Wednesday, January 07, 2009

South Bay- Beach Cities: Sold December 2008


Riviera Village South Redondo


I think the best thing that can be said about 2008 is that it's over!

December was not a great month for real estate sales in El Segundo, Manhattan Beach or Hermosa. Redondo Beach, however, was a different story. There were 44 closed sales in North and South Redondo in December compared to a total of 30 closed sales for El Segundo, Manhattan and Hermosa.


Since January 1, 2009 there have been 13 properties close escrow... 9 of them were in Redondo, 3 in Manhattan Beach and 1 in El Segundo. 16 homes have gone into escrow since January 1, 2009... 12 of them are in Redondo Beach and 4 in El Segundo.


So why is Redondo so hot while Manhattan and Hermosa appear to be relegated to wallflower status... My guess is prices and loan limits. Redondo Beach and to a certain extent El Segundo have seen more rapid adjustments in home prices then either Manhattan Beach or Hermosa Beach. 4 months ago your could find a number of single family homes in North Redondo under $550,000; in fact there were some that were under $500,000. Most of them have now gone into escrow. Buyers were quick to take advantage of FHA and conventional financing at low interest rates. You can still get a home in North Redondo in the $600,000 range with less then 20% down using an FHA loan. With owner occupied fixed rates at 4.5% a lot of buyers have decided now is the time to buy.


I think the second reason has to do with conforming loan limits. When the government decided to lower the conforming rate from $729,750 to $625,000, higher priced communities lost a big advantage for entry level home buyers. At $729, 750 it was possible to buy a home in Manhattan or Hermosa with a reasonable down payment. The loss of $100,000 on the conforming loan limit is a big blow to entry level home buyers who want to be in Manhattan Beach or Hermosa Beach.


The new Administration has a lot of things on the agenda for real estate in 2009. They face a tough job trying to bring back stablity to the credit markets and ultimately to the housing markets. I liked Tom Petruno's Friday thoughts in the LA Times titled Investing for hard times, not The end . He wrote about one of the issues I have always found to be so strange... the number of people hoping to see complete chaos in the housing market. As we have seen in the last few months when the economy takes a dive it affects everyone.


South Bay-Beach Cities: Sold December 2008






South Bay-Beach Cities: Sold November 2008

South Bay-Beach Cities: Sold October 2008

South Bay-Beach Cities: Sold September 2008

South Bay-Beach Cities: Sold August 2008

South Bay-Beach Cities: Sold July 2008

South Bay-Beach Cities: Sold June 2008

South Bay-Beach Cities: Sold May 2008

South Bay-Beach Cities: Sold April 2008

South Bay-Beach Cities: SOLD March 2008

South Bay-Beach Cities: Sold February 2008

South Bay-Beach Cities: Sold January 2008

South Bay-Beach Cities: Sold November 2007

South Bay-Beach Cities: October SOLD 2007

South Bay-Beach Cities: September SOLD 2007

South Bay-Beach Cities: August SOLD 2007

South Bay- Beach Cities: July Sold 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

South Bay-Beach Cities: Sold January 2007

18 comments:

Anonymous said...

"the number of people hoping to see complete chaos in the housing market."

No, you've got it all wrong. We don't want chaso. We want prices to fall back into its traditional relationship with median incomes. This is order rather than chaos. What we had between 2000 & 2007 was chaos. The system was completely corrupted and rotten to the core during these bubble years. A return to sane prices is the most stabilizing thing that could happen.

You proved my point for me. All the action you point to in Redondo Beach has nothing to do with conforming loan limits. It has everything to do with affordability. Prices have fallen to a level people can afford. It won't matter if you needed a conforming or a Jumbo loan if the price is low enough. Like the used car salesman said, "It's the payment stupid".

Kaye Thomas said...

Anonymous 9:19,
And very possibly the downpayment in this case...

Anonymous said...

9:18 got it right. City-Data lists MB's median income for 2007 as $127,185. If you go with the normal relationship between home prices and income you get:

@ 3X income, Med. price s/b $381,555

@ 4X income, Med. price s/b $508,740

Kaye Thomas said...

Anonymous 10:01,
The median price in MB has been significantly higher then 3 or 4 X median income... historically has been around 7-8 X median income.

There are a number of folks in MB that are retired, bought prior to 2002 and a number of residents with lower incomes who were gifted money to purchase a home.

I suspect that you will see the median income rise well over current levels as older residents leave and the incomes of those moving to MB in the last 7 years or so get calculated into the mix.

Anonymous said...

I think if you compare 2000 median income, and 2007 median income, you will see that it has changed only moderately...about 20%.

Couple that with the fact that the median house turns over every 5 years in Manhattan Beach, and you should've seen quite a bit more growth in income over the last five years. In short, high turn over tends to wash out the old timers income. Don't forget that we are talking about medians, not averages.

The next thing to note is that if you look at published income distribution, there are a big chunk of people making ~100 K and a big chunk making ~300 K. Very few actually make the median in MB.

If you take the upper end of the distribution, and assume that it represents "newcomers", that gives you 900-1,200 K/year supportable house median. That is based on 2007 incomes.

My next prediction.....I bet you money that median income in 2008 is DOWN significantly compared to 2007 (mine is down based on reduced investment income). To date, this financial downturn has wiped out 300% more houshold wealth than the dotcom implosion...and it is not done yet.

I think 2009 will be similar. The trend will continue for a few years.

One more comment...it is really not fair or reasonable to say that people are wishing for "chaos" when the system has been distorted so much in the last half decade. People are hoping for a return to normalcy. Seeing as the current financial downturn is intimately tied to the distorted housing market, every rational person should rue the distortions that caused the situation that we are in. NOT wish for the unsustainable situation that got us into this mess in the first place.

Quite simply, the only way forward is "forward".

Be Real said...

Kaye,

You're really pushing it with this "older resident" nonsense. Are you not one your self? Everyone that bought since '02 is pulling in 5000K plus? As someone who's lived here twenty plus years I can tell you that the reality is quite different. 9:18 had it right.

Kaye Thomas said...

Anonymous 11:37,
If you look at the demographics on my site you will not that incomes from $150K-$200K plus make up a substantial chunk of earners in MB compared to the rest of CA and the US.
I actually agreee with much of what you say... and would not be surprised to see a drop in median income across the board. You are also going to see a further decline in prices because of that drop in income.

I hate to disagree but there is a large chunk of the population that wants to see massive declines in value and doesn't seem to realize that huge drops in value across the board are accompanied by a corresponding decline in employment and all asset values. As we have seen in the last few months when all these forces come together you get a market and economy in chaos. These things do not happen in a vacuum.


I understand that people are angry about the rise in home prices... however not all of the increase was because of shady lenders, scum sucking real estate agents or greedy sellers. Buyers certainly play a role as well as NIMBY. I'm going to do a post on this shortly.

Kaye Thomas said...

Be Real,

You are right I have been here a long time as have most of my friends. 11:37 posted that homes turn over every 5 years in MB and that's not true. If you have lived here 20 + years then you know a lot of residents have also been here for a long time.

I don't think I said that everyone in MB since 2002 is pulling down $500K. What I said was that the demographics of those buying in MB since '02 has changed. It is just a fact that you have to have a relatively high income to buy here. Some of it is speculative but a lot of the "new" money in town is pretty solid.

Look at the change in the types of stores in downtown. Walk into any women's clothing store in MB. They have moved from Pete's to trendy and pricey Boutiques. Have you checked out prices in the children's stores in town? How about prices in many of the newer restaurants... sorry but the days of the Seafarer are gone.

The changes have been gradual but MB has gone from a laid back beach town to the in place on the nightly news.

Anonymous said...

Check Redfin demographics for Manhattan Beach.

It shows quite a few statistics (including income distribution).

It turns out that median period of ownwership is not 5 years, but rather 3.75 years.

So it is less that I stated.

Kaye, you are not the median.

Kaye Thomas said...

Anon 6;14,
I did check out the site. I believe it refers to all residents... renters and homeowners not just homeowners. You would expect to see a higher turnover for rental units compared to owner occupied properties.

If the local homeowner population moved every 3.75 years as a median there would be a far higher sales volume then we see on a yearly basis. The historical average turnover for owner occupied properties in Ca is 7 years.

If you review the site you will notice that 40% of the population (renter and homeowners) has lived in the same residence for 5+ years. I would be willing to bet that is a very high figure when including renters as well as homeowners.

Anonymous said...

It does appear valid that the 3.75 includes rentals.

However, with 1/3 rentals and 2/3 owner occupied (I'm actually surprised by this statistic), and only 40% of people living in a house for more than five years (these are pretty much all owner occupied), it is pretty clear that median owner occupancy is less than five years.

For other readers, check out:

http://www5.onboardnavigator.com/1.5/WebContent/OBWC_report.aspx?&AID=386-b385f004f6c7&CD_SID=CO001&RTID=1&RID=20496&Frame=0&Height=600&Width=650&AgentEmail=&AgentID=&SearchID=1&LSID=6&STEXT=90266&STYPE=3&STEXTOPT=&STYPEOPT=-1&STEXTOPT2=&STYPEOPT2=-1&ITID=-1&SITID=-1&PassBackValues=&NHood=&Market=&TaxID=&County5=&PropertyType=-1&TransactionType=-1

For 90266 demographics.

Anonymous said...

"I hate to disagree but there is a large chunk of the population that wants to see massive declines in value and doesn't seem to realize that huge drops in value across the board are accompanied by a corresponding decline in employment and all asset values...Chaos."

I hate to paraquote Peter Schiff but the bursting of the bubble is really the cure. The disease was the fraud-induced run-up in home prices.

If you chaos is what you dread, then you should blame the unsustainable bubble - not the much needed correction.

Anonymous said...

"The median price in MB has been significantly higher then 3 or 4 X median income... historically has been around 7-8 X median income."

Okay, let's assume for the moment that you are right (you're not). If you look up 2007 data for Manhattan Beach you get:

Median home value: $1,792,264

Median household income: $127,185

Ratio = 14.1

In order for prices to come back to correct relationship with incomes, one of two things has to happen.

1. 50% price drop
2. 100% income rise

(or some combination)

http://www.city-data.com/zips/90266.html

Kaye Thomas said...

Anon 9:07,
Would be interesting to know where Redfin got its data.
ZipSkinny...
http://zipskinny.com/?zip=90266

seems to think that 55.5% of population has lived in the same home 5+ years...

Kaye Thomas said...

Anon 9:12
We can argue the ins and outs of the housing problems endlessly without reaching a consensus.

I think the issue is that for the last 20+ years we have seen the "bubble" phenomena over and over in housing. We saw it in the late 70's, the 80's, the early 90's and recently.

The causes for each rise in price were slightly different but the overall effect has been a continual rise in value at a higher level then in other parts of the country. California has and will continue to have some of the most expensive housing in the country.

The last price hike was excerbated by cheap money with few lending standards. A massive drop in housing values accompanied by an economy with serious problems won't cure the problem.

Kaye Thomas said...

Anon 10:30,

I suspect that the answer is as you note... a combination. We will see prices decline but we will also see an increase in residents in the higher income brackets.

The phenomena of high prices in coastal communities is not limited to our local Beach Cities. Manhattan Beach happens to be one of the most expensive in So. Cal but not the most expensive.

We are seeing more and more people from the affluent inland communities moving not only to Manhattan and Hermosa but the other small beach towns up and down the coast.

Anonymous said...

It's also useful to look where zipskinny gets ITS data.

It uses year 2000 census data. I belive redfin is using 2007 census data (will check when I get a chance)

The discrepency is likely due to changes in turnover rate. If I am correct that redfin is using 2007 census data, then you can see the increased turnover due to the housing boom.

2000: 55% of residents had lived in house 5 years or longer.

2007: 40% of residents had lived in same house five years or less.

Kaye Thomas said...

Anon 11:38,

I believe you are correct. I searched a number of sites and found that much of the information is based on 2000 census. I thought Zip Skinny was more current but apparently not...

I think your supposition about people moving up because of the housing boom is also correct. If you take that factor in conjunction with renters moving to new housing that would definitely account for the shorter time span.