The number of homes sold in the Los Angeles South Bay during the first six months of 2023 is the lowest sales volume for a first half in the past five years. Fewer homes have been sold since the new year than sold during the same period of the worst year of the pandemic.
The first half of 2023 has ended with 24% fewer sales than the same period in 2022, which was itself down 15% from 2021. The peak of the market was early 2021, when interest rates were among the lowest in history, exploding the number of potential buyers. The lowest sales volume was during 2020 when 3311 homes were sold, which was still greater than the 3221 sold the beginning of this year.
Median Price Begins Downturn
Coming right on the heels of the sales volume collapse is a drop in the median price. Prices today are down from where they were in 2022, which was the peak of the recent market. The chart below reflects the median price for the first and second quarters of the past five years. Typically, the first quarter is the slowest, with the number of sales increasing through the second quarter and then slowing again for the third and fourth quarters. Here the growth from Q1 to Q2 shows and we can see the change from year to year.
As always, bear in mind that the Palos Verdes Hill offers a comparatively small sample size, so a couple of significant sales can shift the plot lines dramatically on a chart. The chart above shows one such anomaly where PV the median price actually declines in the second quarter.
Looking across the years from 2019 all four areas show the same upward movement in median price until the second quarter of 2022. Then, comparing it to the second quarter of 2023, we can see the trend shifting downward. For example, the Beach Cities median fell from $1.82M in the second quarter of 2022 to $1.72M in the second quarter of 2023. The weakness in median prices is driven by increasingly steeper mortgage interest rates. Barring a change in market dynamics, anticipate this line turning into a steeper downslope for residential prices starting in winter of 2023/24.
When Is the Bottom?
The market is clearly taking a downward turn. Sales volume is off, median prices are turning down. Sellers are not putting properties on the market. Buyers aren’t buying. The few forecasters willing to make a guess this early are saying real estate won’t come back until 2025, possibly 2026. For those who are “waiting for the bottom of the market,” remember that by the time you read it in the headlines—you’re too late—the bottom is gone.
Beach Cities Sales Dropping Fast
Median prices at the Beach have fallen 5% from last June, coming in this year at $1.72M, an even $100,000 below June of 2022. Year to year sales for June are down 7% from last year, at 124 units compared to 133 in June of 2022.
Month over month statistics have been highly volatile since the beginnning of 2023. Interest rates and prices have changed erratically, making short term forecasts nearly impossible. Month to month sales volume has bounced in a range from 2% to 45%. In just six months, monthly median prices in the Beach Cities have ranged between -18% and 26%.
Year to date sales volume at the Beach is down 25% from last year and is off a full 35% from 2019.
The year to date median is down 3% compared to 2022, though it is still 32% above the median in 2019.
Despite market conditions, homes in the Beach Cities remain highly desirable. For June, 78% of sales transactions closed within 30 days of listing and sold for 2.61 % above asking price. Beach homes also offer a great deal of diversity. June sales showed a 19 million dollar range between the low sale at just over $500K and the high sale at $19.5M.
Harbor Area Home Sales and Prices Down
Year to year-same month sales in the Harbor area have been negative since the first of the year. Prices were still holding up in June of last year, but sales volume had been dropping through all of May and June. As a result, the number of homes sold dropped a mere 1% coming into June of 2023. That looks good until compared with the year to date decline of 24%.
Market conditions in the Harbor last year gradually changed from joy for rock bottom interest rates at the beginning of the year to caution as sales tapered off and sales figures stated taking a hit. Median prices for June of the current year have fallen 7% from the June 2022 median of $830K.
Until now, the Harbor area has shown mixed results in the month over month statistics. For June compared to May sales volume was up by 5% (353 versus 337), while median price was up 7% ($772K versus $720K). Like the Beach Cities, the Harbor Area is following a more normal upward swing from the winter doldrums into the spring selling season.
That upward swing is not expected to go very high or last very long. At 1710 homes sold, year to date sales volume from January through June is down 24% versus 2259 sold in 2022. Sales volume is likewise down 17% from 2071 during the same six months in 2019. The variance in monthly sales is expected to drop into the single digits starting in July.
Median prices are down 4% compared to 2022 though still up 33% versus 2019. (Note: Using The Federal Reserve’s “target inflation rate”of 2% annually would have put the Harbor area median price increase at a little over 8%. That implies an “excess growth” of about 25% in median price during the pandemic buying splurge. Much of that difference, if not all of it, is expected to disappear over the next 18 to 24 months.)
June sales detail shows 77% of sales closing escrow within 30 days. Buyers were still bidding up, with the sales price exceeding the list price by 2.61%. The highest sale recorded in June for the Harbor was $4.25M; while the lowest was $527.5K.
PV Peninsula Volume and Prices Mixed
Palos Verdes, contrasting May versus June of 2023 shows a 22% increase in the number of homes sold for a monthly total of 79. At the same time, the median price dropped by 13%, falling to $2M even. Expectations for month over month statistics include fewer sales and more aggressive price reductions as 2023 wears on. The summer and fall months are projected to have weaker home sales, both in volume and pricing, as interest rates increase and buyers and sellers who “must move” run out of options.
Year over year same month sales, showed a volume growth of 1% (one sale), accompanied by a 14% drop in median price from $2.3M. That 1% increase is the first time in 2023 that any of the areas has shown positive growth in the number of homes sold. As such, and knowing that the PV Hill is considerably smaller that the other areas we measure, readers are cautioned about the wide swings in PV statistics.
Sales volume for the first six months of 2023 is down 26% compared to 2022 (326 homes in 2023 versus 438 in 2022. Similarly, sales are down 9% from 2019 when sales of 358 homes were recorded. Median prices of $1.8M for the same period are down 13% from 2022 prices of $2.1M and up 36% from $1.3M in 2019.
Market time has remained good, with 75% of sales closing withing 30 days. Sellers have enjoyed selling prices 2.3% higher than asking prices, a trend expected to disappear before the end of summer. Once again showing the range of homes available in the South Bay, the high sale in PV was $10M while the low was $610K.
Inland Area Makes Strong Showing
Sales volume of 161 homes in the Inland Area for June was up 33% over sales of 121 in May. With 33% more activity came a 1% reduction in median price, which fell to $875K after reaching $880K in May.
Comparing June of this year to June of last year showed a volume decrease of 3% from 166 in 2022. Likewise, this June showed a median price decrease of 3% from last year’s $905K.
Year to date volume for the first six months was down 68%, for 669 units sold, versus 869 in 2022. Going back to 2019, the most recent “normal business year,” sales volume was down 21% from 799 sold in 2019.
Median price of Inland area homes for the same six month period showed at $863K, down 3% from $887K in 2022; and up 32% from $652K in 2019.
Days on market remained under 30 for 82% of the Inland area homes sold in June. Buyers offered 2.6% above asking price. The high market sale was $2.2M while the low was $390K.
Photo by Sebastien Gabriel on Unsplash