South Bay Market Update February 2020
So what’s happening in the South Bay? Pretty much tracking similar to the national market in some ways but definitely not in others.
You may have recently seen articles with lead ins like this in the national media:
“Tight inventories are still the story for existing home sales. Despite pent-up demand and mortgage rates that are near record lows, existing home sales continue to be constrained by a limited supply of homes for sale”
and yes, that IS the main story for many areas and price points in Southern CA.
But right now what’s going on in the South Bay is highly segmented and fragmented with a bold dividing line between the Seller’s Markets and everything else.
Before we take a deeper dive, let’s first discuss….
WHAT’S A SELLER’S MARKET IN REAL ESTATE?
Typically a Seller’s Market is defined as less than 3 months of inventory on hand. There’s more than a few ways to define what 3 months of inventory but however you do, we haven’t seen that in some neighborhoods in so long that I think the definition may need a bit of redefining.
To ascertain whether we are in a Seller’s Market or not, you can look at the number of homes available for sale compared to the last month’s sales (some agents compare to the prior year same month or annualized average) or you can compare what is available for sale to what is in escrow. You’ll hear the term absorption rate also when discussing how many homes are sold in a given time period compared to some measurement of activity.
As a best practice it is advisable to compare like kind properties and price ranges.
Right now in the South Bay some zip codes, neighborhoods and price ranges are what I’ll term extreme Seller’s Markets while others have something approaching a more balanced inventory. As you might expect much of this is driven by price range followed closely by other desirable attributes (commute time, schools, views, property type, etc).
Let’s take a look at some specific markets and the difference between the most competitive Seller’s Markets and everything else and how to sort out the difference.
NORTH REDONDO BEACH 90278 SELLER’S MARKET
Full disclosure, I live in North Redondo Beach and have since 2003 - talk about buying at the right time! (I also lived in Manhattan and Hermosa.)
90278 has been one of the most in demand and hottest zip codes in coastal LA County over the past few years and has seen rapid price acceleration.
These days it is an extreme Seller’s Market. How extreme?
Well as of this writing, there are only 25 active listings and only 8 priced less than $999,000. During January there were 11 sales under $1M out of 16 total.
One of the drivers in North Redondo has been new construction which has been running at around 10% of sales or listings. And moving the needle of the price point up.
So far in February there have been 13 closed sales with only 6 below $1M. There are 33 listings in escrow so with a week left there’s some hope for a good month.
What’s hot in 90278? Everything.
WEST TORRANCE 90503 SELLER’S MARKET
As of this writing there are only 11 active listings. Of those only 5 are SFRs which is primarily what many buyers are looking for here and none has been on the market for longer than 10 days.
There are 21 homes in escrow and during January there were 14 sales in total.
Of the homes in escrow, only 11 are SFRs and in January of the total sales only eight were SFRs.
What’s driving the demand? Price point under $1M, great schools, freeway access, and local amenities.
The further west a house is located in 90503 the higher the price (as would be expected).
What’s hot in 90503? Single Family Residences.
HAWTHORNE: HOLLY GLEN - DEL AIRE (HAWTHORNE) SELLER’S MARKET
Home of SpaceX and Tesla, need I say any more?
While there has been a slight softening of prices in the gated communities (ThreeSixty and Fusion), these neighborhoods (MLS Area 107) remain in very high demand, particularly anything west of the 405 Freeway.
Part of what is driving this is the excellent Wiseburn School District. But also, the proximity to jobs (in El Segundo), Freeway and LAX access and the proximity of high end shopping and restaurants in Manhattan Beach also helps.
Currently there are 5 properties for sale, 5 in escrow, and there were 8 sales in January.
What’s hot? Move in ready properties not too close to the freeway or main streets.
MANHATTAN BEACH - NOT A SELLER’S MARKET
To put some of this in perspective, Manhattan Beach 90266 is the 33rd most expensive zip code in the US. That’s out of like almost 42,000 zips. Really.
As of this post, there are 94 active listings in Manhattan Beach and 39 properties in escrow. In January there were 13 sales.
So based on January sales there is over 6 months of inventory on hand. Based on the common definition that is a Buyer’s Market. However looking at what is in escrow we have a little of 2 months of inventory. And with 17 sales already closed in February - even if nothing else closed this month, we would be back in neutral territory.
So I’m not quite ready to call 90266 a neutral or Buyer’s Market, only to say that it is not a Seller’s Market.
Here’s what some popular zips in the South Bay are looking like right now.
When the red line is not much higher than the blue you are more likely looking at a Seller’s Market. If the red line is below the blue than it is an “extreme” Seller’s Market. Same for the blue line compared to the last line in the group.
If you are not familiar with the zip codes, here’s your guide.
90266 Manhattan Beach
90254 Hermosa Beach
90278 North Redondo Beach
90277 South Redondo Beach
90503 West Torrance
90505 South Torrance
90250 Hawthorne
90275 Rancho Palos Verdes
90274 Palos Verdes Estates, Rolling Hills, Rolling Hills Estates
A fee final thoughts.
The February and March data will really indicate where we are in regards to the market heading into the peak selling season for 2020. Some of the inventory rebalancing is to be expected during this season. Having said that some of the higher red lines above will need to have quite the sell off in order to be positioned to absorb new listings and / or see price appreciation.