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South Bay July Home Market Update: How Do the Numbers Look?

The July South Bay real estate numbers are here.

As we recover from the shock of the shut-down of our local economy, and continue to stay open, the monthly data will get less valuable.

Quarterly data will aggregate bigger data that is more dependable in the short-term, along with helping to see if longer term trends are intact.

I may do just one more monthly report and then plan to stick with quarterly data since month-to-month data does not tell the whole real estate story as the natural real estate cycle gets thrown off and we try to go back to a normal market.

For reference, I have included past blog posts that cover the monthly data for June here and second quarter numbers here.

The pure July monthly numbers are starting to get choppy and a bit difficult to read. This is in part due to the pandemic throwing off seasonal trends and kicking them to other parts of the year. And obviously, we saw huge drops in sales in March, then a surge back, and now I think the market is trying to find equilibrium…whatever that might be.

Before I jump into the numbers, let me cover some important news in the economy along with other real estate sources who share valuable information.

Important and Interesting News

C.A.R. Q2 Affordability

The California Association of Realtors (C.A.R.) released their second quarter housing affordability index, which in my opinion, is one of the (if not the) most important data to follow for California residential real estate.

The median-priced home in quarter two of 2020 was at $610,850 and 33% of California residents were able to afford that home price.

The number of Californians who could afford the median-priced home is down from 35% in quarter one, but up from just 30% a year ago.

So, there is some good and some bad in that.

For Los Angeles county, affordability ran at 32% of residents, slightly better than 31% last quarter, and even the 29% affordability seen in quarter two of 2019. All positive for our local county.

Initial Jobless Claims Fall

The Department of Labor reported initial jobless claims at 936,000 this past week, the first time it has been below one million since mid-March.

At the worst of the job losses, we saw almost 7 million in just one week, so this is great to see the initial claims dropping consistently. That said, pre-pandemic initial claims were well below 300,000, so we still have a ways to go.

These are still far from normal times, but take it as a good sign.

Weyerhaeuser Earnings & Reports

For my die-hard readers, you might remember my May post chatting about the Weyerhaeuser Company. For reference, you can find that past blog here.

Weyerhaeuser is one of the largest private owners of timberlands and began its operations in 1900 according to Yahoo! Finance.

This company supplies so much timber to the construction industry that they are a great barometer for the greater housing market, especially new housing starts. Although large housing developments are not huge in our local markets, it can’t hurt to watch them.

Per Devin Stockfish (CEO), on their quarter two conference call, April housing starts were 25% lower than April of 2019, which translated into weaker timber orders. However, they have found resilience in their product offerings thanks to remodel activity and a recovery to the housing market in the last weeks of the second quarter.

In a nutshell, the company’s results were better than feared, but their dividend still remains suspended and they believe pricing will be choppy. That said, it is good to continue to watch this company.

Pending Sales, No Longer a Leading Indicator

Much like how Weyerhaeuser expects choppy timber numbers through the year, watch for pending sales to get choppy as well.

Below, is the pending sales year-over-year data for July:

  • Manhattan Beach
    • July 2020: 34
    • July 2019: 27
      • Percent Change: UP +25.9%
  • Hermosa Beach
    • July 2020: 20
    • July 2019: 20
      • Percent Change: NO CHANGE
  • Redondo Beach
    • July 2020: 60
    • July 2019: 66
      • Percent Change: DOWN -9.1%
  • Palos Verdes 90274
    • July 2020: 32
    • July 2019: 41
      • Percent Change: DOWN -22%
  • Palos Verdes 90275
    • July 2020: 37
    • July 2019: 45
      • Percent Change: DOWN -17.8%

I mean, what the heck?

I am sure you could have seen this coming, however, pending numbers are everywhere.

The reason being is that you now have a pending sales market that plummeted 75% the first month after the shut down order, then had a recovery, and then a drastic surge in pent-up demand. On top of that, you have some markets with higher inventory and some with lower inventory.

A smooth market trend is officially out the window. And, so are pending sales as a leading indicator.

To understand every market, you are going to need to dive deeper into more details to find out what is really going on. Pending sales will be out-of-whack for some time and it is a metric that is important, but we will need more detail to derive anything from it.

The days of pending escrows being a leading indicator are gone for now. It served its roll in the early stages of the pandemic economy and now we will go look at different data sets as sources, preferably quarterly numbers, as long as we can avoid any new shocks to the economy and market.

Closed Sales Mixed

Closed sales have taken off like a rocket ship by the beach. I unfortunately cannot say the same for the Palos Verdes Hill.

Look at the numbers below:

  • Manhattan Beach
    • July 2020: 49
    • July 2019: 31
      • Percent Change: UP +58.1%
  • Hermosa Beach
    • July 2020: 28
    • July 2019: 19
      • Percent Change: UP +47.4%
  • Redondo Beach
    • July 2020: 94
    • July 2019: 74
      • Percent Change: UP +27.0%
  • Palos Verdes 90274
    • July 2020: 40
    • July 2019: 41
      • Percent Change: DOWN -2.4%
  • Palos Verdes 90275
    • July 2020: 53
    • July 2019: 49
      • Percent Change: UP +8.2%

Much of this is easily explained.

We saw the recovery coming in the past months’ numbers. The beach showed better numbers, while The Hill was lagging by a month or so.

The final results are that the beach cities are surging and P.V. will likely catch up a couple of months later…maybe not in closed sales, but in squeezes thanks to supply and demand imbalances which you’ll see more of later in the blog.

It is also easy to outperform year-over-year numbers when spring activity was pulled forward to slower summer months.

In the end, the beach has made a come back.

The market could be good for a long time or it could run out of steam. But all good for now.

Active Listings are Most Interesting

What interests me most in the July data is…active listings!

It is whacky. See below:

  • Manhattan Beach
    • July 2020: 174
    • July 2019: 149
      • Percent Change: UP +16.8%
  • Hermosa Beach
    • July 2020: 69
    • July 2019: 80
      • Percent Change: DOWN -13.8%
  • Redondo Beach
    • July 2020: 197
    • July 2019: 168
      • Percent Change: UP +17.3%
  • Palos Verdes 90274
    • July 2020: 134
    • July 2019: 172
      • Percent Change: DOWN -22.1%
  • Palos Verdes 90275
    • July 2020: 102
    • July 2019: 184
      • Percent Change: DOWN -44.6%

In a nutshell, Manhattan Beach inventory is up, Hermosa is down, Redondo is up, and Palos Verdes is way, way down. Stats are everywhere.

It is important to remember not to read too much into this or any of the data points too specifically, but it does show you truly just how dislocated the market is getting.

To understand your property or the one that you are considering, you have to take into account a multitude of very specific factors to try and get a hold on things. It is doable, but there is more work than ever to figure out our local markets.

With regards to these numbers, the variation and large gaps either way are actually the most interesting part of the July numbers for me, and something that I will continue to watch.

And of course, more of a reason to get bigger chunks of quarterly data to try and smooth things out to make sense of the market.

Median Price, Just for Fun

And always, below are the rolling 12-month median home prices:

  • Manhattan Beach
    • July 2020: $2,475,000
    • July 2019: $2,350,000
      • Percent Change: UP +5.3%
  • Hermosa Beach
    • July 2020: $1,723,891
    • July 2019: $1,657,000
      • Percent Change: UP +4.0%
  • Redondo Beach
    • July 2020: $1,113,500
    • July 2019: $1,087,500
      • Percent Change: UP +2.4%
  • Palos Verdes 90274
    • July 2020: $1,625,000
    • July 2019: $1,715,000
      • Percent Change: DOWN -5.2%
  • Palos Verdes 90275
    • July 2020: $1,250,000
    • July 2019: $1,235,000
      • Percent Change: UP +1.2%

Earlier in the pandemic, I told you to throw out these numbers.

Well, now that we are three months in, these numbers are becoming a little bit more meaningful than “just for fun.” The market continues to stay resilient, if not stronger thanks to COVID-19 dynamics and the new “stay-at-home” economy.

That said, home is now more important than ever and people are reacting as a result.

Conclusion

In conclusion, the numbers are everywhere.

Manhattan Beach is showing all kinds of strength and active listings are up.

Palos Verdes is lagging on the closed sales and pending front, but inventory is plummeting which will help sellers in a big way.

Right now, it is a weird world out there, but the year-over-year monthly data is beginning to get less and less useful.

Take these numbers, combine them with past monthly reports, quarterly information, and specific sub-market research to value your specific property.

The market has been resilient, if not incredibly strong. That trend should continue barring any shocks to the economy.

Just be prepared for choppy data and manage your risk accordingly.

DRE: 01779425