Portions of the Palos Verdes real estate market are seeing falling prices.
Last month, I penned a post on the Rancho Palos Verdes submarket, Los Verdes, succumbing to depreciating prices. I explored two similar homes on the same street that demonstrated a $200,000 drop in price or a 15% fall from a previous sale just six months ago.
It looks as if that was not a one-time thing. We are now seeing price declines in the condo market – another sign of weakening strength in a P.V. market that over-performed during COVID.
This week I am sharing additional examples of the depreciating prices in the Palos Verdes condo market.
Lunada Bay (PVE) Condo Weakness
First up is a condo sale on Palos Verdes Drive West near Lunada Bay’s charming commercial strip on Yarmouth.
- 2-beds, 2-baths, 1,171 sq. ft.
- Sold: $735,000
This unit originally came to market in July with an aspirational asking price of $949,000. Anyone looking at the comps would know it was almost a pipe dream to ask that much, especially as interest rates were surging.
A month later it was cut to $899,999. Then again two months later to $849,000.
Eventually, it made a deal but only after it took another large haircut of $114,000 to finally close at $735,000 – a disappointing result considering the asking price.
Below are comps from late 2020/early 2021 during the pandemic price surge to give us guidance on values:
- 2-beds, 2-baths, 1,169 sq. ft.
- Sold: $780,000 (December 2020)
- 2-beds, 2-baths, 1,166 sq. ft.
- Sold: $780,000 (February 2021)
- 2-beds, 2-baths, 1,178 sq. ft.
- Sold: $785,000 (February 2021)
It is fascinating to see the sellers begin their sales journey at $949,000 when clearly there were no comps to justify a price even in the $800,000 range.
That said, with three comps occurring in the $780,000 early in 2021, there would have been a sale reaching the 800s had a unit been listed in late 2021 during the home buyer craze.
The point of these comps is that in 2020/2021 condo sales were getting above $780,000.
Today, we have the latest sale going for $45,000 lower 18 months later. That is a 5.7% discount. Small but notable. And if you figure a sale in late 2021, then the discount might be in the double digits froma percentage standpoint.
While this is not the greatest news for Lunada Bay condo owners, it is nothing to fret over if you are a long-term owner. Look at the July 2020 sale just a few months after COVID rocked the world in March of that same year:
- 2-beds, 2-baths, 1,171 sq. ft.
- Sold: $708,000 (July 2020)
Although it is clear condos in the 2322 complex are now down, it is still a higher sale than in July 2020. It just shows how powerful the run up was and its dependance on ultra-low interest rates to support values.
What’s more, this new disappointing $735k comp sold in 2018 (pre-COVID times) for $675,000.
So, the owner is up after 4+ years, but, only $60,000 without factoring agent fees and closing costs which makes this sale close to a break even. Ooof.
Cote d’Azur on PVE Border
Next up is in Torrance’s Hollywood Riviera – the section with the Redondo Beach PO addresses but firmly in the city of Torrance.
The Cote d’Azur complex shares a fence with the border of Palos Verdes Estates and contains condos that are often considered by buyers who are looking on The Hill.
Examples below are not quite as drastic and it is debatable as strength or weakness, but the market is certainly asking questions of values in this new environment.
- 2-beds, 2-baths, 1,312 sq. ft.
- Sold: $1,000,000 (September 2022)
This unit sold recently to an all-cash buyer in seven days for $5,000 above asking price. While the pictures do not highlight its features, you can see the kitchen and bathrooms were updated to compare to the sale a year prior.
- 2-beds, 2-baths, 1,372 sq. ft.
- Sold: $1,050,000 (October 2021)
Its neighboring unit in the complex sold a year earlier at a $50,000 premium.
This unit came to market at a whopping $1,450,000, cut to $1,300,000 and still had no takers. It was not until the listing was cut significantly to $999,000 that it received multiple offers and sold at $1,050,000.
In my opinion, here are a couple of things you must consider:
- If the October 2021 listing had priced itself properly to start, would it have landed an even higher price than $1,050,000?
- The September 2022 sale looks to be one of those sales where there was one eager buyer, and they were willing to pay a slight premium to lock up the property right away. What if that buyer had been more patient or that one buyer was not in the market?
Sure, these thoughts are speculation but while a 5% decrease is similar to the Lunada Bay example, there is a chance this could have been lower.
All in all, the sky is not falling in the Cote d’Azur as listings remain few and far between for the 87-unit community – just seven MLS sales in almost three years.
The decline in price in these condo complexes are not nearly as alarming as the Kings Harbor sale in my previous blog post last month.
However, $50,000 declines are noteworthy. Not to mention, condos are much easier to compare than single-family homes with unique characteristics.
There is no doubt the Palos Verdes market is softening due to interest rates. Its saving grace might only be due to low inventory thanks to owners not wanting to lose their sub 3% interest rates.
I’ll continue to monitor the Palos Verdes Hill, along with the beach cities, as 2023 should be one of the most interesting times in the South Bay market since COVID and the Great Recession.
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