Sunday, October 24, 2010

Manhattan Beach-South Bay-Beach Cities: The Bottom of the Market.. Are We There Yet? Part ll

home for sale sign

Yesterday the Daily Breeze had a note on the front page that median home prices in the South Bay seemed to have stabilized. The article noted that prices even seem to have risen in September 2010. Of course the problem with median price points is that they are dependent on the mix of properties that wind up closing escrow. This is especially true when the volume of sales is on the low side. If more low end then upper end homes close escrow in a given month then the median price appears to have fallen. On the other hand if more upper end homes close escrow then the median rises. Personally I don't see prices rising anytime soon.

On the same page there was an article about unemployment figures for California. More then any other single factor, employment or rather lack of employment, plays a big part in the stability of local housing markets. While state unemployment levels remain high at 12.4%, the ***local South Bay Cities that have the lowest unemployment rates also have the most stable real estatre markets.. Rolling Hills with some of the priciest property in the nation has a 2.2% unemployment rate while Hawthorne, with most homes either a short sale or foreclosure and a big decline in values, has an unemployment rate of 16.1%. It's tough to make a house payment when you don't have a job or much in the way of financial resources.

Last fall I wrote a post questioning if we had reached the bottom of the market . It seemed to me that while homes at the entry level may have found the bottom, the rest of the market remained in flux. One year later the market doesn't appear to have changed much... the entry level market in Manhattan Beach and the Beach Cities continues to remain fairly stable with a few ups and downs . The mid level in Manhattan Beach, up to about $1.6, may have found stability as has the same mid-market level in Hermosa, Redondo and El Segundo at slightly lower price points. It is important to remember that stability doesn't mean prices moving upward. Rather it means that price points are not as volatile. Prices will continue to move around... just not as much . Buyers have a better sense of market value and know when a home is priced right. This is not the time for a seller to test the market. The only thing that will get tested is their patience.

The upper levels of the market in all the Beach Cities are still seeing more movement then the lower price points. Financing or rather the vagaries of financing for the upper end are definitely plaguing the market as appraisals continue to be more problematic then qualifying issues... but that's another post.

Last year at this time sales continued to be brisk through the end of the year and into the Spring market. This year the market is much slower. Buyers continue to be cautious, even with interest rates at all time lows, as they try to figure out where the economy is headed. A few folks are predicting another market crash with prices diving an additional 25%-30% from current levels, but most buyers are not quite as pessimistic.

Inventory always tends to increase after August. The 4th quarter is typically a good time to buy as folks who have a home on the market over the holidays usually have a reason to close escrow before the end of the year. Interest rates are at an all time low but that may not be enough to spark a surge in buying in the 4th quarter this year. Until consumers feel they have a better handle on the economy even relatively stable real estate markets will be on the slow side. As always the South Bay-Beach Cities market remains a tough one to predict.

*** Unemployment figures for the Beach Cities: ...Manhattan Beach 4.5%, Hermosa Beach 5.6%, El Segundo 6.3% and Redondo Beach at 6.7%. These numbers have been relatively stable for the last year.

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