Saturday, July 04, 2009

Manhattan Beach: Second Quarter Sales January to June 2007-2009

Ercoles.. the oldest restaurant in Manhattan Beach

As I noted a few months ago when I posted the First Quarter Sales figures for Manhattan Beach this will become a regular feature every quarter. There is a lot of information about our local real estate market that these numbers provide. Although I'll admit that over the last few days I'm seeing numbers everywhere and even find myself dreaming about median price and price per square foot.

We all know that statistics can take on a life of their own. When viewing our local Manhattan Beach real estate market , the numbers tell their own tale. If you look at the numbers on a month by month basis things look pretty bad. While still dismal, when viewed over time, a pattern begins to emerge showing that the number of sales, while significantly lower then those in 2007, have been fairly stable over the last two years.

The volume of sales is down about 40% from 2007 and roughly 16% from 2008 for the first part of the year. The kicker in the deck is prices. Since the begining of the year home prices have dropped about 22% compared to the same period last year. There were 112 homes that sold from January to June 2009. 92 of them had at least one price reduction before finding a buyer, 8 were sold over the list price and 13 appear to have sold at the listed price.

There is more going on now then these number show. Currently there are 150 homes for sale in Manhattan Beach. Inventory has dropped dramatically because homes are selling.... the big question is what is selling. There are 81 properties pending...67 homes and 14 townhomes. The median asking price for homes that are in escrow is $1,575,000 and for townhomes it is $1,194,000. The median sold price for homes in June was $ 1, 402,500 and $1,217,000 for townhomes.. But.... the median list price for homes that are for sale is $2,349,500 and $1,364,000 for townhomes.

Herein lies the problem with our current market. Of the 150 homes for sale only 65( less then half) are priced under $2,000,000. There is very little demand for homes priced over $2,000,000 for a number of reasons, but mainly because of financing. While we have our share of buyers with some big bucks... they are not in the majority. Most buyers looking in Manhattan Beach today have 30%-50% cash needed for a down payment on a home under $2.5 but they still need some type of bank financing. There are lenders offering loans over $1.5 but most lenders really don't want to make loans over that number. So I'm guessing that one of two things will happpen... either these higher end homes will be taken off the market or you are going to see some very hefty price reductions in the future. I also think you are going to see an increase in owner financing to bridge the gap.

Manhattan Beach: Sold January-June 2007-2009(click on graph to enlarge)

Manhattan Beach: Sold April-June 2007-2009

Manhattan Beach: Sold West of Sepulveda January-June 2007-2009

Manhattan Beach: Sold West of Sepulveda April-June 2007-2009

Manhattan Beach: Sold East of Sepulveda January-June 2007-2009

Manhattan Beach: Sold East of Sepulveda April-June 2007-2009

***All Data is based on MLS information .. Sales not on MLS are not included... some charts have been adjusted to reflect an additional posted sale for June 2009


Anonymous said...


I have been critical of your points in the past--particularly when you suggested first-time buyers were out of touch with the reality of the market by bidding too low. And again when you suggested towards the end of last year that things would fall at most 10-15% from peak. But this time, I think you're with the curve. Your post pretty much syncs with this ABC news article quoted on Westside Bubble...

...And when two blogs from such opposite ends of the spectrum start to sync up--along with a mainstream news outlet--we may not seeing the end of the bubble in beach cities, but the shape of the arc is at least becoming better defined.

Kaye said...

Anon 11:14,
Glad I finally got something right.. LOL..

Seriously I think by last fall it was clear we were down by 20%-25% over all... and I did say I was wrong... :)

As things are shaping up I believe we will see prices trending to flat with smaller declines in the entry levels ( under $800,000).

There will be more, but not as significant, declines in the under $2 million level and some hefty declines in value at the over $2 million level.

Anonymous said...

Yes, you get credit for owning up to it, not many do. But I don't think any community in California is going to escape at least a 30% haircut from peak--and if that's all they get cut, sales are going to be sluggish for longer than other places.

I'm actually more interested in Hermosa data. Do you have that? We're looking for something up to 800k with half to put down, but expect it will be the end of next year before we see a place we'd be comfortable in within range. No question prices are coming down, but too many are still not realistic. Many of the places we like enough to give up our comfortable rental lifestyle are still priced at about a million--where they were in 2005-2006--and they just don't sell. My own guess based on the data I've seen is 2003 prices by the end of 2010, and I believe things will probably recede somewhat further, but that's about the point my wife and I would have incentive and faith enough to move.

Kaye said...

Anon 9:23,
I suspect you are right that we may see a 30% decline in the Beach Cities.

Hermosa has had some decent properties out lately... One I especially liked on 24th St just went into escrow.

As we are now looking at 2004/2005 you just may see 2003 values if prices continue to decline. I think the fall will be very telling about the future prospects for the market.

I'm probably going to put something together for all the Beach Cities Hermosa, Redondo and El Segundo fairly soon that you may find interesting.

Anonymous said...

Two things:

1. You said prices have fallen 22% from a year ago. How much have they fallen from the peak so far?

2. Doesn't it seem a little odd that anyone buying a $2M+ home needs a loan? If you're buying something so expensive, I think you should pay cash. Anyone buying a $2M home is most likely bringing at least $1M to the table as down. Why not just buy a $1M home, cash, and rest assured that you don't have a house payment?

Kaye said...

Anon 10:46,
So far prices in the Beach Cities have fallen between 25%-35% depending in the area/sub area. North Redondo has seen the biggest decline.

As for buying a $1M instead of a $2M... two things come to mind. First you don't get much for $1M in Manhattan Beach or Hermosa. Secondly the interest is still deductible on a mortgage up to $1M. This is also the reason a number of folks are limiting prices they will pay to keep the mortgage at $1M or less.

Anonymous said...

"you don't get much for $1M in Manhattan Beach or Hermosa."

Then, let's rephrase the question to something along the lines of "why don't they buy a $1M house in Redondo" instead.

"Secondly the interest is still deductible on a mortgage up to $1M."

Wow, I didn't know there was an upper limit on mortgage size to qualify for a tax deduction. Also, intentionally getting a loan to save on taxes is exactly the same as throwing $1 out the window and having $.30 come back through the back door - a year later.

Kaye said...

Anon 9:18,
South Redondo isn't that much less expensive if you are looking for a single family home.. You are looking at close to $1.5 minimum there for a 3000+ sq ft home near the water or in the Hollywood Riviera.

People who want to live in Manhattan or Hermosa usually don't want to live in South Redondo.

While South Redondo is very nice it is too far of a commute for a lot of folks. There is not quite the same sense of community in South Redondo as there is in Manhattan and Hermosa. This is probably because Redondo is so large.

Schools also play a part.. Manhattan and Hermosa are slightly better. Also many parents prefer Mira Costa over Redondo Union.

Finally not everyone believes it is smart to pay cash for a home especially when interest rates are so low. I have a number of clients who feel that they are better off paying 5.25% -5.7%interest and taking the tax deduction and then using the money in other ventures.

You may not agree with that but a number of my clients who seem to be doing extremely well financially believe that is the right move for them.

Scott said...

Wonderful post, rich in data, and very well thought out. I look forward to seeing the similar info with HB and South RB. Thanks!

Kaye said...

Scott.. They will be out soon..