2022 South Bay Real Estate Wrap

We’re taking a little different approach with this post. Because it’s not only the end of the month, but the end of the year, we’re doing a quick summary of the monthly data, followed by some more detailed discussion of how the individual areas have fared over the past year. We’ll even try some crystal gazing while we walk through the annual data for each neighborhood.

This is a great place to bring in our At A Glance table. It displays in just a few numbers how all the areas of the LA South Bay are doing compared to last month, and compared to this same month last year.

Looking at December vs November, once again the percentage of unsold homes has increased and the number of homes sold below last month’s median price has also marginally increased. More importantly, on a year over year basis the amount of red ink is even greater. Losses in number of sales and in the value of those sales is clearly growing.

Despite all the negative numbers, there may be a light in the future. For the past couple weeks we have observed a softening in the mortgage interest rates. If that turns out to be more than a mid-winter teaser rate, this spring may shine a bit brighter than previously anticipated. We’re not holding our breath though. Recent speeches from Federal Reserve Bank leaders have stated a clear intent to “hold the line” on driving down inflation with mortgage interest rate increases.

Beach Cities Home Sales Down 47%

Compared to 2021, fewer homes have been sold in the Beach Cities every month of 2022 than the same month the previous year. January started the trend with a decline of 28% versus the number of homes sold in 2021. That difference continued to increase all year. By December sales were 47% lower than the previous December.

As the interest rates climbed, the number of home sales dropped. Looking at the total sales volume for the year, 35% fewer homes were sold in the Beach area during 2022, than were sold in 2021. Of course, 2020 and 2021 were the highly erratic pandemic years. So, looking into sales at the Beach for the last few years we find the number of homes sold has already dropped 21% below the number sold during 2019, our last normal economic year. Effectively, the Covid-19 pandemic created. Then erased any gains of the past three years at the Beach.

Homes sold in: 2019 – 1572 (market normal)
2020 – 1572 (market direction down six months, up six months)
2021 – 1910 (market direction down two months, up ten months)
2022 – 1242 (market direction down twelve months)

While the Beach Cities suffered the largest drop in sales volume for 2022, the South Bay as a whole has also dropped below the sales figures for 2019.

Sales Volume Down Across the Board

All areas started the 2022 year down from the prior month and down from the same month in the prior year. February results were mixed with the Harbor and Palos Verdes areas showing stronger results. March sales jumped up as buyers realized the rising interest rates were about to price them out of the market. From April on, sales volume across the South Bay was trending down on a year over year basis.

In sheer number of sales, the Harbor area fell the farthest. In 2021 annual sales 5292 homes were sold in the Harbor cities, while in 2022 the number dropped to 4017. That amounted to only a 24% decrease compared to the 35% annual collapse in the Beach areas.

On a month to prior month measure, sales declined six months out of nine across the South Bay. Occasionally one or two areas would post a positive sales month, but in the end, 2022 showed a 26% drop in sales volume from 2021 across the South Bay.

Sales Dollars Diving

With the number of sales dropping in a range of 25% to 50% it’s not a surprise to discover the total dollar value of those sales has taken a dive. As the chart below shows, the first quarter of the year was generally positive, then reality set in and the buyers started walking away. The rest of the year was little more than a measure of the recession.

Monthly revenue in the Harbor area alone dropped $200 million between March and December. The Beach cities and the Palos Verdes area lost about $150 million a month in sales value. Inland area sales for the same period are off approximately $75 million.

One should consider these declines in the context of the pandemic. Early on, while much of the world was in lockdown, the government flooded the citizenry with easy money, hoping to keep the economy afloat. Mortgage interest rates were already at the bottom because the economy was just recovering from the last recession. The result was a real estate boom starting in summer of 2021, which continued until March of 2022.

The housing market is now in the “bust” part of the cycle and we anticipate it to last through 2023. Gross sales across the South Bay jumped up from $8 billion in 2019 to $12 billion in 2021. That’s clearly unsustainable, especially from the perspective of a Federal Reserve System which is looking for 2% growth. So far the market decline has taken back about 23% of that $4 billion bubble.

Median Price Is Slipping

There is a lull between when buyers stop buying and prices start dropping. Most sellers need to see headlines about the market change before they make a price reduction. Median prices started to slide in August at the Beach and on PV Hill. The year ended with most areas having experienced multiple monthly declines in the median price. Despite that, median prices still exceeded those of 2021 by roughly 7%.

Comparing 2022 to 2019 better shows the inflation factor. Generally speaking the South Bay ended the year with median prices 30%-35% higher than they were in 2019.

The Palos Verdes market is comparatively small, thus is typically volatile on a monthly basis. The yellow line on the chart above shows the range of high and low median prices. Since mid-year the median price has drifted down and merged into the downward trend.

Year End Versus 2019

We’ve been comparing 2022 to 2019 all year because real estate sales during the height of the pandemic were so out of the ordinary, regular year over year comparisons yielded untenable results. The chart below depicts the current year total sales for the South Bay compared to sales from 2019.

Tracking the blue line, one can see where sales dropped below 2019 values in August, recovered in September, then slipped below again for the fourth quarter of the year. December sales didn’t fall quite as far as projected, but still came in about $200 million less than December of 2019.

The end of the year reflected accumulated sales of approximately $9.3 billion. That would mean 2022 total dollar sales come in at $1.3 billion above the $8 billion total dollar value sold in 2019. Across the South Bay that was an 18% increase.

Broken out by community, we found total dollars sold in the Beach cities to be 4% above 2019, followed by the Inland area with a 20% increase. Harbor came in next with a 21% increase and the PV Hill with a 35% increase.

We expect both sales volume and median price to continue declining through most, if not all, of 2023. By mid-year of 2024 there should be evidence of the beginnings of a recovery.

Disclosures:

The areas are:
Beach: includes the cities of El Segundo, Manhattan Beach, Hermosa Beach and Redondo Beach;
PV Hill: includes the cities of Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills and Rolling Hills Estates;
Harbor: includes the cities of San Pedro, Long Beach, Wilmington, Harbor City and Carson;
Inland: includes the cities of Torrance, Gardena and Lomita.

Photo by T Narr on Unsplash

The Recession Continues – November Home Sales

Home Sales Plunge

November saw the number of homes sold in the South Bay fall 12% from October totals. Sales volume has declined in seven of the eleven months on a month to month basis since the beginning of the year. Sales tipped up a modest 2% on Palos Verdes peninsula, while volume dropped 7% at the Harbor, 18% at the Beach and 24% in the Inland area.

Year over year sales look even more depressed with a 45% drop from 2021 sales across the South Bay. The Beach Cities led the plunge with a 50% fall, followed by the Harbor area at 46%. Palos Verdes and the Inland area brought up the rear with 35% and 41% respectively. The falloff in sales began with a 17% drop in January and has been increasingly negative since.

Because 2020 and 2021 were both significantly impacted by the coronavirus pandemic and the governmental response to it, 2019 is the most recent year with a normal business pattern. Comparing 2022 sales volume with 2019 provides the truest measure of the current recession. Overall, for the first 11 months of the year, the South Bay has experienced a 9% decline in sales compared to 2019.

Through the month of November, sales on the PV Hill have fared the best, showing a modest drop of 3% compared to the same time period in 2019. The Harbor and Inland areas which generally are entry level for the South Bay both fell back 8% for the same period. So far this year the Beach Area has suffered the largest declines with an 18% drop in number of sales versus 2019.

Annual Sales Dollars Off By $3.2 Billion

Comparing year-to-date sales of homes in the Los Angeles South Bay shows a drop in dollar value from 2021 to 2022 of over $3.2 billion. That represents an over-all decline of 22% in total dollars sold from the same 11-month period last year.

The Beach area has been the hardest hit so far with a drop of 34%. The PV Hill has dropped 29%, while the Harbor area has fallen 22%. The Inland area fared the best, only down 19% for the same 11 months.

On a month to month basis, the decline in sales accelerated from 7% in October to 18% in November. The Inland area which had flipped to a positive gain in October plummeted by 30% in November. Similarly the Beach which had been up 7% in October fell 25% in November. The Harbor and Hill areas were off by 8% and 11% respectively.

At this point year to date South Bay sales dollars for 2022 still exceed the total for 2019 by 22%. We expect the end of year numbers to be positive. However, with monthly sales figures shrinking by 30%-40%, we project 2023 to fall below 2019.

Median Price Shows Mixed Results

Statistically speaking, the Beach cities median price fell 8% from October to November. The reality is that the median in October was unusually high. Multiple sales of Strand property drove the median up 14% that month. The blue line on the chart below shows the one month blip and median prices dropping back to a steeper downward pace in November.

Palos Verdes was flat compared to the previous month. This is a rare event as one can see by the erratic yellow line on the chart. Because the physical area is smaller than the other geographical areas, the number of sales is smaller, and mathematically the sample size is smaller. Thus one or two outlier sales can create wide swings in the chart.

Similar to the Beach area, the median price dropped 7% in the Inland area. This decline follows two months of no change, preceded by three months of month over month negative median prices.

At the same time the Harbor area experienced a month to month increase of 2% in the median price. Researching this anomaly we discovered 11 new construction sales in Carson had been accumulated and posted simultaneously by the developer. It’s worth noting that Harbor area median prices have also been elevated to some extent by the new construction on Western Avenue in San Pedro.

From a year over year perspective, November median prices continued to fall in comparison to those of November 2021. The Harbor and PV Hill areas were down 5% and 2%, respectively. Median price in the Inland area dropped from positive 6% in October to negative .05% in November. The Beach cities remained positive with growth of 1% in November. That being in contrast to an unexpected growth of 20% last month caused by the sale of multiple Strand properties in Manhattan Beach.

Despite increasingly deep reductions in sales volume and in median price throughout this year, the median is still higher than it was in 2019. Palos Verdes home owners have fared the best with the current median price 40% above the November 2019 median. The Harbor area is still 34% higher and the Beach cities still maintain a 31% advantage. The Inland area has proven to be relatively stable throughout the pandemic and currently the median price is 27% above that of 2019 for the same 11 month period.

Year End Projection Updated

We’ve been comparing 2022 to 2019 all year because real estate sales during the height of the pandemic were so out of the ordinary, regular year over year comparisons yielded untenable results. The chart below depicts the current year total sales for the South Bay compared to sales from 2019.

Tracking the blue line, one can see where sales dropped below 2019 values in August, recovered in September, then slipped below again in October and November. Assuming the decline continues at the same rate, we are forecasting the December sales to drop another $75 million, or so.

The end of the year would then reflect accumulated sales of approximately $9.4 billion. That would mean 2022 total dollar sales come in at $1.4 billion above the $8 billion total dollar value sold in 2019. Across the South Bay that would be approximately an 18% increase.

Broken out by community, we forecast total dollars sold in the Beach cities to be 6% above 2019, followed by the Inland area with a 20% increase. Harbor comes in next with a 21% increase and the PV Hill with a 35% increase.

At a Glance

As 2022 draws to a close we find the final numbers for both sales volume and median price show the year to be rapidly declining from the final figures for 2021. However, the totals all remain positive. We expect December to continue the trend downward, though the year should end on a positive note.

With the number of units sold decreasing every month by 35% to 50%, and the median price now falling, 2023 should be firmly in the grip of the recession by mid-year.

Disclosures:

The areas are:
Beach: comprises the cities of El Segundo, Manhattan Beach, Hermosa Beach and Redondo Beach;
PV Hill: comprises the cities of Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills and Rolling Hills Estates;
Harbor: comprises the cities of San Pedro, Long Beach, Wilmington, Harbor City and Carson;
Inland: comprises the cities of Torrance, Gardena and Lomita.

Photo by Elias Shankaji on https://unsplash.com/

Despite GDP Growth, Real Estate Is Still On A Downturn

Although it was undeclared, we’ve been in a recession, which is usually indicated by two consecutive quarters of gross domestic product (GDP) loss. GDP has been going down, but now suddenly GDP is going back up. So does that mean we are out of the recession? Well, if it had ever been declared, it would be declared over — but that doesn’t mean it actually is, especially since it was never declared to begin with.

GDP is ultimately based on consumer spending. When consumers spend more, GDP goes up. This is indeed what happened. However, that isn’t necessarily a good thing. You may have read one of my posts from a few days ago about plummeting savings rates. As stated in that post, savings rates have recently dropped dramatically, which is normally an indicator of consumer confidence, but in this situation is actually a result of necessity due to increasing costs of living. In other words, inflation occurs, consumers must spend more to buy the products they need, therefore GDP goes up. We tend to think of GDP increases as good, but the reality is that it’s simply a mathematical value that can shift as a result of a variety of different factors, both positive and negative.

Photo by Thomas T on Unsplash

More: https://journal.firsttuesday.us/economic-recession-or-not-the-housing-market-recession-is-here/87069/

A Recession on the Horizon

September Home Sales Down 35%

Last year saw home sales in the South Bay escalate dramatically as buyers sought to become homeowners while interest rates were still abnormally low. With interest rates rapidly rising it’s no surprise that sales are plummetting in 2022. The Harbor area, traditionally an entry level market, handily out-sold the balance of the South Bay with a drop of only 26%. The remaining areas suffered sales drops ranging from 42% to 47%, with the South Bay as a whole dropping 35%.

Compared to last year, cumulative South Bay home sales were down 21% as of September. The first three quarters of 2021 saw 7767 townhomes and single family residences sold, versus 6163 during the same period this year.

Recognizing that 2020 and 2021 were exceptionally aberrant, we also compared the 2022 year-to-date sales volume to 2019, the last normal year of business prior to the pandemic. As of the end of September 2022 cumulative sales volume was 4% lower than it was for the first nine months of 2019.

The decline from 2019 sales is uneven in that the biggest drop, 15%, is seen in the Beach area, which is typically at the high end of the market. Sales in the Harbor area only dropped back by 2%, while sales in the Inland area fell by 4%. The Palos Verdes peninsula fared best, actually increasing in quantity sold over 2019 by 4%. As always we offer a cautionary note when looking at statistics for property on the PV Hill. Because there are considerably fewer homes in that area, percentile statistics can take large swings.

Median Prices Mixed in September

The number of homes sold in 2022 has declined, indirectly affecting the median price of those homes, as well as the total dollar value of all the homes sold in the same period. A closer look at the median price of homes sold through September yields some surprising changes.

Since prices increased dramatically during the coronavirus pandemic we anticipated finding the median price from 2022 to be considerably higher than that of 2019. Indeed, that is the case with the median in the Beach area up 31% over that of 2019, the Harbor up 36%, PV Hill homes up a staggering 47% and the Inland area up 30%. But, that is gradually reversing.

July and August of this year showed depreciation in the median price across the South Bay. Prices consistently dropped in a range from 2% down (Inland) to 18% down on PV Hill. September sales broke the pattern with only the Beach cities losing value per the median. The Inland area was flat, showing no change from August. In an unexpected twist, both the Harbor area and the Hill came in with an increase in the median price. The growth was modest, up 6% for the Harbor area and up 3% for the Hill. Despite the slight improvement in September prices we anticipate continued downward pressure as inventory grows and time on market stretches.

Looking at the median price on a year-over-year basis, we find September with minor declines from August. The Palos Verdes cities showed prices dropping by 2% last month and this month. At the same time the Beach cities dropped 2%, while the Harbor and Inland areas increased by 4% and 2% respectively.

Median prices started 2022 with increases regularly coming in well above 10% growth. In April we saw the first negative where the median for the Hill fell 2% from 2021. Since then we have watched the rate of price appreciation decline from double digits until now in September with both the Beach and PV areas losing value.

We fully expect all areas of the South Bay to reflect declining median prices before the end of the year. While prices will be down on both a month-to-month and year-to-year basis, we don’t anticipate the median to fall below 2019 price points this year.

Total South Bay Sales Dollars

When the number of sales is decreasing and the median price of those sales is also decreasing, one has to assume the gross revenue will also decrease. Governor Newsome has been warning for several weeks that the 2022-23 fiscal year will not see the State level revenue surpluses California has been enjoying.

During the first quarter of 2022 gross revenue from real estate sales remained predominately positive, with year-over-year growth rates of about 6% per month. Since March the South Bay has only seen two instances of sales growth, 7% in the Harbor area for April and 3% in the Inland area for June. Every other entry on the chart is negative, with September declines averaging about 40%.

Cumulative sales for the first three quarters of 2022 were off by 29% compared to 2021. Our monthly sales dollars chart shows a zig-zag downward trend since spring of this year. Of course, 2019 is a more realistic point of comparison as a result of market gyrations created by the pandemic and our government’s fiscal response.

Comparing 2022 sales totals to 2019 yields a clearer picture of the current direction of the market. Instead of a sea of red ink, we can clearly see that 2022 sales have remained above those of 2019 with the exception of August. Sales started normally, then in March the Federal Reserve Bank announced a .25% interest rate hike, and promised more to come.

Buyers threatened with increasing monthly payments jumped into the fray and pumped sales up for a couple months. Then a new .5% increase, accompanied with the promise of multiple .75% increases throughout the year began a downward slide in home sales that is continuing.

Following the trajectory of the maroon line, and assuming the interest rates continue to increase, we predict 2022 sales will drop below 2019 again in October. The Federal Reserve Bank has already announced plans for another .75% increase in November, followed by a .5% increase in December. Adding another 1.25% will bring the full increase for the year to 4%. We envision the fall in sales growing steeper, bringing total sales below that of 2019 for the final quarter of the year.

Statistical Summary

This would be the heart of the discussion if we were dealing with a normal fiscal environment. Here we could talk about month-to-month changes and changes from the same month last year to this year. Instead we’re faced with an unanticipated side effect of the pandemic—out-of-control inflation followed by a steep recession.


The areas are:
Beach: comprises the cities of El Segundo, Manhattan Beach, Hermosa Beach and Redondo Beach;
PV Hill: comprises the cities of Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills and Rolling Hills Estates;
Harbor: comprises the cities of San Pedro, Long Beach, Wilmington, Harbor City and Carson;
Inland: comprises the cities of Torrance, Gardena and Lomita.

Goodbye Marymount, Hello UCLA!

Marymount California University, is no more. But, shed no tears! The prestigious University of California at Los Angeles plans to open the site for classes in the fall of 2023-24. Escrow had not yet closed as of this writing, but all appears to be moving forward at good speed.

We are told the finalists included four developers and three educational institutions. We’re pleased that UCLA was the successful bidder. We’ve heard some of their ideas and look forward to having them as neighbors.

However, we’re also interested in what kind of potential the developers saw in this deal. There’s a total of 11 acres already developed as residential and 24.5 acres developed as a campus. What would that have looked like if a residential developer purchased the site?

The 24.5 acres, some of it with gorgeous ocean views, is the jewel in the transaction. A little “back of the envelope” calculation says that using an average of 15,000 square feet per lot, Which is about the average in that neighborhood, one could build about 70 high end homes at the location. New construction on similar sites is selling for about $7.5M today, giving a value for the finished project of approximately $525M. Not bad for a land purchase of $80M, especially considering we haven’t started looking at the 11 acres.

There exist some legal complications in the 86 unit, 11 acre property. Deed restrictions purported to require the land to be used to house students. That can readily be accommodated by an educational institution, like UCLA. Developers on the other hand might have to pay some serious legal costs to do anything else with the land.

And it might have been worth the legal expense. A quick look at the apartment building market in the South Bay shows roughly comparable buildings selling for about $420K per unit. That would make 86 units worth about $36M, almost half the stated purchase price.

We’ll never know what might have been. The entire South Bay can look forward though, to an educational revival. A refreshed campus with UCLA’s academic resources and access to the university program at AltaSea and other port projects is a great starting ground.

Photo by D koi on Unsplash

South Bay Median Home Price Plummets

With four months left in a very chaotic real estate year, we want to take this opportunity to lay some ground work for understanding why the market has headed into a recession. And, to keep things on a positive note, we end with a couple of suggestions on how you might profit from this turn of events.

Some of the nation’s most respected analysts (including Ivy Zelman of Zelman & Associates and Mark Zandi of Moody’s Analytics) are predicting recessionary price drops ranging from 10-20% and lasting through the next two years. (Arguing that we’re only looking at a brief correction, pundits at Goldman Sachs and the Mortgage Bankers Association continue to predict single digit growth.) Meanwhile, here on the street, we’re watching prices drop across the board for the second month in a row.

In August we reported that median home prices across the Los Angeles South Bay fell from July, the prior month. Now looking at August sales we find all four areas of the South Bay showed declining median prices again. The month-over-month price drops ranged from 6% at the Beach to 25% in the Inland cities. (See bottom for description of areas.)

Underlining the month-to-month price slippage, three of the four areas also showed declining prices versus the same month last year. Only in the Harbor area are homes still selling for more than they did in 2021. Even there, median price has slid from 9% down to 4% above August of 2021.

2022 Compared to “Normal” Business in 2019

The past two years have seen real estate stumble with the Covid lockdowns in 2020, then skyrocket with the low interest rates in 2021. It’s worth a look back to 2019 to see how the current conditions compare to the most recent “normal” market.

Looking at sales volume in the period January through August of 2019, 1064 homes had sold in the Beach cities. So far this year only 905 homes have sold. That is a 15% drop in sales since the last normal year of business. The trend line for the Beach area has been sliding downward since April.

For the first eight months of 2019 the Harbor area showed sales of 2955 compared to 2945 for this year. That is a drop of .3% – a statistically insignificant change. However, the trend line has been dropping since March. August sales were up slightly from July, which was an unusually slow month for the Harbor area. We expect sales to continue a downward trajectory into 2023.

Palos Verdes home sales for the same period in 2019 totaled 537 versus 568 in 2022. The Hill is the only part of the South Bay where year to date 2022 sales exceed those of 2019. At 6% it’s a healthy increase, too. Despite being the best performing area in South Bay, Palos Verdes sales volume peaked in March and continues to slide. Sales in July were unusually weak, so August shows an upward step in the trend line.

Sales in the Inland area, very much like the Harbor area are down only .4% from 2019 sales for the same period. The difference is statistically insignificant, and the trend line is headed downward.

Declining sales volume creates a larger inventory of homes to sell. As the inventory grows, sellers have more competition and buyers become more demanding and prices start declining. We anticipate continuing growth of available inventory, followed in late fall or early winter by a spate a price drops.

Median Price Up 54% Since 2019

Palos Verdes homes have seen the greatest impact of the Covid-era buying mania. Comparing median prices from the first eight months of 2019 to the first eight of 2022, we find a 54% escalation on the Hill. Normal growth over a three year period would have created 9-10% in price appreciation. Expect much of that excessive price expansion to be erased over the coming months.

Compared to 2019, Beach area median prices have shot up by 32%. This is easily three times normal growth. As we see in the chart below prices started adjusting downward as early as May in the Beach cities.

Since 2019 median prices for the Inland area have climbed 30%. Here in the August 2022 chart below we see Inland area prices have been dropping steadily since May when the median was $910K. During that four month period values have slipped by over $50K.

In the Harbor area home prices have escalated 34%. From 2019 at $565K to 2020 at $607K the Harbor area median grew $40k. Then in 2021, it added another $90K reaching $700K. So far in 2022 the median has reached as high as $830K – another $130K increase, but has now dropped back to $725K, losing $105K off the June median.

Most home buyers are constrained by their income to a particular price range, and salaries have not increased at a rate even remotely similar to real estate prices. Recent studies have shown about 25% of potential buyers were priced out of the purchase market in California by the soaring Covid-era prices.

Interest Rate Shrinks Annual Sales Dollars

In total sales dollars for January through August of 2019, the South Bay weighed in with $5.3 billion. During the same period in 2020 the aggregate amount shrank back to $4.9 billion, followed in 2021 by an upward explosion to $7.9 billion. So far in 2022 the area has reached $6.9 billion.

Each time the Federal Reserve System (fed) increases the short term interest rate the pool of potential buyers shrinks again. As this is written, the Fed is preparing to increase the rate by at least .75% in mid-September and two more increases are anticipated by the end of 2022.

At the current rate of declining value, we estimate the 2022 annual sales value to be approximately $9.5 billion, a decrease of 27% from 2021. Remember that huge budget surplus California had last year? Do not anticipate another this year, and possibly not for a couple of years as the state works its way through this recession.

The Silver Lining in the Cloud

One theory of success in real estate is “Buy low, sell high.” Flippers subscribe to that concept, buying at the bottom, updating and selling at the top of the immediate market. Another theory, not as well supported, but statistically more profitable, is “Buy and Hold.” Buy a piece of property at the best price you can and use it or lease it but – never sell it.

A deep market adjustment doesn’t come very often, so when it does one should take maximum advantage. At the moment it appears there will be a heavy price contraction starting late this year. We’ll know better in late fall and early winter, but all indications today are that a wise property investor should be preparing to buy at the bottom of the market – soon. We constantly search the Southern California coast for outsstanding investment bargains. Tell us what you want to invest – we’ll tell you where to buy.

Methodology

For purposes of comparing homes in the LA South Bay, we have divided the South Bay into four areas. Each is composed of homes of roughly comparable style, geographically similar location and physical characteristics, as well as approximately similar demographic characteristics.

The areas are:
Beach: comprises the cities of El Segundo, Manhattan Beach, Hermosa Beach and Redondo Beach;
PV Hill: comprises the cities of Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills and Rolling Hills Estates;
Harbor:. comprises the cities of San Pedro, Long Beach, Wilmington, Harbor City and Carson;
Inland: comprises the cities of Torrance, Gardena and Lomita.

Main Photo by Amelia Noyes on Unsplash

The Highest Crash Risk California Metros

The aftershocks of the Great Recession are already here. We’re currently in the midst of a second, undeclared recession, albeit a less severe one. The lower severity doesn’t necessarily mean lower impact, though. Government assistance is what pushed us through the Great Recession, and that’s unlikely to occur again.

A recession doesn’t have to mean a market crash, but it’s a very real possibility. Some areas are at higher risk of a crash than others. The highest risk metros are those with high loan-to-value ratios, home flipping, new residents, and rapid home price growth. In California, these metros are Riverside, Sacramento, Bakersfield, San Diego, Stockton, and Fresno. Those aren’t the only areas that may be affected, though. Market problems in any one area will also cascade to other regions.

Photo by Hans Isaacson on Unsplash

More: https://journal.firsttuesday.us/these-california-metros-risk-housing-crash-during-the-recession/85478/

Recession FAQs: Is Another on the Horizon?

It is currently believed by experts that the US is heading towards another recession. It’s not a guarantee, and it won’t be for around six months if it does happen. So what exactly is a recession, and why is another being predicted? Many people are only aware of a recession as being a period of economic struggle. But it has a technical definition, which is two consecutive quarters of shrinking GDP. GDP is definitely not the entirety of the economic picture, but the conditions for a recession almost certainly indicate job loss and lower wages. What’s being predicted is simply a prolonged reduction in overall consumption, and this is mostly because interest rates are going up.

The Fed is purposefully raising interest rates in an attempt to reduce inflation. But a reduction in inflation doesn’t necessarily translate to no recession. If interest rates rise too quickly, it could actually cause a recession during a period of high inflation, which is called stagflation. This is what happened in 1981. Currently, experts believe the Fed is increasing interest rates too quickly. And it’s possible that they shouldn’t increase the rates at all; the prospect of increasing rates to reduce inflation is based on the outdated concept that high inflation is triggered by high wages. It’s true that businesses often like to take advantage of increased wages by raising prices without a significant decrease in demand, but this is calculated corporate greed, not an economic law. Perpetuating this idea only further lines the pockets of the already wealthy.

Photo by Marc Schaefer on Unsplash

More: https://www.theguardian.com/commentisfree/2022/jun/16/is-the-us-heading-for-a-recession-heres-what-you-need-to-know

LA South Bay Real Estate: May 2022

Number of Homes Sold

The number of homes sold in the South Bay has declined from last month, and has declined from last year. The quantities are actually rather dramatic given that May is typically a time of increasing sales. The drops range from -7% to -17% lower than April sales of this year, and from -17% to -25% below May of last year.

With over half the year remaining, mortgage interest rates have doubled, currently sitting around 6%. The hike in interest rates has so far reduced the average buying power by about -25%. Coupled with home price increases estimated to have risen 38% since the start of the pandemic, the immediate future of real estate looks dismal.

202205_sales_vol_chart

Inflated consumer prices are also blocking potential home buyers as the Consumer Price Index (CPI) climbs toward a 10% annual hike. There’s little chance of saving for a down payment when the price of everything on the shopping list is going up..

Retirement accounts are often a source of down payment funds. As of this writing the major stock market indices are all down: Dow Jones Industrial Average, -16%; S&P 500, -22%; Nasdaq Composite, -31%. Forecasts are growing for a Fed-induced recession that may begin as soon as this fall. Some potential buyers may see borrowing from their retirement fund to purchase a property as a means to preserve the capital during a recession. Others may not be in a position to do that.

Median Price Sold

May prices delivered a mixed message. The Palos Verdes Peninsula, which had seen two months of decline from a temporarily high median price, headed back up again. The Beach cities continued a steady climb, and the Inland area showed a modest price increase after having dropped 1% in April.

However, the Harbor area, which is as large as the other three areas combined, took a -6% hit to prices. We anticipate the Harbor and Inland areas, which comprise the bulk of the traditional middle class family homes in South Bay, to be the first to react to the economic stress.

Typically, the recession cycle starts with a slowing of sales. As properties languish on the market, sellers begin to reduce prices. One after another, median sales prices will drop until the price reduction offsets the impact to buyers. At that point, buyers will begin to support the reduced purchase prices and we can see growth in the market.

Experts differ in their estimates of how long this cycle will take, and when we can expect the market bottom. There are some predicting a rapid fall based on the speed with which the Federal Reserve Bank (Fed) is reacting. The June meeting of the Fed ended with a .75% hike in the prime rate, and a promise to raise it at least another .75% before the end of the year. While that could slow the economy as early as the beginning of 2023, more conservative minds suggest the end of 2023 for a turn-around.

Area Sales Dollars

The total sales dollars tell the truest story. While sales are slowing and median prices are beginning to slow, the combination shows up here.

Everywhere except the Beach is showing reductions in total sales on a month to month basis, and on a year over year basis. The declines are small to date, with year over year ranging from -1% to -10% in May. Month to month changes ranged from +2% at the Beach to -19% in the Harbor area.

202205_monthly_sales_$_chart

These early numbers follow the general pattern we’ve seen in recent recessions, whereby entry level homes are the first impacted and the last to recover. We anticipate the Harbor area to lead the charge down, followed by the Inland area. Recent years have shown the Beach to be the strongest growth area, so we expect the recession to hit there last, following declines on the Hill.

The nature of the impending recession is still uncertain. Some pundits are saying that at least initially we should expect “stagflation,” that odd environment we first encountered back in the 1990s when prices of everything continued to climb, along with job layoffs and massive unemployment. Other forecasters suggest that because the international economy is roiling with continuing high tariffs (courtesy of the last administration) and new monetary sanctions daily (courtesy of the current administration), this particular recession may last much longer than normal.

In Summary

As the table below shows, the majority of the negative impact for May happened in the quantity of housing units sold. With one exception, prices continued to escalate. We believe this is temporary and likely to change before the end of the year. The -6% drop in median price at the Harbor presages the direction of home pricing as inventory grows and listings stagnate.

Approximately 3 out of 4 listings coming across our desk recently have been either Price Reduction or Back On Market. That means property is staying on the market longer. The Average Days On Market (DOM) for May ranged from 10 days on the PV Hill to 14 days in the Harbor area. As recently as this winter we were still seeing multiple offers on the first day the property was available.

Another measure of the market condition is how far the average sales price declines in the first 30 days on market. We did a quick look for May and came up with these statistics. Thirty days after the original listing, the price had dropped from the original: at the Beach, -9%; the Harbor -6%; PV Hill -18%; Inland -5%. As of May, we’re also seeing property that has been on the market for several months, with several price reductions.

Notable Properties

The high and low sales for May were not terribly dramatic. A Manhattan Hill section home and a downtown Long Beach condominium. Thay are simply very big, and very small.

High Sale

Located at 812 5th St, this Manhattan Beach hill section home was originally listed at $10.5M and sold for $8,980,000 after 34 days active on the market. The home offers six bedrooms and seven full bathrooms in 5576 sq ft. Amenities included ocean view, pool, spa, custom waterfall & fire features, a full basement with recreation/media room, home theater, storage, a temperature-controlled wine cellar, and private guest quarters.

Low Sale

Measuring barely 381 sq ft, the studio condo at 819 E 4th St #25 sold for $215,000 in one day. Located in the vibrant East Village of Downtown Long Beach this tiny home offers a remodelled kitchen and bathroom. The unit sits on the second floor, overlooking the intersection of 4th and Alimitos and within walking distance of many downtown shops, clubs and eateries.

Main photo by Kostiantyn Li on Unsplash

Expected Price Drop May Cause Double-Dip Recession

While we can all agree that high prices and low inventory is not a recipe for a healthy real estate market, reversing the trend too quickly can cause issues as well. Prices are predicted to start declining towards the end of 2022 and throughout 2023 and 2024. This may be good for prospective homebuyers, but it’s not good for sellers who purchased relatively recently.

A sharp decline in prices could result in negative equity for some people looking to sell, meaning that they won’t be able to sell normally and may have to go into foreclosure. This is not the same type of recession that we’ve just experienced, but it’s a recession nonetheless. Fortunately, it’s not likely to result in a crash, since the continued low inventory is a positive for sellers. The market is expected to begin to stabilize in 2025, but not without steep economic losses.

Photo by John Fornander on Unsplash

More: https://journal.firsttuesday.us/how-to-prepare-for-the-reo-resurgence/83443/

LA South Bay Real Estate: The Recession Has Arrived

In a normal year one would expect April to be the turning point for the LA real estate market. March is still cold and the children are still in school for another 10 weeks. April’s the month when the weather turns warm, the flower buds poke up, and the buyers come out to start the spring buying season. It hasn’t happened that way this year.

Prices had gone through the ceiling by the end of 2021, much of the activity stimulated by fear of escalating mortgage interest rates. Usher in 2022–January and February were typically slow and in March home sales bounced up like an indicator of business as usual. But, interest rates continued to climb and April ended with the total number of home sales down instead of up. Likewise, total sales dollars were down across the South Bay.

Number of Homes Sold

Judging from the charts, entry level homes in the Harbor area were clearly the center of activity for South Bay real estate. As interest rates pushed against the 5% mark, panic set in among first time buyers who had been outbid multiple times. Prices went up as high as buyers could afford, a number that shrinks amazingly fast with each tenth of a percent increase in the interest rate.

Across the South Bay, the number of homes sold in April dropped by -4% from March, which had been an increase of 59% over the prior month. As we see from the chart below, sales were uneven between the various areas.

On the entry level front, at the same time Harbor area home sales were dropping off, Inland homes gained sales. On the high end, sales on the Palos Verdes peninsula were also facing declining numbers, while Beach area sales increased.

So far declining sales counts have been modest, but a decline overall, coupled with a decline in half of the individual areas covered indicates that buyers are pulling back. Part of the resistance is a matter of simply being priced out of the market. Another important piece is the anticipation of price corrections in the near future. We have heard multiple buyers say they are watching and waiting for lower prices later this year.

At this point we’re well into the second quarter of the year and it looks as though those folks may be on track for some savings. even some of our most gung-ho pundits are beginning to see a market downturn on the horizon.

Median Price Sold

Interestingly, Harbor area prices went up at the same time the number of sales went down.The March to April price increase was a modest +6% compared to a +21% increase over April of last year. Similarly, the Beach cities had a month over month increase of +4%, while showing +19% year over year. While sales prices are still rising in those areas, the increase is a fraction of what it was last year.

Sold prices on the Hill continued to slide downwards. Because the February increase in the median price was created by the sale of new construction, and that building phase is now sold out, a downward turn in median price is expected. We anticipate that leveling off soon.

In the Inland area the median price for homes sold during April of 2022, was +12% greater than sales in April of 2021. By comparison, the median price of those sold in March of 2022 versus April of 2022 decreased by -1%. It’s a modest decrease that points to the direction of the South Bay real estate market for the balance of the year.

Area Sales Dollars

The total dollar value of home sales in the South Bay usually tracks right along with the number of units sold. The few times it differs are important times like these when the number of homes sold is dropping, and/or the sales prices are dropping. Today, of the four areas we track, PV Hill has a declining number of sales, both in comparison to last year and in comparison to last month. As we noted above, the area also is declining in total dollars compared to last year and last month.

As we discussed in last month’s issue, some of the reason for the drop is found in new construction homes that sold at a much higher price than the typical Palos Verdes resale home. The rest of it can be found in longer days on market waiting for a buyer, and in price reductions.

At the opposite end of the spectrum, the Beach cities showed gains last month for both number of units sold and for the total sales value of those homes. The only decline this month for the Beach was in number sold compared to April of last year. Sales this April were off by -21%.

The Harbor area still trended upward in dollar value, both month over month and year over year. But, the number of units sold was down for both time measurements. The price competition was very stiff in what is generally an entry level market. During the past couple years, bidding wars and over-asking sales prices have kept the dollars high. The April numbers show that changing rapidly.

Total dollar sales for the Inland community increased 15% month over month. That was the highest growth of all four areas. Scanning those individual transactions showed an odd pattern. Sales in the price range from about $325K up to about $750K were a familiar mix of some under asking price, some at asking and some above asking. The degree of variance was about what one would expect. Unexpectedly, for sales over $750K, nearly every property sold above asking price, and in many cases well above asking.

We found no clear explanation for why this phenomena occurred. There is a suspicion that buyers who were priced out of Beach properties may have shifted their bidding wars into the increasingly popular parts of west Torrance. This theory is supported by the distribution of sales among the various neighborhoods.

In Summary

In the table below are the core statistics comparing April to March of this year, and comparing April of this year to April of 2021. The prevalence of negative numbers is convincing evidence that high prices and high interest rates are pushing the South Bay real estate market into a recession.

Notable Properties

One of the more interesting properties sold in April is a four bedroom, five bathroom home located in west Torrance. The home was purchased by the seller as their family home in 1990 for just above $360K. The children grew up and the parents remodeled in 2022 and sold the house.

As would be expected in a good neighborhood with a contemporary remodel, the home sold for over the asking price of $2.7M. The final selling price was slightly over $3M. and just happened to be almost exactly $360K over the asking price.

In the 32 years that family owned the home it appreciated at an average rate in excess of $84K per year. It’s the classic “American Dream.”

Main photo by Amy Vosters on Unsplash

Stagnant Wages Major Struggle for First-Time Homebuyers

Many older people think of Millennials as being young kids who have no life experience and no financial know-how. The reality is Millennials are in the normal age range for first-time homebuyers, and some are even older. Their financial problems are not due to lack of knowledge. It’s due to a series of economic struggles that were completely out of their control.

Most Millennials came to age during the Great Recession, and so employment simply wasn’t available during the years when they were expected to find a job. That has made it more difficult to find one even after the Great Recession ended, as employers are expecting someone their age to have more experience. The 2020 recession, during a time when society expects their age group to be looking for a house, hit Millennials yet again.

In addition, inflation has far outpaced wage growth. Even those Millennials who have a job are not earning nearly as much adjusted for inflation as older generations were at the same age. Only about half of Millennials are employed full-time, and less than two-thirds are employed at all. Even though wages are increasing, they are still stagnant because of how quickly prices are increasing. Between 2012, when the market was finally recovering from the Great Recession, and 2020, when the most recent recession started, wage growth was at 24%. Home prices, however, went up over 3.5 times as much, by 86%.

Photo by Jp Valery on Unsplash

More: https://journal.firsttuesday.us/employment-and-wages-highest-hurdles-for-millennial-first-time-homebuyers/82778/

Market Stability Anticipated In 2024

With government support having ended, this may prompt people to think the economy has stabilized and recovery is imminent. But this is just the precursor to a stable market. The market needs time to adapt under normal conditions, and probably won’t become stable again until 2024. The main factor in overall recovery is the job market, which has yet to fully recover, and a stable real estate market requires construction to catch up to demand.

Some policies remain from government actions during the recession, though. Three laws — SB 10, AB 345, and AB 571 — will help out in construction efforts. SB 10 allows more areas to be zoned for up to 10 units, AB 345 allows ADUs to be sold separately from the primary residence, and AB 571 prohibits impact fees on affordable housing. Two more laws, SB 263 and AB 948, reformed bias training for real estate professionals. This legislation should have lasting impact in making the recovery more comfortable.

Photo by Logan Cameron on Unsplash

More: https://journal.firsttuesday.us/2021-in-review-and-a-forecast-for-2022-and-beyond/81281/

Renters Overtake Homeowners in Suburbs

Homeownership has been a mainstay in suburban areas, where the typical house is a single-family residence or possibly a duplex. Residents in these areas have tended to be middle- or high-income earners. All of this is starting to change as the demographic is switching to Millennials and Gen Z homeowners. The majority of residents in suburbs are now renters, unable to afford to purchase a home.

Millennials and older Gen Z people inherited the effects of the Great Recession, which delayed their careers and consequently their ability to own a home. This also compounded with student debt, since Millennials are a highly educated generation. All the while, prices are increasing but wage growth is stagnant. While some of these people recovered somewhat since the Great Recession, others were still trying to get back on their feet or were just entering the job market when the 2020 recession hit. Most of Gen Z is still not old enough to own a home, so it’s unclear whether this would extend to them as well.

Photo by Dhru J on Unsplash

More: https://journal.firsttuesday.us/californias-suburbs-flip-as-millennials-and-gen-zs-become-majority-renters/

End of Forbearance Plans Could Swing the Market

With the foreclosure moratorium ending, the only thing keeping many homeowners in their homes is a forbearance plan. Once those end, the effects on the market could be drastic. The good thing is that it’s easy to predict when that will happen, since forbearance plans have a designated end date. Many of them have already ended in the past two months, but we will continue to see more ending throughout the rest of the year.

One of the effects of a large increase in foreclosures or forced sales is plain to see, and that is an increase in inventory. With inventory being so low right now, one could be forgiven for thinking that’s what the market needs. But it most certainly is not. Let’s take a look at the reasons demand is so high right now: low interest rates, and the fear-of-missing-out (FOMO) mentality that buyers have when inventory is low. Interest rates are going back up now, so that’s no longer an incentive to buy. If inventory increases drastically, FOMO won’t be a factor either. Foreclosures and forced sales will remove all incentive to purchase while increasing inventory considerably, causing a full swing in the market. But that’s not all. People living in foreclosed-on homes aren’t just statistics; they are actual people, and their increased economic struggles will only make it more difficult to reach a recovery point in the recession.

Photo by Ruslan Khadyev on Unsplash

More: https://journal.firsttuesday.us/how-1-5-million-homeowners-exiting-forbearance-will-impact-inventory/79744/

Today’s Housing Bubble Will Likely Deflate — Not Pop

There are many similarities and also many differences between the current recession and the Great Recession of 2008. Two of the core similarities — and the ones that define a housing bubble — are that prices are accelerating faster than purchasing power, and that there are changes in consumer values. While legislation and shifting values have addressed some of the issues that contributed to the Great Recession, most notably subprime lending, ultimately the crisis was a relatively natural economic response to the events that triggered it and followed a normal boom-bust-rebound cycle. The 2020 recession is somewhat of a reflection of this, though the specifics differ. The economy was already headed towards a natural downturn in the cycle, but the process was sped up by the COVID pandemic.

That’s where the similarities end, though. While nearly everything is ultimately tied to the economy in some way, it’s the pandemic, more so than economic conditions, that prompted valuation changes. Preference for larger homes and home entertainment, rather than homes closer to work and out-of-home entertainment, will probably continue as long as work-from-home remains a common practice, which will likely last a while. It’s true that people are leaving large cities and moving to cheaper areas, but this is more so out of necessity than desire. Peoples’ tastes have actually become more expensive, even if their wallet isn’t any larger. An economic downturn wouldn’t prompt this behavior. The only reason this isn’t currently sustainable is that the market hasn’t recovered yet. Once it does, probably around 2024-2025, it’s likely that the bubble will slowly deflate rather than explode.

Photo by Nathan Dumlao on Unsplash

More: https://journal.firsttuesday.us/shifting-fundamentals-what-2008-can-teach-agents-about-2021/79690/

Recession Declared Over, But We’re Not Out of the Woods Yet

The National Bureau of Economic Research (NBER), a private non-profit economic research institution well known for researching recessions, has declared that the 2020 recession is over. In fact, it ended quite a while ago, and only lasted two months, the shortest recession in history. NBER defines the start of a recession as the month following a peak in economic activity, and the end of a recession as the month at the bottom of economic activity. In this case, those months were March 2020 and April 2020 respectively. The delay in declaration is because it generally takes several months to figure out whether a recession is truly over or not, since there can be ups and downs in between the peak and trough. With this declaration, another downturn would officially be considered a separate recession.

So what does this mean? Well, it doesn’t mean the economy is healthy again. It just means we’re past the worst of it, and are in the recovery stage after the recession. We’ve been in recovery for quite some time, and will continue to be. It’s important to note that while the start of the pandemic and the start of the recession occurred at approximately the same time, they aren’t codependent. Rather, the pandemic was merely an exacerbating factor in a recession that was already approaching. Many of the effects, both psychological and government mandated, of the combined scare of a simultaneous recession and pandemic are still lingering and slowing down the recovery. The major factor keeping us back is lack of recovery in the job market.

Photo by Erik Mclean on Unsplash

More: https://journal.firsttuesday.us/the-2020-recession-was-the-shortest-ever-but-its-effects-continue-in-the-housing-market/78835/

End of Utility Disconnection Moratorium Could Spell Trouble

Last year, the California Public Utilities Commission (CPUC) imposed a moratorium on utility disconnects for nonpayment. The CPUC moratorium applies to both residential and commercial buildings, and they regulate the majority of electric and gas companies. However, this moratorium is slated to end July 1st, and the total amount owed is fast approaching $2 billion.

Utility companies aren’t about to simply forgive all of these charges. Fortunately, they’re thinking of plans that can help people balance their debts without owing large lump sums. Possibilities include partial forgiveness and/or rate categories, or even full forgiveness for qualifying households. California is also working on including utility aid in their state budget plan.

Photo by Federico Beccari on Unsplash

More: https://patch.com/california/redondobeach/s/hlwq5/unpaid-ca-utility-bills-approaching-2-billion-survey

Not All Recessions Are Created Equal

The real estate climate is currently in a state of rapidly rising prices, while in the midst of a recession. Some people are having flashbacks to the Great Recession of 2007 and fearing a housing bubble and imminent crash. But there are some important factors that make this nightmare not a likely reality.

Leading up to 2007, there was an overabundance of supply due to high rates of construction. Loose lending practices were the trigger, as they resulted in mass foreclosures and subsequent drop in demand, making sellers who were liable for foreclosure unable to find buyers to get them out of their hole. This is the opposite of what’s happening now. Supply is incredibly low due to a lack of construction, and buyers are facing cutthroat competition. There are no foreclosures happening right now because of the foreclosure moratorium. Even when the moratorium ends, the number at risk of foreclosure is much lower.

In some ways the real estate market is actually a strong point of the current economy, despite the recession. So a housing bubble isn’t to be expected. But that doesn’t mean we’re out of the water; the recession still exists. And it’s not going away until job recovery happens, which isn’t expected until 2024-2025.

Photo by M. B. M. on Unsplash

More: https://journal.firsttuesday.us/pricing-crash-or-near-miss-the-factors-different-from-the-last-recession/77815/

Current Hot Market May Not Be Sustainable

After lockdowns ended, the real estate market was inundated with prospective buyers who seemed to be itching to take advantage of low interest rates. Interest rates have started to climb back up, yet demand currently shows no signs of slowing, despite continuously rising prices. So what’s the actual reason demand is high, and perhaps more importantly, is it a good reason?

The stimulus packages are a likely culprit. A government stimulus is always going to effect short-term change, but its goal is also long-term change. This is done by a multiplier effect — when people have more money to spend, they spend more, which causes the money to recirculate and improve GDP. However, it’s important to realize what the money is being spent on. Between a quarter and 40% of stimulus money was spent on food, household goods, and debt, and much of the remainder was saved. The stimulus certainly helped people to get through the recession, but it didn’t actually do much to improve the economy as a whole.

From the outside, the real estate market looks like it’s recovering, since it’s becoming more competitive when there isn’t much reason for it to be any longer. In reality, most of the people who can afford to buy right now could already afford to buy before the pandemic, and the rest are perhaps falsely optimistic. The primary factor that can result in long term recovery hasn’t happened yet, and that’s job recovery. The job market isn’t expected to recover until 2025, long after the eviction and foreclosure moratoriums end.

Photo by Maria Lin Kim on Unsplash

More: https://journal.firsttuesday.us/riding-the-stimulus-wave-when-will-it-end-for-real-estate/77854/

Mortgages Keep Market Competitive Despite Lack of Job Recovery

2020 saw a large increase in mortgage originations, particularly refinances, as a result of low interest rates. It was expected that this would start to fall off in 2021, since interest rates are starting to go back up. However, they’re still low enough that refinances continue to be common. The statistics are a bit misleading for purchases, though. Low inventory is boosting home prices, accounting for a significant part of the increase in loan origination dollar amount even beyond increasing the number of loans originated.

Something is still missing, though. Even though much fewer loans are delinquent now than in 2020, the share of them that are over 90 days delinquent is increasing. This is because people continue to tread water through moratoriums, but aren’t earning any money. Jobs still haven’t recovered from 2020. Foreclosure moratoriums and forbearance programs are going to end eventually, and that’s going to be a problem for some people who have lost their jobs during the pandemic and haven’t been able to find work yet. If home prices continue to rise without an actual jobs solution, these stopgap measures are going to be the proverbial dam that causes the market to crash when it breaks.

Photo by Jilbert Ebrahimi on Unsplash

More: https://journal.firsttuesday.us/mortgage-originations-will-2021-shatter-2020s-record/77747/