Wednesday, April 04, 2012
Manhattan Beach- Beach Cities : The bottom of the market.. did you miss it?
Everyone wants to buy at the bottom of the market... the tricky part is recognizing the bottom. The Manhattan Beach-Beach Cities real estate market has been moving down since 2007. During that time we haven't had any false upward movements as has happened in previous markets. Nor have we seen a widespread flat market (with a few exceptions) since the market first started to decline.
An often overlooked aspect of the bottom of the market is that once you reach it prices don't start moving upward at a rapid pace. In fact if anything prices become stable and possibly even move a bit downward for awhile before they start moving upward slightly or staying flat for months.
Markets that have reached the bottom usually see changes months after the bottom has been reached. Suddenly there is a lot of activity in a market that was relatively lackadaisical. Inventory declines as more buyers enter the market and homes sell faster. In our local Manhattan Beach-Beach Cities market we see builders re-entering the market and entry level properties move up in value as developers bid against entry level buyers for smaller homes. Buyers are more willing to pay the listed price and sometimes a bit more if there are multiple offers.
If we look at the local South Bay Beach Cities real estate market it looks as if we may have reached the bottom sometime between October -December 2011. Inventory in all the Beach Cities is very low. Pending sale numbers are high and sold prices are often above the listed price. But as we have learned over recent years things are not always as simple as they may appear.
All these scenarios are typical of real estate markets as they reach the bottom. Only time will prove whether or not this is the end of the decline or just a stop along the way. So what is the key to knowing if we have reached the bottom... well it's usually when folks realize that they can't buy a home today for the same amount or less than at a time in the recent past.
For many of my clients it means that the property they rejected as over priced 6-8 months ago probably sold for less than a similar property in today's market. It means that you can no longer offer 10%-20% below the list price and expect to be taken seriously ( unless the property is grossly over priced). It means there is a lot of competition in the market that wasn't there last year and many of these folks are sitting on large amounts of cash.
There is a possibility that as we wind down the armed conflict in the Middle East local Aerospace companies who thrived on government contracts could be seeing a different scenario and start laying off employees. The South Bay Beach Cities had real problems in the 90's when aerospace cutbacks led to major unemployment. This time around the job base is far more diverse and unemployment due to layoffs from governments cuts may not be as serious in Manhattan Beach, Hermosa Beach, Redondo and El Segundo as they were in the 90's. But there are no guarantees.
Obtaining a loan remains a challenge as low appraisals are still an issue. The government continues their double talk about helping the housing market while putting major obstacles in the path of qualified borrowers. Fannie and Freddie are no longer the safe haven many investors thought and many in DC believe that Fannie and Freddie should no longer be guaranteeing loans. While our real estate market didn't have as many issues as other areas there are still a number of short sales waiting to hit the market.
So.. have we reached the bottom of the real estate market decline in Manhattan Beach and the Beach Cities.... only time will tell.