Real Estate Edge

Builders Continue To Snap Up Manhattan Beach Lots

2022-11-14T17:49:29Z

Builders continue to snap up developable lots in Manhattan Beach. Through the first seven months of this year, we count 24 (this is an unofficial count since most of these properties are difficult to track because they trade off-market).

This sort of lot sale activity will likely result in a substantial influx of new construction hitting the market at the end of 2023 and into 2024.

Included in that mix is the Hill section lot pictured above that we sold to a developer at the end of July, a 50 x 145 upsloping lot at 932 9th Street that just closed for $2,845,000.

And we also have a new construction project in the Hill section at 926 10th Street – pictured here in an architect’s rendering – that should be completed no later than the first quarter of 2023. This is the result of another lot sale to a local developer that we successfully closed last year (for a list of all of our lot sales, see our Lot Sale Program page).

Needless to say, the new construction market remains vibrant here in Manhattan Beach. If you have questions about upcoming new construction projects in the beach cities, or if you have a small, older home or teardown that would qualify as a developable site, please use the contact form below or just call us direct at 310.729.4255.

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Mid-Year Review

2022-11-14T17:49:30Z

Halfway through the year and we’re already starting to see a change in the market as both sales and price appreciation have slowed dramatically in Manhattan Beach and Hermosa Beach.

Nowhere is this more readily apparent than in the once red-hot Manhattan Beach single family home market where the year-over-year median sale price for the first 6 months of this year barely eked out a gain of 0.6% versus the first six months of last year on a 28% decline in sales.

Townhomes and condos in Manhattan Beach also saw a decline in sales but the median sale price did a bit better than single family homes, increasing 16.9% y-o-y.

Pictured here is the median-priced sale this year for all residential units (condos, townhomes and single family homes) in Manhattan Beach – 693 19th Street, an older 5-bedroom, 3312 sqft single family residence in the Tree section that closed in March for $3.1 million.

In Hermosa Beach, the median sale price for single family homes increased 8.3% in the first half of this year compared to the same time last year while the median price for condos and townhomes actually declined by that same percentage. Meanwhile, total sales for all residential units declined by 31.6%.

Sales Data – First 6 Months of 2021 vs 2022

Manhattan Beach

Type	Median Sale Price			Sales			Median DOM
	2021	2022	Percent	2021	2022	Percent	2021	2022
Single Family Homes	$3,192,500	$3,212,500	+ 0.6%	184	132	-28.3%	9.5	8.0
Townhomes / Condos	1,689,500	1,975,000	+16.9%	50	35	-30.0%	16.0	7.0
All	2,969,000	3,100,000	+ 4.4%	234	167	-28.6%	11.0	8.0

Hermosa Beach

Type	Median Sale Price			Sales			Median DOM
	2021	2022	Percent	2021	2022	Percent	2021	2022
Single Family Homes	$2,460,000	$2,662,500	+ 8.3%	72	56	-22.2%	9.0	8.0
Townhomes / Condos	1,825,000	1,673,000	– 8.3%	64	37	-42.2%	11.5	8.0
All	2,001,000	2,150,000	+ 7.4%	136	93	-31.6%	10.0	8.0

In the current environment of rising interest rates, you might conclude that higher mortgage rates are negatively impacting the market by mitigating demand and there is certainly some anecdotal evidence to that effect.

However, in this case, declining sales in the first part of this year may be a reflection of supply, or more accurately the lack of supply, as evidenced by a median Days on Market of just 8 days for both Manhattan and Hermosa, clear evidence of how quickly the sparse inventory was being snapped up.

When we covered this subject back in April (see Looking Ahead in 2022), inventory was at rock bottom levels in Manhattan Beach in the upper 20s and lower 30s for all residential units (single family, condos and townhomes) combined. We predicted then that inventory would increase by at least 50% later in the year and it looks like we’re already there as total inventory of available residential properties of all stripes stood at 59 as we went to print. Hermosa has seen a similar improvement in available homes for sale of late.

As for demand, we’ll see how that half of the supply-demand equation holds up in the second half of this year with the Fed projecting further rate hikes to tame inflation.

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Looking Ahead in 2022

2022-11-14T17:49:31Z

What’s in store for the real estate market for the remainder of 2022?

Rising Interest Rates

As you’ve probably surmised by now based on the recent pronouncements from the Federal Reserve as well as the gyrations in the stock market, interest rates are on the rise.

Due to inflation concerns, a shift in the policy outlook from the Fed is suggesting far more rate increases than was expected which, in turn, is pushing bond yields higher.

For example, the yield on the 10-year US Treasury recently hit a high not seen since 2019 (as we went to print, the yield stood at 2.47%).

Meanwhile, the average rate on the popular 30-year fixed mortgage, which loosely tracks the yield on the 10-year Treasury, just surged to 4.72%, a level last seen pre-pandemic.

Economists had expected rates to rise only slightly this year but now that is changing, with the first three months of 2022 showing the biggest 3-month rate spike since 1994.

“Mortgage rates have a small chance to top out before hitting 5% and a good chance of topping out before hitting 6%, said Matthew Graham, chief operating officer at Mortgage News Daily.

Lawrence Yun, chief economist for the National Association of Realtors (NAR), now says he expects the rate to hover around 4.5% this year, after previously predicting it would stay at 4%.

Housing Inventory To Increase

The supply of available housing nationwide hit an all-time low of 1.7 months of inventory in February.

Yet, here we are in March and the national inventory of single family homes for sale, as shown in the chart, hit a record low of just 241,000, which is 21% lower than last year’s low point of 307,000 available homes.

We’ve seen this same pattern locally with the supply of all listed properties in Manhattan Beach, for example, sinking to 1.3 months worth of inventory in February (28 properties total). The situation has improved only marginally since then (34 homes, including townhomes and condos were available as we went to print).

As higher mortgage rates take hold, we fully expect inventory to increase by 50% or more later in the year. How soon we get there will be a function of how high and how rapidly mortgage rates rise.

Declining Demand

Thanks to higher mortgage rates and higher house prices, sales of new single family homes unexpectedly fell in February.

Meanwhile, the NAR reported that total existing home sales (previously-occupied homes, including townhomes and condos) sank 7.2% from January and was also lower by around 2% on a year-over-year basis.
“That (high prices and rising mortgage rates) is a double whammy that erodes affordability for homebuyers, especially first-timers,” said Frank Nothaft, chief economist at CoreLogic. “First-time buyers are a sizable part of prospective shoppers and their share of purchases has slipped from one year ago.”

However, rising mortgage rates can also have a counterintuitive effect on the housing market. “Home shoppers are actually sprung into action in an attempt to buy a home before mortgage rates rise any higher,” says economist Ali Wolf. Consequently, she thinks the “downshift” in buyer demand will take time to get going.

Moderating Appreciation

In 2021, nationwide home prices jumped 18.8%, according to the S&P CoreLogic Housing Index (19.3% in Los Angeles), the highest calendar year increase in 34 years of data and substantially ahead of 2020’s 10.4% gain.

In case you’re wondering, last year’s winner among major metropolitan areas was Phoenix, with a whopping 32.5% median increase.

Look for home price appreciation to moderate significantly this year due to the impact of increasing mortgage rates on affordability. In fact, home sellers may already be adjusting their expectations as asking prices recently slipped slightly, according to Realtor.com.

The old adage, “Trees don’t grow to the sky” pertains here.

That being said, don’t expect home prices to fall this year. The reason? Inventory plummeted during the pandemic (see the chart above) and there simply aren’t enough homes for sale to match demand from buyers.

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