As 2020 ended, it looked like the real estate industry here in the Los Angeles South Bay was going to run right through the pandemic with prices climbing the whole way! It didn’t happen. January put the brakes on sales across the board. Every area showed a drop in the number of sales, with Palos Verdes dropping the deepest at 40% below December’s transaction volume.
Along with a decline in the number of sales, The South Bay showed a 35% drop in sales dollars from December to January. Monthly statistics can be misleading though. With a year like 2020 we need to look at the wider perspective. On a year to year basis, we’re still riding high with a 33% increase across the area.
Keep in mind these are relatively small volumes of data, dealing only with the “hyper-local market” here in the South Bay, so some large percentile swings are unavoidable.
Month-to-Month sales volume indicates a general softening of the market with a significant drop in the number of purchases. In addition, the price side of the chart hints at a pending drop in prices.
Much is being said about the January sales decline, most of it anecdotal. There is a seemingly hopeful general consensus that a pandemic peak, combined with the political climate, were the main drivers keeping people from buying real estate. Theoretically, now that spring is in the air and “herd immunity” is in sight we might again see those scorching increases of last year.
The Beach cities showed a 12% decline in January sales prices compared to December, however we need to remember that December 2020 was a record month for median prices at the beach. In fact, for much of the year, high-end sales dominated the charts for Beach area sales.
There’s good reason to hope for stabilizing volume and pricing, though. Even at the comparatively modest 2% monthly increase we’re seeing in PV and the Inland areas, the annual increase is nearly 25%. That far exceeds the 2% annual increase the Federal Reserve Bank is targeting. These numbers are reminiscent of the lead-in to the Great Recession.
On the year over year side, things look somewhat different. In January of 2020, before the pandemic became front page news, overall sales volume was 13% higher than 2019. Building on that impressive growth, this January shows a similar 18% sales increase for the South Bay. The pandemic has taken a negative toll in many aspects of life, but real estate here in the South Bay is prospering throughout it all.
While the number of sales has increased over last January, price growth has been equally impressive. Beach areas and the Palos Verdes cities came in at 10% and 11% respectively. Boosted by the record low interest rates, the lower priced Harbor and Inland areas were up an even greater 14% and 15%. Recent inching up of the mortgage loan interest rates threatens to dampen sales as the least qualified buyers slip out of the market.
We’ve looked to the Beach area more and more often in recent years as an early indicator of where the market is going. We do that because a large percentage of the transactions in the Beach cities are primarily for investment value as opposed to being simply homes. Right now it’s looking like investors are taking a pause. The coming three to six months should tell us how long it’ll be until they come back into the market.
Long Beach, San Pedro, Harbor Gateway and similar locales have benefited greatly from the currently low interest rates. The month to month sales volume has had the least impact of the South Bay, with only a 25% decline compared to 30% across the board.
Similarly, prices have maintained nicely. Up 1% from December and up 14% from last January puts homes there in competition with the Inland cities for being the most marketable homes.
Prices are up 2% on the hill compared to December, and they’re up 11% over last January. A very respectable performance considering that month to month sales are off 40% and annual sales are only up by 5%.
It’s always important to note that homes on the peninsula are quite diverse in nature and in size, and the market is relatively small, so one or two transactions can distort statistics.
While the Beach cities are known to be havens for investment, the Harbor certainly has it’s own share of investment dollars. Many of the remodeled tract homes flying off the market in the Inland areas have already been purchased off-market by developers who refurbish and resell them. This has been especially prevalent over the past year as sales burgeoned in the entry level markets.
Despite dropping 35% from December, sales volume was up 24% over last January. At the same time there was a tidy 15% improvement in pricing over the same month last year.