Tony Cordi

South Bay Luxury Activity Listings Update - 5/10

Another month has passed us by. In the exclusive world of super luxury homes priced over $10 million, we have actually seen an increase in the number of homes that surpass this threshold from a month ago. The new number of homes available on the market today stands at 15. The increase comes from a home in Palos Verdes Estates that has had an upward adjustment in asking price.

This is perplexing given that the total number of homes sold in the entire South Bay ever for more than $10 million remains fewer than a dozen and we are coming off of a brutal credit market retraction.

Of the 15 homes on the market, eight are on the strand in Manhattan Beach and Hermosa Beach. There are now four homes located in Palos Verdes Estates, two in Rolling Hills, and one in Rancho Palos Verdes. The average home has been listed for over four months.

I will continue to track the progress of these homes in light of the current market conditions.

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Tracking the Manhattan Beach Tree Section Over the Years

Sand Dune Park is but one of the many great attributes of the Tree section of Manhattan Beach. It had become increasingly popular as a workout destination in the last few years to the point of frustrating many of the neighbors to the park. Apprently, the increased visitor count was taking a toll on the area.

The city council closed the park for several months, but eventually agreed to re-open it with significant restrictions on the use of the dune. The intent of this post is not to delve into the politics behind the decision, but rather to explore the Tree section from the standpoint of property values changes this past decade.

Though no single metric perfectly captures the relative home values for an area, median sales prices are often accepted as a good relative measure of this. Back in 2000, the median sales price for a Tree section home was $799,000 on 162 sales. Prices rose steadily every year thereafter until they hit a peak in 2007 when the median price came in at just under $1.9 million on 112 sales.

The credit market crash of that year left very few parts of the country unscathed and the Tree section was no exception. Median prices dropped down to $1.46 million last year and have fallen even lower to $1.3 million for the first four months of this year. In spite of this, the values of homes here have still comfortably outpaced inflation and, in fact, have experienced nice appreciation.

On the surface, this recent downturn appears to be attributable to the beaten up financial markets and the recent economic recession. Ultimately, this may very well explain why values have declined as much as they have, but not for obvious reasons. Over the years, the development and sales of new homes has essentially been a catalyst for the tremendous growth in home values. Their absence effectively removes this catalyst from the equation and dampens these value gains.

There have been many new homes built in this area since 2000 and their presence has impacted the community on a number of positive levels. In my view, they have significantly added to the quality of life here, though I imagine the pounding of nails and the like have frustrated more than a few neighbors over the years.
One of the benefits of this renewal is that it leads to a rise in aggregate home values. The Lunada Bay area of Palos Verdes Estates, with a median home sales price of $859,000 back in 2000 exceeded the values here. However, by last year the Tree section had pulled well ahead of Lunada Bay by this measure, primarily because the pace of new home development here has been triple the rate there.

Looking at this from yet another perspective, back in 2000 the value of existing occupied homes sold and the new homes sold were commensurate on a price per sq. ft. basis. The fact that the new homes were larger pushed prices as well as comparative values higher. The effect of this was somewhat modest in 2000, but in 2007 it had a huge impact. New homes became even larger and there was a premium in value on a per sq. ft. basis paid for these homes over the other homes sold. The net effect was that the median sales price was lifted by over $300,000 that year.

When the financial markets tanked, the number of newly built homes sold dropped in half. As a result, the lift from the new homes sold was about $100,000 or only a third of what we experienced in 2007. Interestingly, for the first four months of 2010, we’ve managed to hold steady on 2009 pricing but in the complete absence of any new home sales.

On a side note, a lot of the new building of 2007 occurred in the area of the Tree section north of Valley/Ardmore. This resulted in a significant increase in the gap between the median sales prices between the two sides of this dividing line. Historically, the number of sales south of the greenbelt has always exceeded those of the area to the north. Prices, on the other hand, have always been greater on the north side. In 2007, there were more new homes sold to the north and the gap in median prices was significantly higher that year. More recently, more new homes have been built to the south and the gap in values has fallen as a result.
Now getting back to the Sand Dune, I wondered what, if any, impact the challenges and the subsequent controversy there have had on home values in the immediate area. In the end, the relatively small size of the neighborhood adjacent to the park and the few sales of homes there make it very difficult to definitively address the question of impact on value.

The median price for a home in the Tree section back then was $799,000 on 162 sales of all home types. The neighborhood adjacent to the park, which for the purposes of this article includes the homes located between 29th Street and 36th Street out to Blanche Road, accounted for 15 of the homes sold that year. The median price of $842,000 for these homes actually exceeded the median for the entire Tree section though the average price per sq. ft. of these homes was $329 compared to $350 for the broader area.

Spinning forward to last year, the median price of the six homes sold by the Sand Dune was $1.56 million compared to $1.46 million for the entire Tree section. This gap is about the same as what we saw back in 2000. The overall average came in at $587 per sq. ft. while the Sand Dune area homes averaged $512 per sq. ft.
This morning after I dropped my daughter off at her pre-school, which is, coincidentally, near the Sand Dune, I noticed signs of new development in progress. This is a clear indication of an increase in confidence in the market and I anticipate that we will see home sales rise in the coming months ahead.

South Bay Homes Market Update for Week of 5/2/2010

The market appears to be holding steady. The number of new listings for this past week, at 68, is the same as the prior week. The total number of active listings stands at 767, down from 780 the previous week. Closed sales jumped up to 61 from 39, though new escrows actually tapered off to 64. There are now 405 homes in escrow. Given the lack of change in year-to-date median prices over the last few weeks, I will skip the calculation this week and revisit this next week.

The least expensive closed sale for the period was a two bedroom condo on Camino Real in Redondo Beach. It was significantly below the most expensive sale which turns out to have been $7.334 million for a strand home in Manhattan Beach. My old neighbors had owned it for about 12 years. It had a total of just under 4,400 sq. ft. of living space.

Distressed sales backed down from eight to four this last week. This does not include the three probate sales.

Only two of the 61 closed sales were of new homes. It will probably remain this low for the next few months or longer.

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South Bay Homes Market Update for Week of 4/25/2010

Another week has passed and we seem to be settling in to a pattern here with respect to South Bay real estate activity. The number of new listings for the week climbed slightly to 68 and is continuing to exceed the 50 home threshold we straddled at the beginning of the year. The total number of homes of all types for sale is just shy of 780. There were 39 closed escrows this past week and an additional 73 new escrows opened. The total number of homes in escrow is 432, up from 418 the prior week.

The median prices for the year-to-date for both this year and last year did not shift from last week. For this year, the median sales price is holding steady at $850,000. Last year it was cruising along at $800,000 on 409 sales. The number of sales this year thus far is 616. We are still well below historic sales levels, but we have clearly moved past the brutal performance of the market last year.

The least expensive sale for this past week was a loft in Rancho Palos Verdes, with a modest 431 sq ft of living space, which sold for $200,000. The most expensive sale was also in Rancho Palos Verdes, specifically in the West Palos Verdes area. It is a five bedroom home with 4,300 sq ft of living space and it sold for $2.8 million.

The number of distressed sales, those classified as being either bank-owned sales or short pay sales, took a breather a couple of weeks ago, but bounced back up this past week. Of the 39 closed sales for the period, eight of the homes were in one of these categories.

The number of new homes sold also appears to be on a bit of a hiatus. Only one of the recent 39 sales was built within the last 18 months. spec building took a big hit in 2008 and early 2009, but there are signs that a rebound may be in effect.

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South Bay Homes Market Update for Week of 4/22/2010

What a difference a week can make. Last week I noted that 11 of the 45 closed sales of all home types in the South Bay could be classified as distressed. This week the number dropped to two out of the 37 closed sales. This is encouraging news, though it is clearly too early to classify this as a trend. The number of closings is down slightly from last week as is the number of new sales. There are currently 418 homes in escrow with the addition of 75 new sales. A total of 64 homes were put on the market this past week and, after adjusting for sales, the current inventory stands at 763 homes of all types.

For the year-to-date through 4/22/10, there have been 568 sales with a median sales price of $850,000. Contrast this with the 365 closed sales for the same time frame last year when the median sales price was $800,000. This represents a more than 50 percent increase in the number of sales over last year and a 6.25 percent gain in price. At this point, it seems safe to say that the slide in sales and price has stopped and that we are, in fact, experiencing a modest spurt.

The least expensive closed sale last week was a two bedroom condo on Artesia Blvd. in Redondo Beach that sold for $393,000. On 9th St, in the sand section of Manhattan Beach, there was a 2,650 sq ft home that sold for $2.72 million, making it the most expensive closing of the week. Given the age of this home, at over 50 years, it is likely this home will be scraped and then replaced with a new one.

Of the 80 closed sales this month thus far, only three were built in 2009 or this year. The amount of spec building that we have seen here in the past has definitely cooled off so far in 2010.

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