosa and 107 in Redondo Beach with sales of 15 , 7 and 20 homes closed as of the first 10 days of November.

So I would again expect that we could well see November eclipse prior years. But remember that those sales and escrows reflect the activity 30-45 days earlier.

Here’s some trends you might want to watch.

SHOWINGS / BUYER DEMAND vs INVENTORY / PRICE

No doubt that over the past few months showings were up. Way up. It was not uncommon to see 10-20 Buyers go through a hot property on a Saturday or Sunday. Nothing has changed as far as Buyer demand goes but anecdotally agents are stating that many listings are not being shown.

But no doubt, there is still high demand.

And while we are seeing inventory levels holding steady, nothing indicates that they are increasing or likely to.

That means that if nothing else changes in 2021, expect to see this past Summer’s activity level on steroids if the economy recovers and mortgage rates stay low.

Speaking of mortgage rates……

MORTGAGE RATES MUST STAY LOW TO SUSTAIN THE CURRENT MARKET

Buyers with good credit, steady employment, and 20% down are currently seeing rates in the 2s. Whether that means 2% for a 7 Year Arm or 2.75% for a 30 year fixed, most purchase money mortgages are sub 3.

Compare that previously when rates were in the 3s and then started going above 5 and even close to 5%. Buyer’s freaked out and withdrew from the market.

Here’s a prediction.

Once rates get back to the mid or high 3’s, and they will one day, prices will level off and, dare I say it, possibly decline somewhat (for less desirable properties).

But rates aren’t going up anytime soon, so for now expect to see…..

SELLERS: DON’T GET AHEAD OF THE MARKET

The biggest mistake Sellers make is over pricing their listing. So while the “experts” are predicting price increases, it is not overnight. If your neighbor’s home sold for $1M that doesn’t mean that you should price at $1.07M. These increases are “over time”.

Let’s take a deeper dive at October sales by city.

MANHATTAN BEACH MARKET SNAPSHOT

The data supports want is being felt on the street: still a Seller’s Market but it is starting to cool.

There is Buyer demand but only for some properties.

As of this blog post, there are 115 listings with a median days on market of 50 days and 44 of the listings have had price reductions. Some substantial.

Click on the graphic for the source data which will update in real time.

HERMOSA BEACH MARKET SNAPSHOT

Interesting jargon. Hermosa is a market categorized as “in stasis” whatever that means. Also technically a “Seller’s Market” although I doubt that some of the 61 Sellers who’s homes are on the market as of this posting feel that way.

Median days on market is 43. Price reductions are noted on 23 listings.

If the Manhattan Beach Market softens, expect Hermosa to feel the effect.

REDONDO BEACH MARKET SNAPSHOT

Much more of a Seller’s Market but still categorized as cooling off which is entirely concurred with.

Redondo most likely sees a lot more first time Buyer activity than the other Beach Cities so they are more likely looking for turnkey properties which truthfully many are not.

Median days on market right now is 27 which is why it is a 60 on the MAI compared to the other Beach Cities.

ONE FINAL THOUGHT

We are starting to approach the silly season when you will see predictions and forecasts for 2021.

What I’m pretty sure of and willing to predict right now is that no one really knows what is going to happen next year.

And that’s OK.