Manhattan Beach CA/ e-PRO..... Kaye Thomas...

Last week Curbed LA pondered that real estate may be on the way to boring. They wondered if our local real estate markets have lost the frenzy we have all come to associate with buying and selling real estate in Southern California.

However if the 24 folks who made offers on 1708 Magnolia in East Manhattan Beach last week are any indication... we have not reached boring. The home was listed for $699,000 and drew big crowds. The accepted offer was about $825,000 for a 3 bedroom+ den, 1 bath home with 1236 sq ft home on a 4870 sq ft lot that needed upgrading. A few days later 1509 Manzanita a 3 bedroom 1 bath 1098 sq ft home also needing updates on a 5247 sq ft lot in Liberty Village saw a quick sale. Originally listed for $749,000 this one appears to have accepted an offer at $799,000.

Of course the real excitement will occur when these homes are appraised. That is the cliff hanger as the loans on both these homes fall under conventional guidelines and therefore will be subject to the appraisal rules under Fannie Mae and Freddie Mac guidelines.


Mid level priced homes also seem to be faring well. In the Trees a newer home at 648 26th Street on an over-sized lot drew over 300 people at the Saturday and Sunday Open Houses. The home was built in 2004 and is on a 5120 sq ft lot. It is listed at $1,799,000. Rumor has it that they have received offers but so far no sale has been reported.


While sellers in the upscale price ranges continue to search for buyers, sellers in the entry to mid level price ranges seem to be having better luck providing they are priced right. Overpricing is still the kiss of death no matter where your property falls on the price scale. I can think of a number of homes that have been on the market forever. They were priced too high and have been rejected by buyers. Now they are "old" inventory and will likely have to really drop their price to attract interest. It's never a good idea to chase the market down at any price level.

An article in the Daily Breeze points out that South Bay median home prices were up overall even as prices were lower then at this time last year. While prices in the South Bay were up 7.4%, the Beach Cities saw prices drop 25.6% from last year. Manhattan Beach was down 12.9%, Hermosa saw declines of 25.8% and Redondo was off 7.2% from September 2008. However even though prices were off from last year by a fairly significant amount, Manhattan Beach had the highest median home price in the California with a median of $1,502,000.

Meanwhile the financial markets are very concerned about what's happening in the commercial real estate sector. For those of us who remember the S & L debacle of the '80's this could be an issue that will have consequences for the residential market. We just saw what happened when credit dried up from 2007-2008 and the effect that had on the residential housing market.


Personally, I think a little boring might be nice....

Last week those in the know seemed to be saying that the recession was over. The LA Times cheered that Southern California's Vital Signs are Improving and the Southern California housing market was about to hit bottom. But toward the end of the week the news was not quite as good with state unemployment numbers reaching above 12% and a few economists hedging their bets. Irwin Kellner from Money Watch theorizes that maybe it ain't over til it's over and I think I agree with him. Much as I would love to see our Beach Cities real estate market stabilize I'm having a hard time believing that the real estate market in California has reached the bottom with such a high unemployment rate and the state in so much financial turmoil. Employment and financing are going to be major issues that must be resolved before we begin to see a return of a normal market


This real estate market is different then previous markets and consequently may be harder to call. I suspect that we will see the home market bottom by city and sub areas within each city. As an example I think that we may have seen the bottom in February of this year for the lowest priced single family homes in Manhattan Beach ( $750,000 or less), Hermosa Beach ( $700,000 or less) N. Redondo ( $600,000 or less), S. Redondo( $700,000 or less) and El Segundo ( $650,000 or less). We may also be nearing the bottom for entry level townhomes/condos in the Beach Cities. I think we will see properties priced in Manhattan and Hermosa from $800,000-$1M reach their lowest level by the end of the year. The rest of the markets will level at different times over the coming year. I also think that reaching the end of the market will not signal an uptick in prices. Most price points will remain flat with the exception of Strand and walk street properties near the Strand which seem to have a life of their own even in a down market.


While it may be true that the South Bay employment market is doing better then other parts of the state we are not out of the woods yet. I know a number of folks who may have jobs but have lost of lot of perks. Many companies will not be paying an end of the year bonus to employees that was a standard benefit. Others are changing more for health care benefits. If you are on a salary plus commission your commission percentage may be significantly lower. If you own a company you may be paying yourself less if the company income has decreased. In other words a lot of folks just simply are not making the same amount of money they were a few years ago.


Consumer spending continues to be below expected levels in all categories. Home buyers are still expecting prices will continue to decline a bit more and continue to make offers the listed price. These are not necessarily buyers who think the market will drop another 25% but rather those who think there is a little more to be discounted... maybe another 5%-10% before we see the bottom of the market. That's not to say there are not some homes that are receiving multiple offers with prices above the listed price but these usually were often priced below market value. Having multiple offers doesn't always mean the offers are over the listed price. It isn't unusual to have multiple low offers if buyers feel the price is on the high side.

One of the big issues affecting the housing market is that banks are still very leery when it comes to extending credit to buyers on a purchase loan or homeowners looking to refinance. If you are not a straight salary W2 employee banks are not going to be your friend. In our market many of the people making the most money are commission based and banks don't like 1099 folks very much.


We have been so consumed with foreclosures that a major problem in our market is often overlooked... owners who want or need to refinance and can't qualify. If you are self employed you might find that with all the new rules and regulations many of the assets you took for granted no longer count as much when a lender reviews a loan package. Prior to September 1, 2009 if you had a lot of assets in stock, bonds and other accounts lenders gave you 100% of the value of those funds. Since September 1, 2009 lenders will only allow you 70% of the value of the assets toward qualification which means you just lost 30% of your financial power.

I spoke with a few lenders last week and the general consensus of opinion is that there are going to be more problems with upper end housing well into next year. With values having declined by 25% +/- in most of the Beach Cities owners may find it difficult to refinance. Another issue is that if your income has changed or if you are commission based you might not qualify for a new loan even if the payment is lower on the same amount of money because of rule changes. Most of these people will not wind up in foreclosure but they may have to sell at a discounted price if they can't refinance.

While it is true that inventory has decreased and sales picked up over the summer, the fact is that the decrease was not all due to properties selling. A number of sellers just decided to wait the market out while others opted to rent their homes for a year or two. As we come to the end of the year sales volume is again declining compared to previous months. I expect that the 4th quarter will be better then last year as the financial markets are not in as much turmoil. However until lenders losen credit a bit more and consumers decide to start spending I don't think we have seen the end of the recession or the bottom of the real estatre market.

South Bay-Beach Cities.. some thoughts on where real estate prices headed for the second half of 2009....



Sometimes when I get caught up in my geeky statistical mode I'm not quite sure where the numbers will take me. Over the last week or so I've been posting information on home sales in Manhattan Beach, Hermosa Beach, Redondo Beach and El Segundo for the period January-June 2000-2009. My original intent was to stick with the year over year figures for January-June 2007-2009. I soon realized that I needed to go back further to get a better picture of market trends.


While those numbers were interesting and showed definite changes in the market, there was still something nagging me about the market. My focus became a bit clearer after I posted the stats for July 2009 in the Beach Cities. The overall trend was very clear... inventory is down, sale volume is up a bit and prices are significantly lower in all the Beach Cities. But there is more then that happening in our local market.


Reviewing the numbers it is easy to see that sales volume peaked for homes sold in Manhattan, Hermosa and North Redondo in 2002. However in El Segundo it peaked in 2001 and in South Redondo it was 2000. Using median sale prices it looks as if home prices peaked in El Segundo, and North and South Redondo in 2006. In Manhattan Beach it seems to have been 2008 and in Hermosa it appears that prices are still rising into 2009. ( The numbers for Hermosa are somewhat misleading as the volume of sales was very low with some high ticket sales in the Sand and Valley sections... the July 2009 numbers seem more in line with the peak around 2006).


Currently it appears as if home prices in 2009 are hovering between 2004 and 2003 in North and South Redondo and El Segundo. In Manhattan Beach , home prices are between 2005 and 2004 levels. When you kick in July numbers Hermosa real estate prices are also around 2005 to 2004 levels. Overall median price declines for all the Beach Cities seem to be averaging somewhere between 21%-25% from their respective peaks.



So what does the future look like for home prices in the South Bay-Beach Cities? Truthfully, my crystal ball started acting funny around 2006 and has never been the same since... but my guess is that we will see prices continue to slide over the next 6-9 months. Whether the slide is large or on the small side will depend on what happens in the economy. If the economy is truly seeing a bit of light at the end of the tunnel, with the prospect of the recession winding down before the end of the year, then prices will probably not fall much more then 7%-10%. But if the recession hangs on and moves into fields occupied by upper income folks then you can expect to see home prices falling at least 10% and perhaps as much as 20%. However I don't think you are going to see the low entry level prices drop much more. I believe that end of the market in all the Beach Cities will be relatively flat with the possible exception of older North Redondo townhomes that were built in the late '70's and early '80's.


Here's what I'm seeing... Banks are getting very tough not only on standards for a borrower but also on the appraised value assigned to the property purchase. Fewer comps in the higher end of the market means lower appraised values, which translates to unhappy buyers and sellers and deals that fall apart. It also translates to overall lower comparable sales or sliding prices. Sellers can't throw out a number they "want" or "need" and expect buyers or appraisers to go along without supporting data.


Buyers are not only being very choosy about condition and location but they are sticking to their guns about price. They have the luxury of time on their side and will walk from a property they feel is overpriced if the seller refuses to negotiate. On the other hand they will often bid higher on one they deem to be undervalued if there is a multiple offer situation. However they won't be stampeded into a purchase if they suspect they are being manipulated by a seller. All of these conditions happening together are part of the forces that are pushing prices lower.


I believe home prices over the $2M in the Beach Cities are going to start moving downward. Historically this area of the market has been very sticky as sellers don't necessarily "have" to sell. They can hold out for a higher price even though other sectors of the market are moving lower. We have a low rate of unemployment in the Beach Cities compared to other parts of the state. However in the last few months I'm seeing a number of buyers leaving the market because they have either lost their jobs or are concerned that they might. Many who own their own businesses are paring down as their companies struggle in the current economic malaise. Real Estate is not a oneway street and if buyers are having these issues, you can bet there are a number of homeowners who are also facing uncertain economic times. If we begin to see more upper income folks in trouble then we can expect to see prices drop as many scramble to get out from under and maybe take a little cash with them. Lack of security is a great motivator even for the upper income set.


Foreclosures have not been a significant part of our market but you may see that change. Most of the homeowners in the South Bay-Beach Cities have managed to weather the current financial storm. However if the recession starts to affect the middle-upper income segment of the market then you can expect to see more foreclosures and short sales in the Beach Cities. These lower priced sales in turn lower overall prices for those who may not be in financial trouble. If we suddenly see a spate of foreclosures and/or a dramatic increase in short sales you will see a corresponding drop in prices. The Beach Cities are considered to be a declining market and appraisers don't care if the sale is a short sale, a foreclosure or regular sale when looking at sold comps... a sale is a sale.



On the bright side rates will probably continue to be low through the Spring. If prices continue to slide into the fall and winter, buyers just might get some pretty good deals before the end of the year. As a number of buyers found out this Spring that some of the best deals happened in the 4th quarter of last year and January and February of this year.



If you own your home and need to refinance I know BofA and very likely other lenders will have some new programs that might finally help folks who need to refinance. If you need to refinance call a reputable lender now. The FEDS have a number of programs that might actually be of help.

Relocation.com is a company about ...well ...relocation. They are a terrific resource for those planning a a move to a new area. Recently they have begun a series of posts on their relocation blog naming the best real estate blogs written by real estate agents around the country. This week their focus was on Los Angeles. I am very pleased that this blog was named as one of the Best Blogs in Los Angeles.

It should not surprise those of us in the South Bay that three South Bay blogs were chosen... after all we know the South Bay is a great place to live.

South Bay Real Estate Blogs:

Beach City Real Estate Info.... Kaye Thomas

Red Square Homes Blog... Blake and Diana Roberts

Palos Verdes Lifestyle... Norma Toering

Best Los Angeles blogs not in the South Bay:

Long Beach Real Estate... Laurie Manny

Pasadena Views... Irina Netchaev

San Fernando Valley Real Estate Blog... Judy Graff

Malibu Real Estate Blog ... Michael Gardner

Phyllis'LA Real Estate Blog ... Phyllis Harb

Up2Date Real Estate ... Doug Willis

Terra Firma ... Christopher Hain

Other Cities:

Best Real Estate Blogs in Minneapolis/St. Paul

Best Real Estate Blogs in Chicago

Keep an eye out for new cities to be added ....

For all of you who are new to blogging or new to Active Rain... Many of those mentioned by Relocation.com in LA, Minneapolis/St. Paul and Chicago are Active Rain members. Many of us came to AR in the early days and were totally green about blogging. I can truthfully say that I learned how to write an effective blog because of all the information and the terrific people that make up the AR Community.

Manhattan Confidential, our local consumer blog, posted an article today about the decline in sales in Manhattan Beach and the Beach Cities. The post points out two things... the number of sales began to decline in 2002- 2003 ( higher prices mean fewer sales) and 2006 was when buyers started saying no and the market started cooling. Fast forward to 2009 and we have a real estate market that is trying to recover from a lousy economy and a tough lending market. Yet with all the chaos of the last few years prices, with a few exceptions, are still on the high side.

The issue for many Beach Cities' buyers is that while prices have fallen a lot in Manhattan, Hermosa and Redondo; they don't seem to be down as much as many believe they should be. Every news source is telling potential buyers that California has the largest number of foreclosures in the nation and prices are dropping like crazy. The media posts a new statistic every day on how much real estate prices have dropped in California. There are a glut of articles about buying foreclosures and short sales. So why are prices still so high in the Beach Cities?

Last Sunday the LA Times had a terrific front page article that addressed the issue... why some markets are not acting in the way buyers expect. The main thrust of the article is that while prices are down overall, they may not be down as much in the more desirable areas.... i.e. The Beach Cities as say in Riverside. This scenario is very frustrating for buyers and for sellers. Buyers believe that sellers should accept lower prices for homes that have been on the market for long periods of time. Sellers/Banks, on the other hand, want to sell for as much as they can, especially when facing a loss.


While not everyone thinks this is the time to buy... there are a lot of folks who are willing to take a chance and buy now. Most of these buyers don't think we have reached bottom but believe lower prices along with some very good long term interest rates mean it might make sense to buy. The problem is that there is still a big disconnect between where buyers believe prices should be and the prices that many home owners or in some cases banks are willing to accept. Many of my clients are especially frustrated with the prices that banks are setting for short sales.

While we don't have a huge inventory of REO's... there are a number of short sales in all the Beach Cities. Many of these are new construction that didn't find buyers. A number of builders have received NOD's. Logic would seem to say that as these homes have been on the market for a year or more that Banks would be wise to be fairly aggressive about accepting offers from well qualified buyers...but that isn't what seems to be happening.

We have seen an uptick in sales in the last month. This may be a seasonal reaction... spring is historically our buying season. It could be low interest rates. It could be that buyers are seeing a little light at the end of the tunnel in the economy and the housing market. Personally, I think prices still have a way to go before we see the bottom... but the bottom might not be as low as was predicted a few months ago. The kicker for our market will be foreclosures. If we see a spike in the number of foreclosures over the next 6 months then you can expect to see prices drop quite a bit. If we continue to have relatively few foreclosures prices will continue to be soft but will more likely be flat.