Mortgage Interest Rates Still Climbing

In a normal year, the interest rate for a conventional mortgage loan would be lower than the rate quoted for a “high balance” loan, which would be slightly lower than a “jumbo” mortgage. (Here in Los Angeles jumbo is more common than not.) The theory behind the differing rates is one of risk management. Lenders generally consider larger loans to be more risky, thus jumbo costs more.

Guess what! It’s not a normal year. It’s a Presidential Election Year. In addition to the political strife, our nation is closely involved in a couple of economy-disrupting wars in other parts of the globe.

The end result is jumbo loans with fixed interest rates that are as low or lower than conventional loans. Despite headlines touting strength in the economy, interest rates have increased by approximately .5% since the first of the year. The most recent announcements from the Federal Reserve System are hinting that anticipated rate reductions aren’t happening at all in the first half of 2024, and the number of potential reductions is expected to be less than previously expected.

Last year saw median prices in the South Bay falling below 2022 prices through July. In August of last year price declines began to abate. By December of 2023 prices had started to stabilize. The new year continued that trend with only one negative median price result in January. Improving on that, February showed solid growth in prices across the South Bay. The real estate market seems to be reacting to what is touted as an improving economy.

However, compared to last February, sales volume this February was a mixed bag with overall positive growth of 2% despite declines of 3% in the Harbor area and 14% on the Hill. These weaker sales figures follow a strong growth in the number of homes sold in January versus the same month in 2023.

Recent month to month history has shown that a decline in sales volume is typically followed by a decline in median price. This “tit for tat” resonance indicates a market where buyers are at the edge of their ability to buy and sellers are feeling the resistance. Indeed, following the upward movement of mortgage interest rate activity for the first two months of the year leads to the conclusion sales volume will drop, followed by more substantial price decreases in coming months.

Beach: Sales and Prices SeeSaw

On a month to month basis, the Beach area has seen serious ups and downs in the number of homes sold and in the median sales price. January started with a massive 46% drop in sales from December, then February showed up with a 48% increase in sales volume. By way of contrast, Palos Verdes sales were down 16% and down 14% for the same months. The median price for Beach homes slipped 1% in February versus a 13% increase in January.

February sales volume versus February of 2023 was also steeply higher at 33%, the largest increase of the South Bay areas. At $1.175M the median price was up 29% over the same month last year. This is a somewhat surprising median price increase in light of other annual increases around the South Bay falling in the range of 5-18%.

Looking at year to date for the first two months of 2024, the Beach area had positive sales volume of 32% with a median price increase of 17%.

Harbor: More Up and Down

Responding to the volatility of the economy, the Harbor area flipped from negative numbers in January to positive in February. The number of homes sold was up by 8% over the prior month, while the median price of those homes increased 6%. The largest of the South Bay areas, the Harbor area typically has less variability in both sales and prices than the other areas.

Annual figures, looking at change from one year to the next in the same month, is usually a predictor of long term direction. February home sales in the Harbor area seem to be close to the bottom of market. Volume dropped by 3% from 2023, the smallest annual decline since the end of the pandemic.

At the same time, the median price rose 18% above that of February 2023. It should be noted that the median price in the Harbor last February was exceptionally low at $675K. In contrast, the $795K for this year appears to be on the high side and should be expected to moderate as the year goes on.

Year to date, the number of homes sold has increased by 2% over 2023. The median price has gone up 12%.

Hill: Numbers Continue to Fall

Real estate on the Palos Verdes Peninsula was off more this month than last. Month to month sales volume dropped by 14%. Median price, which was flat last month, has fallen by 1% this month. This kind of back and forth jockeying in price and volume looks jerky in the month to month statistics.

When viewed against the backdrop of annual data one can more readily see the direction. Annually, residential sales dropped by 14%, roughly the average of the past few months. While sales volume was dropping, the annual median price rose a surprising 10%.

Combining January and February for year over year numbers shows the number of homes sold increasing by 11% and the median price increasing by 9%

Inland: A Mixed Bag for Sales and Prices

Like the Beach cities, the Inland area enjoyed a huge surge in the number of homes sold for February, after suffering a large drop in sales January. Volume was up by 40% for the month. Median price dropped 4% after an 11% jump last month. So far this year the market has been very unpredictable.

As mentioned early, the “same month, last year” perspective is starting to level out. Residential sales volume for February of 2024 increased by 6% compared to 2023. The median price was up 5% over for the same period. The annual percentage of change seems almost stable by comparison the the monthly.

Year to date, Inland sales have increased 7% while the median price has declined by 1%. So far in 2024, only the Inland median price has declined from the first two months of last year.

Beach=Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo

Harbor=Carson, Long Beach, San Pedro, Wilmington, Harbor City

PV Hill=Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates

Inland=Torrance, Lomita, Gardena

Photo by Matt Burt on Unsplash

Some Things To Know Before Purchasing A Property

Before purchasing a new home, there are some important details that will help you make your decision. You’ll want to know what you’re paying for, as well as how to get the best deal. Asking the right questions will make the process much smoother for you.

First, make sure you know exactly what it is you’re buying. Is any personal property included in the sale? Is any fixture excluded? A purchase offer should address personal property and any exclusions. Also, if there are any disclosed concerns with the property, you’ll want to know what they are. It may not be worth your while if there are any major concerns. You’ll also want to know what you can expect to be paying in utility costs. After all, utilities are a component of homeownership costs.

If you want the best deal you can get, you should definitely ask your agent for a comparative sales report. This is a report which details recent sales histories of similar properties. Depending on the area, it may be unlikely to find an exact match, but this will give you a rough estimate of the expected price range for a property that you’re considering. This is particularly important if you’re concerned that the property may be overpriced or have some sort of defect. To aid in this, you can also ask how long the property has been on the market. If it has been sitting around longer than average, there could be an issue. Another question you may want to ask is if the sellers have already bought another home. This could give you some insight into the motivations of the sellers, which may help you negotiate.

Photo by Evgeni Tcherkasski on Unsplash

January Home Sales Down, Prices Up

Across the Los Angeles South Bay the number of homes sold in January was down compared to December—way down. For the same time period median prices are mixed with most sales either flat or down.

Looking at sales volume in January versus January of last year, shows big increases in activity. However, that serves more to show how slow the real estate market was at the beginning of 2023, than how good it is today. Median prices were likewise up for most areas when compared to the same month last year.

From a historical perspective, looking back at 2019, still the most recent “normal” business year for real estate, we see sales volume overall remains 21% below that benchmark. Median prices, which shot up during the pandemic have stubbornly stayed up. As of January, median prices range from 25-30% above the 2% inflation factor the Federal Reserve targets.

The combination of inflated prices and mortgage interest rates testing the 7% level has created a stagnant market place. Typically a presidential election year would bring rosy news about a growing economy and low interest rates. At this point there’s only one month of data, not enough to make any forecasts, but 2024 is off to a slow start.

Beach: Sales Off 46%

Month to month sales volume in the Beach cities collapsed by 46% in January. After back to back increases in the number of homes sold for November and December, the huge drop was unexpected. Juxtaposed against the 13% increase in median price, it demonstrates the current market dynamic.

The only actual buyers are people who have no choice but to move, despite the low inventory and high interest rates. At the same time, most sellers are stalling because they don’t want to be sitting on the market for weeks. And, because most sellers are also buyers, they’re waiting for a better market with more homes available and lower interest rates for their replacement purchase. As a result, the number of available homes listed on the MLS is further depressed.

This has brought about a rare phenomenon, the “off-market” sale. Both buyers and sellers are actively looking for deals that can be consummated without the competitive environment of the Multiple Listing Service (MLS). Buyers love the fact there are no bidding wars. Sellers are glad to sell at asking price without endless open houses and dozens of showings. The properties usually end up on the MLS as history, but not as competition. How long this trend will last depends on the economy over the next few months.

The market at the Beach has clearly improved since last year. Sales from January of 2024 have climbed 30% compared to January of 2023. At the same time, median price has moved up 7%. Of course, as mentioned earlier, last January was far from a good market in real estate.

Given the turmoil of recent years, one is compelled to look back at 2019, before the pandemic with it’s rock-bottom interest rates and sky-rocketing prices. Using that metric, January sales this year fell 34% below January of 2019. Median price this January was 43% higher than it was in January of 2019. Clearly “normal” is still a long way off.

Harbor: Sales Off 13%

Month to month statistics from the Harbor area demonstrate a truism. Pointing the way toward stability in the market, many of January’s home sales came with a reduced price. The median price dropped 4%, rather than increasing as it did in the Beach cities. Those price reductions appealed to buyers and the number of transactions increased considerably. Correspondingly, the sales volume only dropped 13% as opposed to a 46% drop at the Beach.

Harbor area sales for January 2024 ended with 9% more transactions than the same month lin 2023 in an unsurprising response to the market collapse of last winter. Also on the positive side, median prices for Harbor area homes increased by 7%.

Pre-pandemic residential sales for January 2024 was mixed in comparison to January of 2019. Sales volume was off, with 16% fewer homes sold in 2024. At the same time, median prices were up 44%.

Hill: Sales Off 16%

November and December of last year looked like a bad thing was turning good, and then January 2024 came along. Home sales on the Hill suffered less than at the Beach or Inland, but a 16% drop in sales volume in an already moribund market hurt. Median prices on the Hill hit that “sweet spot” with no change up or down.

Compared to January of 2023 the number of home sales on the Hill went stratospheric climbing 50% for the month. Of course, having read this far you know last winter was a low spot in the market. Combine that with the comparatively small number of sales on the Palos Verdes Peninsula and it’s easy to have outsize percentages. While sales volume was up 50%, median prices climbed a more modest 8%.

January 2024 versus January 2019 in home sales on the Hill showed an solid improvement. The number of homes sold increased by 27%, in contrast to falling sales in the Harbor and Beach areas. With the number of home sales up, a 37% increase in the median price is a welcome addition.

Inland: Sales Off 36%

Home sales in the Inland area closely followed those at the Beach in January. Similarly, the month ended with a calamitous 36% drop in the number of homes sold—down to 67 homes from over 100 in both November and December. Likewise, the median price came in with an 11% increase, slightly less than at the Beach. This shows the effect of “sticky prices” where a lot of sales don’t happen because the sellers are resistant to lower offers and buyers are balking at higher prices.

On a year over year basis, January 2024 showed 8% growth in the number of sales compared to last January. Median prices continued following the long downward slide of 2023 and dropped another 6%.

Comparing the Inland sales to 2019, the most recent stable year, the number of homes sold has dropped by 39% leaving a lot of room for recovery. The median price has climbed 40% over that five years, roughly 27% greater than the “ideal inflation” sought by the Federal Reserve.

Beach=Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo

Harbor=Carson, Long Beach, San Pedro, Wilmington, Harbor City

PV Hill=Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates

Inland=Torrance, Lomita, Gardena

Photo by T Narr on Unsplash

Understanding Prepayment Penalties

There’s a strong tendency to want to pay off your mortgage as quickly as possible. There’s also a strong reason for lenders to not want you to do that — they get less money because you aren’t paying as much in interest. Because of this, they frequently use prepayment penalties. This is an extra fee for paying off your mortgage too quickly or before the term of the loan ends. If you’re simply paying the minimum amount anyway, this won’t affect you, but if you think you may want to pay off your loan early, you’ll want to know your options.

Different states have different laws regarding prepayment penalties, and some don’t allow them at all. In states where they are allowed, they come in two types: hard prepayment penalties, which are fixed fees regardless of the reason for prepayment and that are usually a percentage of the loan amount, and soft prepayment penalties, which are only charged if the borrower pays a large amount in a short time period. Even in states that allow prepayment penalties, not all loans will have them, and you may be able to negotiate with your lender for their removal. When shopping for loans, make sure to read all the terms of the agreement, and talk to a legal professional if there’s anything you don’t understand or want to learn how to negotiate.

Photo by Mari Helin on Unsplash

How Generational Preferences Affect The Real Estate Market

If you’re planning to sell your home, or just want to be informed about current trends, you may want to know about present day homebuyers’ preferences. The problem is that looking at general trends only tells you about the largest cohorts of homebuyers, which are Millennials and Baby Boomers. Not only do these two groups have vastly different preferences between each other, it also ignores Gen X and the admittedly small group of Gen Z homebuyers.

Knowing the demographic makeup of your region can help you to understand what the people in your area are looking for. Alternatively, knowing what other cohorts desire can help tailor your choices to attract people to your home. There are certain things you cannot change, such as the walkability or access to public transportation in your neighborhood and presence of nearby parks or schools. However, if you know which types of people are looking for the sort of things that exist where you are, you can base your decisions about things you can change based on that group’s preferences.

Currently, Baby Boomers are not in the business of buying large, fancy homes. They’re looking to downsize, or remodel a home to suit their personal needs. They also generally want a healthcare facility nearby, since their age can lead to medical complications. Gen X is looking for a mix of business, family care, and leisure. Many Gen X people are working and also spend time caring for their aging parents, which leads them to want either nearby parks or recreational facilities to improve their work-life balance, or a suburban or rural lifestyle if they work from home. Millennials are the largest cohort of potential homebuyers, but they also can’t currently afford expensive homes. Rising housing costs mean Millennials are currently transitioning from renting to their starter homes, since many of them have had their initial homeownership plans delayed. As for what they’re looking for, they’re big on technology and sustainability, and prefer easy access to employment hubs via either walkability or public transportation. The group of Gen Z homebuyers that are actually able to afford a home have probably not been much affected by delays, so their digital native and eco-friendly identity is even more pronounced than in Millennials. They prioritize energy efficient homes, smart technology, and cultural diversity.

Photo by Nathan Dumlao on Unsplash

2023 South Bay Real Estate: Fail

By every measure South Bay real estate failed last year. The volume was down from the prior year in every residential area, the median price fell from 2022 heights everywhere, and the double whammy of crashing sales and falling prices brought the total revenue down from 2022. Judging from early reports the same is true across most of the state.

Part of the story doesn’t read so poorly though. As we look back across the year, the second of half of 2023 was far better than the first half of the year. This in two respects: first, the month-over-month statistics for sales volume have improved. The median price is still falling, but that’s to be expected if we’re going to see a sales volume increase concurrent with continued high interest rates. The market is going to demand that some of the “overly enthusiastic” price increases come back down.

Second, the year-over-year decline in median price is slowing—not reversing—slowing. Roughly speaking, the number of homes sold for less than 2022 prices improved from 83% in the first half of the year to 45% in the second half of 2023. That signifies an approaching balance in the market. Buyers are still holding back, but some sellers are coming forth to meet them.

2024 South Bay Real Estate: Better Days Ahead

We expect to see continued slippage in the median price, accompanied by increased sales volume. The Los Angeles South Bay is somewhat insulated from the vagaries of national and international events, but 2024 is facing an active political climate. The continuing wars around the planet would be enough to rattle economic markets here. This year sellers and buyers also have to factor in a contentious national election.

While the Federal Reserve System is officially apolitical, history has shown a tendency for improved economic conditions during election years. The final quarter of 2023 saw a softening of the wild swings in home sales volume and pricing. With less than 10 months until the presidential elections we anticipate continued easing of interest rates and increased sales activity. Median prices have fallen by about 2% across the South Bay in 2023 and probably won’t drop a lot more in 2024.

Sales volume fell by 15% across the South Bay in 2023. Nearly all of that drop was in the first half of the year. The new year is expected to be positive with growth in sales across the board.

Beach: Strong Sales On Weak Prices

Comparing December to November, the number of homes sold at the Beach was up 13%. That increase in sales is on top of a 9% increase in November, a dramatic turnaround from the 27% drop in October. On the other hand, the month to month median price fell 5% in December.

December of 2023 was similarly mixed when compared to December of 2022. Year over year saw sales volume increase a staggering 39%. Looking back shows December of last year as the absolute slowest month of the year for home sales at the Beach. The median price plummeting by 10% certainly helped generate those December 2023 sales.

Year to date numbers, comparing all 12 months, showed the number of home sales off by 11%. At the same time the median price was down 4% for the year. Much of the annual decline in sales volume occurred in the first half of 2023, when monthly drops of 25%-35% put the brakes on prices. Beach area median prices have taken steep falls since February 2023. It may take a couple more months before the first stimulating news on the interest rate front, but it would appear we’re looking at the “bottom of the market” now. Regardless of whether you’re a buyer or a seller, this is time to reassess your options.

Harbor: Positive Across the Board

December versus November of 2023 saw sales volume go up 1%. During that time the median price went up 2%. Harbor area homes sales dropped precipitously through the third quarter when they suddenly found strength and were positve in the single digits for the last quarter. Monthly declines in median price have been the order until the final quarter when median prices appear to have leveled out.

Looking from the annual perspective, home sales in December 2023 were up 3% over the last month of 2022. Using the same comparison, median prices were up 13%. This suggests the Harbor area may already be seeing improved stability.

Summarizing 2022 versus 2023 for the Harbor area, overall home sales volume dropped 17% for the year. Looking from a longer term perspective, sales have fallen 26% from the ‘pre-Covid benchmark year’ of 2019. From 2022 to 2023 the median price fell 2%. Again over the longer term, median prices in the Harbor area are up 31% over 2019.

Hill: Median Price Down – Sales Up

December home sales increased on the Hill by 9% over November levels. For the same mnthly period, median prices were down 9%. This pattern is expected to shift over the first quarter of 2024 as prices stabilize and interest rates decline to allow more potential purchasers to enter the market.

Compared to December of 2022, December 2023 came in with sales of 22% more homes and a median price increase of 5%. A solid year over year growth for the Hill.

Taking a step back and looking at the full year, sales volume fell 17% from 2022. At the same time, median price fell only 1%.

Inland: Sales and Prices Still Sliding

The last month of the year brought no relief for the Inland area. The number of homes sold continued to decline with sales down 2% compared to November. The median price was down for the second month, this time 5% for the month.

Looking at the same month last year, gives year over year sales volume down 2%,and a median price that’s down 2%. The final quarter of the year has been a rough adjustment period for the Inland area.

In the broader year over year view, the Inland area again fell, with sales volume down 11%. Median price was flat for the period with a tendency toward negative. It’s a transitional period which should resolve into a firmer picture by the spring of the year.

Beach=Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo
Harbor=Carson, Long Beach, San Pedro, Wilmington, Harbor City
PV Hill=Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates
Inland=Torrance, Lomita, Gardena

Photo by frank mckenna on Unsplash

Real Estate Investment On A Budget

Many people believe they don’t have the capital to initiate a real estate investment. While it does require some capital, the requirement may be lower than you think. This is especially true if you can find a group of people that want to pool money with you for an investment. You don’t need to demonstrate that you could afford it on your own in order to convince investors to pool money. But even if you aren’t crowdfunding the investment, with enough good research you can find something that works on your budget.

The first thing you need to do is figure out what that budget actually is. While there is always some risk in investing money, real estate is not supposed to be a high-risk investment — don’t try to push the boundaries of your financial stability. Research the market and connect with real estate professionals, or more experienced investors, even if you don’t plan to pool with them. You should also research loan options, and don’t be afraid to take a loan out on investment property, since the rent should ideally pay for the loan over the course of its lifetime. You can also save on costs with some DIY work.

There are a couple different ways to start off. One option if to find cheaper, smaller investments — including off-market properties, which are often at discounted prices — and work your way up after you’ve build up some equity. Another is to purchase a multifamily residence and live in one of the units, termed “house hacking.” This allows you to simultaneously only have one property’s payments to deal with, earn rental income, and accrue equity, with the tradeoff that multifamily properties have a higher upfront cost.

Photo by Acton Crawford on Unsplash

South Bay Home Sales Improve!

Every month we compare the level of home sales from the preceding month to the same month of the preceding year. For example, November of 2023 is compared to November of 2022 to determine whether the number of homes being sold is growing or shrinking. The year over year number of homes sold across the South Bay has been shrinking every month since October of 2021–until now. November of 2023 marked the first time since October of 2021 where the number of homes sold increased over the same month in the prior year.

Lest we become overly enthusiastic, we need to remember that at this time last year successful sales figures were plummeting, Closed escrows were shrinking at up to 50% below the prior year in fall of 2022. So a positive value could only mean we’re bouncing along the bottom.

Also on the positive side, there is some improvement in median price which has been shrinking most of this year. At least as of November, it’s looking like “scattered improvement” in the South Bay real estate market.

Beach: Home Sales Pull Out of Dive

After two successive months of declining sales volume and falling median prices November real estate activity brought positive news to the Beach Cities. Last month saw a 9% jump in sales volume over October, and a 4% increase in the median price. The number of homes sold climbed from 79 last month to 86 in November. Concurrently, the median price gained nearly $70K.

The downside was a 3% drop of the median price versus November of 2022. The sold median for last November was $1.700M compared to $1.656M this year. The year over year sales volume gained 8% with 86 sales versus last years 80 transactions.

Year to date remains in red ink with sales down 14% January through November. For the same time period, the median price has fallen by 2%.

Harbor: Volume and Prices Turn Upward

Compared to November of 2022, both sales volume and median price climbed by 7% last month. This is the second month of solid upward figures for residential home sales in the Harbor area. Sales figures for the area have been in red ink since the beginning of the year, so these are welcome statistics for home owners wishing to sell.

On a monthly basis, the number of homes sold in the Harbor area fell by 6%, dropping from 267 in October to 252 in November. despite a median price increase of 1%.

Looking at the longer term, median price for the first 11 months of the year has fallen from $756K in 2022 to $740K, for a decline of 2% in the year to date median price. Sales volume for the same 11 months went from 3,770 in 2022 to 3,076 this year, a decrease of 18%.

Hill: Sales Volume Down, Prices Up

Comparing November of 2023 to November from last year shows a 10% drop in sales from 51 units in 2022 to 46 units this year. Despite the decline in number of sales, the median price for November climbed 19%, going from $1.77M in 2022 to $1.94M this year.

Monthly changes to the median price are much smaller and have been getting smaller as the year progresses. The November decrease was 1%, having dropped from $1.96M to $1.94M. The median price has varied monthly throughout the year. It ranged from a high of $2.3M in May of this year and fell as low as $1.6M in February. Year to date the median for the Hill is up 1% from 2022.

After having risen in September by 14% and in October by 13%, the number of homes sold on the Hill fell by 27% in November. Of course, part of the decline is seasonal. However, month to month sales volume for the first 11 months of 2023 was off by 19% in Palos Verdes with a similar drop of 16% overall for the South Bay.

Inland: Median Price Up from 2022

November 2023 was a good month for the Inland area compared to the same month last year. The number of homes sold climbed 11%, from 96 sold last year to 107 this year. Median price turned upward by 6%, ending the month at $851K, changed from $800K in 2022.

Compared to October of this year, Inland homes sales fell 8%, dropping from 116 homes to 107. That rate of change was slightly higher than the 6% drop across the South Bay. Median prices fell 7% for the month.

Year to date, the Inland area sales volume is off by 12% while the median price is up 1% from the same period in 2022.

Beach=Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo
Harbor=Carson, Long Beach, San Pedro, Wilmington, Harbor City
PV Hill=Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates
Inland=Torrance, Lomita, Gardena

Photo by Andrew Sterling on Unsplash

Palos Verdes Homes Top the South Bay Market

Home sales on the Palos Verdes Peninsula chalked up an impressive set of statistics in October. Comparing the October 2023 sales to October of last year showed a stunning 26% increase in sales volume beside an equally impressive 11% increase in median price. At the opposite end of the spectrum the Beach Cities October sales volume fell 19% from 2022, while the median price dropped 14%.

Elsewhere across the Los Angeles South Bay volume and prices were mixed with the general trend leaning toward decreased number of homes sold and prices struggling to stay level with last month while often slipping below.

Year To Date Sales Continue to Drop

In between the highs and the lows real estate activity in the South Bay has been mixed for the months of August through October. While many commentators are cautiously hopeful, it must be noted that year to date comparisons continue to show significant declines in the number of homes sold, with an average drop of 18% from 2022 for the first 10 months of the year. Likewise, median prices are falling for the January through October time frame. For example, median prices on the Hill were up in October, but have fallen 4% year to date compared to last year. Similarly the Beach area median is down 3% and the Harbor area is off 2%.

Sales volume is clearly down. By this time in 2022 sales were at 6700 units versus 5500 this year. Many buyers have been “priced out of the market” and many sellers are resisting the idea of “prices going backward.” The result has been a lot of deals not being made.

Year to date, the deals that have been consummated are still generally at median prices above last year, however the most recent three months have shown at least half of sold homes required price reductions to make the sale. With winter setting in, we expect continued reductions in both the volume of sales and in the prices of sold homes.

Home Sales at the Beach Hit a Wall

Throughout the year real estate in the Beach Cities has maintained spotty growth. Sometimes median prices improved, sometimes sales volume. But, October brought a wall of red ink for the Beach. Month over month sales volume plummeted by 27%, while the median price dropped 5% from September when it was flat at $1.7M.

Year over year transaction volume dropped 19% from September of 2022. The median price fell 14% for the same period.

Looking at the year to date statistics showed more declines with sales volume for the first 10 months of 2023 coming in 16% below that of 2022. At the same time, the median price was off by 3%.

In prior downturns the Beach area has been among the last to respond to market negativity and one of the first to recover. If the pattern repeats, sales at the Beach will continue to show predominately negative numbers for the late fall and winter months. Most chroniclers project a return to positive market conditions in late 2025 or early 2026 in general.

Harbor Volume and Prices Turn Upward

Home sales in the Harbor area moved from all negative last month to mostly positive this month. Sales volume on a monthly basis jumped from 24% down in September to a 7% increase in October. Similarly, the month to month median price went from -1% to +1% in October.

Annually, the number of homes sold in the Harbor area increased by 6%, a significant change from having fallen 26% in September. The median price came in at $750K, up by 7%.

That’s only the second time this year the Harbor area median price has come up into the positive range when compared to 2022. Overall, the year to date median sits at $739K, 2% below last year’s number of $756K. Sales volume for the Harbor is off 20% year to date. The number of homes sold for the first 10 months is 2824, compared to 3535 in 2022.

Palos Verdes Homes Star in October Sales

Home sales on the Hill came in at 63 homes sold with a median price of just under $2M. Month over month that represented a 13% growth in sales volume and no measurable change in the median price.

On an annual basis October sales were up 26% over the same month in 2022. This year’s median price was up by 11% over last October.

While these numbers reflect impressive growth it’s important to remember that the number of transactions on the Palos Verdes peninsula is quite small, which results in some dramatic percentile shifts. For example, the annual percentage of change in the median price so far this year has ranged from a low of -29% to a high of 17%. By comparison, the Harbor area where monthly transactions number in the hundreds, has an annual range from a low of -11% to a high of 7%.

On a year to date basis, the Hill showed a more common face with the January through October sales volume down by 20% from 2022. During the same time frame median prices fell by 4%.

Inland Area Sales Volume Down, Prices Up

In a surprising turn of events, the Inland area has shown an increased median price for both the monthly and for the annual sales figures. The median price came in at $917K this October, which was 2% above the September median. On an annual basis, the median was up by 7% over the $860K of October 2022.

With 116 units sold for the month of October this year, the sales volume was 11% lower than it was this September. The monthly decline was even greater than the drop of 9% for the year over year comparison to last October.

Year to date, the Inland area has outperformed the balance of the South Bay on median price and on sales volume. For January through October there is no discernible change to the median price from 2022 to 2023. In the same time frame the sales dropped by 14%, the smallest decline of the local areas.

Beach=Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo
Harbor=Carson, Long Beach, San Pedro, Wilmington, Harbor City
PV Hill=Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates
Inland=Torrance, Lomita, Gardena

Photo by Julianne Takes Photos on Unsplash

Over A Third Of Homebuyers Paying Cash

In September, the share of homebuyers paying all cash was 34.1%. This is the highest it has been since the beginning of 2014, and an increase of 4.6% from September 2022. However, this doesn’t mean homes are more affordable; in fact, it’s the opposite.

While it’s true that a significantly higher share of buyers are paying all cash, there are much fewer sales overall. Total sales decreased by 23% over the past year. Compare this to a decrease of only 11% for all cash sales. Cash sales aren’t going up, rather sales overall are going down, and cash buyers are less affected.

The reason for this is high interest rates, since cash buyers don’t care what the interest rate is for a mortgage loan they aren’t getting. Interest rates fluctuate up and down on a daily basis, but rarely change by much at a time. But in this case, they hit a two decade high in September at 7.2 and then continued an upward trend into October, almost reaching 8%. As of last week, they had started to drop back down. Despite this decrease, with how erratic rates can be, that isn’t a sure sign that rates are now trending downward.

Photo by Andres Siimon on Unsplash

More: https://www.redfin.com/news/all-cash-homebuyers-september-2023/

Inspections Alone Won’t Uncover All The Potential Problems

Certainly, one of the benefits of a home inspection is peace of mind that the property you’re buying or selling doesn’t have any major issues. However, some issues can be hidden even after an inspection. Home inspections are typically visual assessments by a single individual. Some things could be missed, particularly if the home is large, and problems that are difficult to see visually can easily escape notice.

If a mold, mildew, or pest problem is easily seen by a home inspector, it means the damage is already done. You’ll need specialists to detect these issues before they arise. The same is true of faults in the foundation or structure as well as environmental hazards such as lead and asbestos. There are also some things that records may show but that an inspector wouldn’t have any knowledge of without access to these records, such as outdated plumbing and wiring and unpermitted home renovations.

Photo by Stefan Steinbauer on Unsplash

South Bay Real Estate Struggles to Stay Afloat

The summer selling period for real estate in the South Bay showed mixed results for August and September. July was down across the board, but both the volume of sales and the median price was able to rebound in some areas. Notably, the Beach Cities come out of the third quarter with median prices up by 2% over last August, and up by 3% over September of 2022. That growth wasn’t enough to make up for earlier this year when median prices were down by as much as 17% in year over year sales.

Year To Date Prices Down Across the South Bay

Comparing the first nine months of 2022 to the same period in 2023 shows median prices at the Beach down 2%, the Harbor down 2%, the Hill down 8% and the Inland area down 1%. Similarly, the number of homes sold dropped at the Beach by 15%, the Harbor by 22%, the Hill by 23% and the Inland area by 14%. On average across the South Bay sales volume was off by 20%.

To some extent this validates the supply versus demand theory. With interest rates above 7%, many potential sellers (who are simultaneously buyers elsewhere) have simply changed their plans. They’ll wait for interest rates to abate before trying to move. The California Association of Realtors reports that the number of homes sold across the State has fallen for 27 consecutive months. Locally, a couple of neighborhoods have shown year over year improvement a couple of times, but overall, the last time sales volume was positive across the South Bay was September of 2021, 24 months ago.

Because there are so few homes available for buyers in a must move situation, those buyers are forced to buy despite high interest rates and despite elevated prices. Mortgage interest rates are currently testing the 8% number, and are expected to stay there into 2024. Most forecasts expect the number of sales to drop even further, possibly offset by an increase in renters and a corresponding increase in rental prices.

Things don’t happen very fast in the real estate market. We mentioned earlier that sales have been declining here for 24 months already. But, prices are still up and interest rates are still climbing. Currently, we expect to see a shift in the pattern this winter. As time goes on, more and more sellers will surrender to the inevitable and lower their asking price. Coupled with an increasing number of short sales and foreclosures, that will create the key metric the Federal Reserve is looking for to quell inflation. Most pundits are suggesting 2025-2026 for the bottom of the current down-trend and the beginning of a recovery.

A Home or a House?

Are you buying a home? Are you looking for a neighborhood that matches your personality? Are you looking for schools for your children? And nearby businesses for your family needs? That’s a home. If you’re looking at the appreciation rate for the zip code and how much you can leverage, that’s a house. The difference becomes important when the real estate market is rocky. When you’re buying a home, you’re looking at time over generations. Percentages on a loan mean little then because the property can be refinanced many times before it belongs to the family.

Are you looking for a house? Are you measuring the appreciation and the cost to income ratio? Are you looking for a distress sale and a rock-bottom price. Now is the time to put your cash away. Make no mistake—cash will be required! That’s not to say you can’t finance part of your investment, but count on having “skin in the game.” Your lender will require it. Over the next twelve months, accumulate as much cash as possible, and make your broker your best friend. You want a constant finger on where good deals are happening and you want to be one of the first on the scene. The “bottom of the market” is a hypothetical point. Your best deal can be anywhere in the area and any time in the downturn. It just has to meet your investment requirements!

Beach Cities Holding Strong Over 2022

The median price of homes sold in the Beach Cities was flat for August and September, following a 2% drop in July. Coming in at just under $1.7M the month over month price has been mostly down for the first three quarters of the year. Following a similar pattern, the month to month sales volume has fallen after a strong start in early spring.

In year to year comparison, both August and September have shown a modest improvement over the same months last year. Median prices were up 2% in August and 3% in September. This improvement comes on the tail of four straight month of declining median prices. Supporting the growth in median price, sales volume was up 23% in August and 20% in September. The positive numbers at the Beach are a welcome respite following 21 months of falling volume.

Looking at year to date 2023 versus 2022, median prices are down 2% and sales volume is down 15%.

Harbor Volume and Prices Slipping

September found home sales in the Harbor area fell in all measures. On a month to month basis, sales volume dropped 24%. At the same time, median prices fell 1% below the August median.

Year over year showed the number of homes sold down by 26% and the median price down by 3% from September of last year.

Year to date for the first three quarters of 2023 sales volume was off by 22% while median prices dropped 2%.

This is a pattern we expect to see repeated again and again during the coming two years. First the sales volume declines steeply, and median prices begin a downward trend. Then as the sales volume continues to decline, sellers begin to panic and the few active buyers tighten up on the terms of their offers. The cycle typically continues until falling commodity prices and weak employment numbers convince the Federal Reserve inflation is under control. Then it will start lowering the interest rate and allow markets to float free again.

Palos Verdes Transactions Volatile

The PV Peninsula came through September with positive numbers for the month, though the annual and year to date numbers suffered some slippage. Sales volume for September came in 14% above August and the median price was a respectable 15% above the prior month.

Compared to September of last year, home sales on the Hill fell by 7%. That decline was countered by a 5% increase in median price over the same month in 2022.

Like the rest of the South Bay, PV suffered downturns in the year to date statistics. The first three quarters of 2023 ended with a 23% downward slide in home sales volume, accompanied by an 8% fall in median price.

Inland Area Sales Volume Mixed, Prices Up

The Inland area performed surprisingly well in September. Home sales in the Inland area typically mirror those in the Harbor area. Last month brought a surprise when the median price climbed 6% above August. This positive note came despite a 12% drop in sales volume.

September of 2023 compared to September of 2022 brought even more surprise with a 5% increase in median price as well as a 17% jump in sales volume.

Year to date activity for the first nine months of 2023 compared to the same time frame in 2022 fell in line with the rest of the South Bay, Sales volume fell by 14% and median price by 1%.

Beach=Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo
Harbor=Carson, Long Beach, San Pedro, Wilmington, Harbor City
PV Hill=Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates
Inland=Torrance, Lomita, Gardena

Photo by Oliver Cole on Unsplash

Can’t Rent Out Your Whole House? Rent Out A Room

Have a bit of extra space in your house, and wish you could use it for something, but aren’t in a position to downsize? You can rent out single rooms, even if your home is a single family residence. It can even be a basement, if it’s large enough to serve as a bedroom. That way, the extra space doesn’t go to waste, and you even earn a bit of extra income. Of course, not everyone wants strangers living in their home, so this idea may not be for everyone. But if you don’t mind or even would prefer another occupant, it’s a win-win for you.

Keep in mind that renting out a room is still renting something out, and you must still follow regulations. Read up on the Fair Housing Rules if you don’t already know them, and talk to an expert, particularly if there’s something you’re unsure about. And of course, the same guidelines apply for finding a tenant. That means being very specific with what’s being offered and what sort of tenant you’re looking for, making sure to request background and credit checks as well as references, and meeting the prospective tenant in person before signing the deal. If you don’t want them in your home before you’re sure you want them as a tenant, your first meeting can be in a public space, like a coffee shop — though keep in mind your tenant will want to see the property before they sign.

Photo by Storiès on Unsplash

How To Tailor Your Home Staging For The Fall Season

Fall may not be the single most common season to buy or sell a home, but it’s certainly one of the most common. It’s a good idea to get your home staging right for the season, because it’s not a time that you want to miss out on opportunities.

Fall makes it more difficult to set the stage, but that makes it all the more important. You’ll want to rake leaves in front of your house, because leaving them makes the area look less cared for and therefore less appealing. Shorter days in autumn mean it will get dark earlier. Make sure to amp up the lighting so people can actually see the home they’re attempting to buy. Also note that prospective buyers are likely to spend more time inside the home, as autumn weather tends to be unpredictable. Maintain a comfortable temperature in your home and highlight appealing aspects of the home’s interior. If you really want to go all out, fresh baked cookies are sure to feel cozy to your buyers.

Photo by Priscilla Du Preez on Unsplash

What Is A Contingency?

You may have been told that a listing is contingent or seen a list of contingencies. But what is a contingency, exactly? A contingency is a condition that, only if met, causes a transaction to proceed as normal. It’s a way to protect both the buyer and the seller in case something goes wrong. It both assures the seller that the transaction will go through as long as the condition is met, and may enable the buyer to renegotiate or back out if it isn’t met.

Not every contingency is something the seller can necessarily provide, though, so it’s never a guarantee of a successful transaction. There are several types of contingencies. There is one that the majority of sellers can meet without any effort, and that is a title contingency. This specifies that the seller must be able to demonstrate that they have clear title to the property. In most cases, this isn’t difficult, but things such as inheritance could complicate this. A couple types of contingencies relate more to the buyer. These are financing contingencies and sale contingencies. Transactions with financing contingencies are contingent on the buyer being able to acquire financing. Sales contingencies refer to the sale of the buyer’s current property. This is normally used when the buyer is reliant on funds from the sale of their home in order to afford the new home. The last two common contingencies rely on a third party, an inspection contingency and an appraisal contingency. As the name might imply, these make the transaction contingent on a successful inspection and an appraisal at or above the purchase price respectively.

Photo by Mina Rad on Unsplash

Local Real Estate Meets the Inflation Fight

In August the South Bay real estate market showed some slowing of what has seemed a continuing slide into negative numbers. Closed transactions showed a partial recovery from the July report of declining sales and declining values, across both the past month and the past year.

August showed positive growth over July in sales volume except for transactions on PV Hill. Median prices compared to July were down except at the Harbor.

Annual statistics were similarly mixed with notable increases in sales at the Beach and Inland areas. Median prices compared to August of last year with modest increases in the Beach Cities and Harbor Area.

Beach Cities Show Strength in August

Sales volume at the Beach seemed surprisingly strong, however a look back in history reveals weaker than normal sales in July of this year and August of last year. The 127 units closed in August was much more in line with expectations, than the 91 sold in July or the 103 sold in August of 2022. Sales in a normal year would come in at about 125-135 units, showing that the Beach Cities are currently close to a normal number of transactions for the month.

Median prices came in negative compared to July, though less than a 1% drop. Last year’s weak sales led to an increase of 2% in median price this August, despite an overall downtrend for the year. Hypothetically, assuming the Federal Reserve policy of 2% growth, median price at the Beach should have been about $1.62M in August. As the market stabilizes from the pandemic, the median has steadily dropped from a high of $1.76M in April to the August actual of $1.67M..

Year to date transactions showed a continuing decline in sales volume (-19%) and median price (-4%) versus 2022. Likewise, sales volume was off 31% compared to the baseline year 2019. Median price is still coming in positive compared to the baseline, up 28% from 2019.

August Harbor Area Sales Climb

Looking at August versus July of this year shows Harbor area sales volume up a healthy 22%. While the month over month numbers are positive, sales are off 8% compared to the same month last year. For perspective, note that in 2019, the last normal year of business, there were 436 homes sold compared to 328 this August. Using that reference point, monthly sales are off by 25%.

Median price for last month was $751K, up 1% from July and up 4% over August of last year. Going back to 2019, the median was $575K, giving the current median price an increase of 32% over our baseline year. At the same time, the high median for this year was in June at $772K, and the lowest was $675K in February.

Year to date, the number of homes sold at the Harbor is down 22% from last year and likewise 22% from 2019.That decline in sales volume is driven by the increased median price which is up 32% compared to the first eight months of 2019. Being generally an entry level market, the Harbor area has shown a drop in sales every month of this year. Likewise, the year over year median price has dropped every month until August.

Palos Verdes Volume and Prices Drop

Sales and median prices were mixed everywhere in South Bay except for the PV Hill. All the statistics for August went down on the Hill. Month over month saw a drop in sales of 2% and decline in median price of 6%. Both are modest changes by comparison to most of the South Bay, but are indicative of the direction of the market in general.

Looking at August of last year compared to August of 2023 shows a dramatic decline of 36% in sales volume. Closed escrows dropped from 77 units last year to 49 this year. Annually, median prices dropped 6%, the largest drop of the four areas.

It’s important to note that in 2019, which being the most recent ‘normal’ year of business, August saw 90 units sold on the Palos Verdes peninsula. Monthly sales volume has dropped off by nearly 50% from the reference year.

Year to date through August shows sales volume down 25% from last year, with median prices falling by 10% over the eight month period. Comparing to 2019 year to date volume is off 21%, while median price comes in at 32% above the 2019 figure.

The disparity created during the pandemic is gradually leveling out as the year goes on. Palos Verdes median prices have fallen six out of eight months this year. The same has been true of the balance of homes sold in the South Bay.

Sales Up, Prices Down for Inland Area

From July to August transactions in the Inland area climbed 15%. Simultaneously, median prices fell by 2% for the month. January kicked off the year with a 16% increase in the median price. February saw that pricing promptly reverse and fall 14%. Since then sales volume has gradually dropped each month and median prices have shifted into a pattern of decline.

Year over year pricing numbers are nearly identical with a 15% jump in median price for January, followed by dropping prices every month since. Similarly, most of 2023 has seen falling sales for homes in the Inland area. So far, August has been the only month with growth in closed transactions.

Year to date statistics compared to 2022 have been much the same with the number of homes sold dropping by 17% and the median price down 2%. In keeping with the rest of the South Bay, comparisons to 2019 reflect sales falling 18% while the median price remains 32% above what it was before the pandemic.

Where Is the Real Estate Market Going?

The number of homes being sold has consistently fallen this year. Likewise, the median price of sold homes has generally been falling since the beginning of the year. The driver behind this has clearly been mortgage interest rates rising from under 3% to over 7% in a matter of months. The Federal Reserve managers have been very upfront about continuing these rates into the foreseeable future.

Most estimates state that about one third of potential buyers can no longer afford to continue with their purchase plans. We see a continued decline in the median price, as sellers find it impossible to sell at the price points reached during the pandemic. When ‘’time on market’ increases without a sale, sellers who ‘must sell’ will gradually lower prices.

Polls are showing those who aren’t compelled to sell are finding it hard to let go of mortgage interest rates below 5%. This reluctance, combined with the sliding median prices, will contribute to more stagnation in the market.

Photo by Carl Clark

How Long Does The Home-Selling Process Take?

The average time it takes to sell a home from listing with an agent to closing the sale is about 90 days. Many factors affect how long it takes to sell a home. These elements can include market conditions, buyer financing, the time of year, and the prep time to get a home ready for marketing.

A home that is in good condition, has good curb appeal, and is in a good location will attract buyers more quickly. Competitively pricing a home is key to having a reasonable time on the market. A cash buyer and one who is willing to buy a home in as-is condition can expedite the closing time.

Once an offer is accepted, the average closing time will be 30 to 45 days. The buyer’s loan is processed during this time along with the lender obtaining an appraisal. Property inspections also occur during the closing process. The title and escrow companies will then coordinate the signing of all the final documents, collect the buyer’s closing funds and finalize the settlement statements so the transaction can close.

Photo by Gaining Visuals on Unsplash

Market Stalled By High Interest Rates

As of August 2023, interest rates are somewhere around 7%, possibly higher. While this isn’t astronomically high — they have historically been over 10% — it’s too high for current homeowners to want to exchange their homes. This is because 92% of current homeowners with a mortgage have an interest rate below 6%. Almost a quarter even have locked in an interest rate below 3%.

High home prices are actually somewhat helping current homeowners, since the price boost increases their equity. Prices have increased 14% in the past two years, which results in approximately $86,000 in equity over that time period. However, this may not be enough to offset the increased mortgage costs, especially for those with very low interest rates. Assuming a mortgage of $500,000 and a current interest rate of 3%, a new purchase with the same loan amount would result in a $1,200 increase in mortgage payments per month.

Normally, when demand is low like this, supply is high. This isn’t the case right now. Previously, we would have been able to blame declining construction due to increased construction costs. That’s no longer the case, though, as construction has largely, though not completely, recovered. It may even be simple lack of demand that is the final obstacle to a full recovery for construction. To see the real problem, remember which group we’re talking about — current homeowners. These are the same people who would be selling to buy a new home. If they’re not willing to buy in the current mortgage climate, they’re not selling either.

Photo by Adrian N on Unsplash

More: https://journal.firsttuesday.us/todays-homeowners-are-stuck-on-yesterdays-rates/91951/

Home Financing Options For Struggling Teachers

The share of teachers able to afford homes near where they teach is dwindling rapidly. This year, teachers can afford only 12% of homes within 20 miles of their schools. This is a decrease from 17% last year. In 2019, before the pandemic, they could afford 30% of homes in their school’s area. Fortunately, there are options to help teachers.

The Department of Housing and Urban Development (HUD) is sponsoring a program called Good Neighbor Next Door, which sells homes in revitalized areas to certain government workers at half the listing price. This program is available to pre-K through 12 teachers as well as law enforcement officers and firefighters. Some of Fannie Mae’s programs, while not specifically aimed at teachers, have qualifications that teachers frequently are able to meet.

In addition to federal programs, there are also state and private programs to help teachers. California created the School Teacher and Employee program back in 2018. This specific program is discontinued, but is now folded into their MyHome program, opening it up to more people. The private program Homes for Heroes provides a 0.7% rebate on home purchases made through the organization’s specialists. It is available to firefighters, EMS, law enforcement, military, healthcare professionals, and teachers.

Photo by Kenny Eliason on Unsplash

More: https://finance.yahoo.com/news/teachers-are-struggling-to-buy-homes–heres-where-to-turn-for-help-202043847.html

How Much Do Real Estate Agents Charge?

Real estate agents make their income from commissions when they represent buyers or sellers on the sales of homes. By law, the amount of commission charged must be negotiable. The industry average is 5% to 6% of the home sale price.

Although the percentages of the split may vary, traditionally, a 6% commission would be divided between the listing broker’s office and the selling broker’s office. The listing agent represents the seller, and despite the name, the selling agent is the one who represents the buyer. Three percent would go to the listing broker’s office, which would be split between the broker of record and the listing agent, per their office agreement. Likewise, the other 3% would be split between the selling agent’s broker of record and the selling agent.

For example, if a seller agrees to pay a 6% commission on a $1,000,000 sale price for their home, the total commission paid at closing would be $50,000. Of that, $25,000 would be disbursed to the listing office, where the agent would be paid $12,500 or more, depending on the agent’s commission agreement with the broker. The other half would be shared between the buyer’s brokerage and agent. Agents also generally pay Errors and Omissions insurance premiums as well as other transaction fees.

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