Thursday, August 23, 2007

Manhattan Beach-Beach Cities: Home Prices vs Income

The Daily Breeze has an article about job growth in CA and it's an eye opener that goes a long way toward explaining the South Bay real estate market. In a nutshell jobs are growing on the low and high end but not much in the middle and the gap is large.

The #1 question I'm asked is how can people afford homes in the South Bay-Beach Cities.... The answer is that most of those who live here are making a lot of money. The types of jobs are different and cover a divergent economic base. Gone are the days of everyone in the South Bay working at an aerospace company a few blocks from home.

This is why home prices are so expensive in Manhattan, Hermosa, Redondo and El Segundo. It is also why you won't see the collapse of the home market in the beach cities that other places in CA or the country may face. Our problem will be one of liquidity not foreclosure.
Yes there will be foreclosures but not on the widespread basis that other communities face. The reason is that most people in the Beach Cities did not fall into the subprime category. That doesn't mean we don't have a few but there are not many. We will probably see more problems related to poor financial choices rather then an inability to afford a home.

For those who continue to complain about high home prices don't expect to see much change. Prices may decline a bit to accommodate the change in the loan underwriting but those who are waiting for the 30%-50% price drop in the Beach Cities will be sorely disappointed.

The sad fact is that middle income earners are probably not going to be able to buy in Manhattan Beach, Hermosa Beach, Redondo Beach or even El Segundo. The median home price in Los Angeles County was $547,500 in July.. In El Segundo it was $1,650,000... in South Redondo it was $1,129,000... North Redondo it was $685,000... Hermosa Beach was $1,255,000 and in Manhattan Beach it was $1,843,000.

It is doubtful that even the most optimistic buyer really believes that home prices in Manhattan Beach will drop by more then a million dollars to meet the median price in Los Angeles County. The same is true for the other Beach Cities. North Redondo is our most affordable real estate market and prices there have been very stable in the last year reflecting conservative buying decisions. However the median price of a North Redondo townhome was $675,000 which is still well above the median price in Los Angeles County.

What this means is that first time Beach Cities home buyers are going to have to consider other cities and other choices. This is why many young couples bought in Fusion and are looking at 360 in the South Bay. There are some beautiful new developments in Torrance.. The Village on Oak/ Acacia just off Crenshaw near Wilson Park has beautiful units starting at $535,000. The units next door at Bayberry start in the mid $600,000's. There is another phase.. Laurel which should be complete by early 2008 starting in the low $600,000's.

If you want a single family home then you may be looking at Wiseburn in Hawthorne. The school district is good and you can buy a small home at a good price. The El Camino area has some nice homes that are perfect starter homes. There are good neighborhoods in Torrance that are half the price of a home in the Beach Cities. You can check out schools and find out which area has the best schools that fit your budget.

If you want a home in the Beach Cities then you may have to make the same choices your parents did... start small in a nearby city and work your way up to the location you want..... Or as my Mama used to say.... the days of Champagne taste on a Beer budget are over..

South Bay-Beach Cities: Sold July 2007
South Bay-Beach Cities: Sold June 2007
South Bay-Beach Cities: Sold May 2007
South Bay-Beach Cities: Sold April 2007
South Bay-Beach Cities: Sold March 2007
South Bay-Beach Cities: Sold February 2007
SouthBay-Beach Cities: Sold January 2007


Ricardo Bueno said...

Unfortunately anyone who is anticipating a price reduction at the 30-50% level is clearly following the mis-directed path of the media and the friend who follows the media.

Realtors and lenders should be sought out for advice today more than ever. It's a new era in the world of lending and that has implications for the real estate world.

Just because foreclosure rates are up tremendously at the National level, that doesn't mean your beach cities will be affected as severely as Palmdale, Bakersfield, etc.

You've provided excellent statistics for your beach cities home owner/prospective buyer. Now they need to be attuned to the changes in the lending environment and how those changes affect them.

Kaye Thomas said...

Ricardo- As a lender you know what.. and where.. the problems lie in our current housing market.
The Beach Cities will see problems.. no one will escape unscathed in this market but we will fare better then most.