Some surprises in South Bay Real Estate, 2019 vs 2020

It’s October 1, so it’s time to look at the changes in the local real estate market, both for the month and for the third quarter.

2020 has been a year for making and breaking records. Most of them have been records we truly didn’t want to even consider, like the number of pandemic deaths, and the number of unemployed. Until now, we had little reason to believe the real estate market might bring better news.

Through the first half of the year, the number of homes available on the market just kept climbing. At the same time, the number of homes selling remained stubbornly flat. Despite interest rates hovering just above zero, it seemed buyers had other things on their mind. Then in July the number of closed sales jumped 41%, while available inventory came up a tiny 7%.

Sales continued to climb in August and September, though nothing as dramatic as July. Overall, for the third quarter, unit sales were nearly double those of both, the first quarter of the year (+79%) and the second quarter (+76%).

For the first time this year, the inventory has dropped appreciably.

Comparing to last year, that huge spike in sales brought September in at 47% more sales than in September of 2019. On a quarter over quarter basis, Sales are up 23% over 2019. The red bars in the “Sold vs Available” chart above shows the climbing number of sales, with the blue bars showing the sudden drop of available inventory in September.

Not only were the number of sales climbing, but prices have continued to escalate year over year. September of 2020 showed median prices had increased 23% over September of 2019. Median prices rose 15% for the third quarter of 2020 versus the same time period in 2019.

Combined, the impact of the increased sales and increased prices brought the total dollar value of sales for September 2020 up 89% over that of September 2019. Quarter to quarter, the annual increase was 40%.

South Bay residential sales for the third quarter of 2020 exceeded two billion dollars.

How do we explain record sales and prices during a pandemic, with sky-high unemployment, and the threat of a recession coming from behind? It’ll be weeks before the pundits have sorted it all out. In the meantime, here are a couple of possible explanations.

Third quarter sales range from $285K to $10.5, so we know some of these have been entry level homes. Folks who have been priced out of the area, and because of the lower interest rate could suddenly qualify to purchase here, have jumped at it. Sales under $1M comprise 42% of the total.

At the opposite end, sales over $3M made up 9%. Once again, the interest rate makes it possible to leverage a mansion at a relatively affordable monthly payment. A lot has been said about the future worth of property compared to today’s dollar. Investing at a reduced interest rate usually contributes to a sizable profit at some future sale date.

In between, from $1M to $3M, we have 49% of the third quarter sales. That’s roughly the number of people we would expect to sell for one or another of the typical reasons people move. In fact it corresponds nicely with the rate of market activity for the first half of the year.

In summary, if the thought of making a move in the near future has crossed your mind, this may be the best moment to do so. Call and we’ll put together some numbers specific to your property and your situation. No problem–no obligation!

Photo by Richard Horne at unsplash.com.

August 2020 Sales Analysis

It’s September already! That means it’s time to look at a summary of real estate activity for LA’s South Bay neighborhoods over the past month. Our data is ultra-local which means you get to see the market conditions almost immediately after the month ends.

This summer we’ve been enjoying a relatively busy real estate market with a big jump in sales and mixed results in prices. August 2020 weighed in with the median price nearly 6.8% higher than August of 2019. However, it wasn’t enough to beat the median for this July. August median prices were down by 1.8% from last month. In the first eight months of the year, we’ve seen two months where the median increased, versus six months when it decreased.

Median PricesAugustJuly
2020$1.10M$1.12M
2019$1.03M

We saw 450 homes sold in August, up by 10% from July of this year. Compared to August of 2019, sales this year were up 13%. July and August were exceptional sales months compared to January through June. Both months had sales in excess of 400 units, while the first six months of the year were less than 300. March of 2020 made it all the way to 291 sales despite pandemic activity kicking into high gear that month.

Closed SalesAugustJuly
2020450408
2019398

July & August sales were up nearly double the sales numbers from the first half of the year. Why the jump in summer? Anecdotally, we’re hearing interest rates being at or below 3% brought those buyers not financially impacted by Covid-19 to the table. That huge savings in interest helped drive prices, as well. To buy now and take advantage of the interest rates, many buyers have been willing to offer slightly above asking price, to lock the deal in.

August brought a significant increase in the number of homes available for sale. At the end of August total available counts stood at 3.68 months of inventory, compared to 2.17 months at the end of July. In raw numbers, that’s an 18% increase in homes available for sale. More sellers put their homes on the market, and there weren’t enough buyers to absorb the increase. As Covid-19 moves to a back burner, we expect the inventory to return to higher numbers comparable to the beginning of the year.

A rising inventory indicates downward pressure on prices.

With subsidies and protective government programs closing, we anticipate fewer buyers will be able to purchase. At the same time, we expect the continuing stress will create more defaults and short sales. Forced sales, also known as ‘distress sales’ tend to push prices down.

Combined, a growing inventory and economic stress are precursors of a shift to a buyers’ market. Several noted commentators are predicting a recessionary market lasting through 2021 and possibly into 2022. Like so many things in today’s world, no one is sure of where we’ll end up. But it’s pretty much guaranteed to be different than we had planned.

Photo by Gustavo Zambelli on Unsplash