The 3rd quarter officially ended last week.
We now have a large dataset to dig into to tell us how the South Bay real estate market is reacting to this wild and crazy 2020.
If you have been a weekly blog reader throughout the year, then you know I have tried to shed light on the South Bay market’s performance in various ways via:
- First quarter data
- Month-over-month data
- Yearly month-over-month data
- Second quarter data
All of these different datasets have had their place over certain times during the pandemic.
Today, I am excited to share third quarter data because of the extra-large group of numbers we can compare to help smooth out discrepancies in seasonal data brought about by the Coronavirus.
Please note how I am approaching this quarter’s numbers.
I am not taking the three months from Q3 of 2020 and comparing it to the three months of Q3 of 2019. The seasonal trends have been thrown off and create some whacky comparisons.
Instead, I am taking the first nine months of 2020 and comparing it to the first nine months of 2019. I repeat…that is Q1, Q2, and Q3 of 2020 versus Q1, Q2, and Q3 of 2019.
This approach allows us to consider the normal first months of 2020, the chaos of the stay-at-home order, and then the incredible comeback and demand for homes as the result of the new world we live in.
We can view a larger tranche of data and try to get rid of the seasonal trends that have been thrown off.
Let’s take a look…
As mentioned in my last quarterly post, Manhattan Beach saw a huge a drop in transactions because of the pandemic. Pending sales were down 79.1% in April, while closed sales fell a dramatic 47.7%.
When accounting for the entire nine months of 2020, Manhattan beach has been resilient and certainly flexed its muscles when it comes to price.
Below are the first three quarters year-over-year on median prices:
- Manhattan Beach Median Prices: UP +10.02%
- Q1 – Q3 2020: $2,586,749
- Q1 – Q3 2019: $2,351,000
It is hard to picture a better result for Manhattan Beach homeowners when in comes to price growth. Amidst all the unprecedented craziness of 2020, high-end beach real estate did not skip a beat. In fact, it has only gotten stronger.
Back in April, I do not think anyone would have imagined a 10% jump in prices at the conclusion of the third quarter, just six months later.
- Manhattan Beach Closed Sales: FLAT
- Q1 – Q3 2020: 290
- Q1 – Q3 2019: 289
As for sales, Manhattan Beach is flat.
There are a lot of national news articles and agents talking about lack of supply, but, when it comes to Manhattan Beach, there is no shortage.
Not only have sales matched last year’s pace, but active inventory in the city is about as high as it has been in relation to the last 10 years. So, while the market is surging, supply and demand look to be in equilibrium for Manhattan Beach.
Palos Verdes Peninsula
With the massive size of the Palos Verdes Peninsula, I am going to break down the four cities on the Hill and leave out the unincorporated areas to keep it simple.
See below for the year-over-year performance in first three quarters’ median price:
- Palos Verdes Estates Median Prices: UP +2.98%
- Q1 – Q3 2020: $2,008,250
- Q1 – Q3 2019: $1,950,000
- Rancho Palos Verdes Median Prices: UP +5.26%
- Q1 – Q3 2020: $1,300,000
- Q1 – Q3 2019: $1,235,000
- Rolling Hills Estates Median Prices: UP +16.01%
- Q1 – Q3 2020: $1,375,000
- Q1 – Q3 2019: $1,184,500
- Rolling Hills Beach Median Prices: UP +4.00%
- Q1 – Q3 2020: $3,380,000
- Q1 – Q3 2019: $3,250,000
The Hill is having a steady and solid year for price increases.
Rolling Hills Estates is the one major outperformer when it comes to values.
Much of the reasoning for this is twofold:
- Fewer condo sales are happening during the pandemic, so there are fewer low-priced sales in buildings like The Estates.
- Larger homes with backyards and privacy are hot. As a result, the new luxury development at Rolling Hills Country Club has gone bananas. Essentially, they are selling out of product and having their best year yet.
Factor in fewer condo sales and record high Rolling Hills Country Club luxury home demand, and that creates the perfect storm to drive pricing much higher for the city of Rolling Hills Estates.
- Palos Verdes Estates Closed Sales: DOWN -20.2%
- Q1 – Q3 2020: 114
- Q1 – Q3 2019: 137
- Rancho Palos Verdes Closed Sales: DOWN -2.9%
- Q1 – Q3 2020: 340
- Q1 – Q3 2019: 350
- Rolling Hills Estates Closed Sales: UP +8.5%
- Q1 – Q3 2020: 115
- Q1 – Q3 2019: 106
- Rolling Hills Closed Sales: UP +100%
- Q1 – Q3 2020: 26
- Q1 – Q3 2019: 13
As for Palos Verdes Estates and Rancho Palos Verdes, sales are mixed between going up and down.
The sales pace of Palos Verdes Estates and Rancho Palos Verdes are down thanks to lower inventory. Palos Verdes Estates is seeing active listings trend below its typical supply over the past five years and Rancho Palos Verdes is essentially at its lowest inventory level that we have seen in over a decade.
Rolling Hills sales have doubled when compared to 2019. The reasoning is obvious…most of these properties offer massive estates with acres of land, which are in high demand.
Rolling Hills Estates has been able to deliver inventory to keep pace with demand as active listings are in line with historical trends, allowing for sales pace to grow year-over-year.
The smallest city on our list, Hermosa Beach, can sometimes be misleading due to the lower transaction volume. However, with three quarters taken into account, you can take these trends to the bank on how the city is performing in 2020.
- Hermosa Beach Median Prices: UP +7.58%
- Q1 – Q3 2020: $1,775,000
- Q1 – Q3 2019: $1,650,000
As you can see, Hermosa Beach is having an incredibly strong first three quarters of the year despite the pandemic effects. A 7.5% gain is incredibly strong, especially for an area that is not known for its large backyards. That said, it is the views and proximity to the beach that are continuing to drive this market higher.
- Hermosa Beach Closed Sales: UP +14.1%
- Q1 – Q3 2020: 154
- Q1 – Q3 2019: 135
The sales volume is strong as well, up just over 14%. Hermosa Beach has the second highest inventory levels since the Great Recession (the highest levels were last year). By maintaining more inventory, it has allowed transaction volume to surge and allow for price expansion too.
There is a boatload of data to process in the biggest city we cover here on the blog.
Unfortunately for Redondo Beach, it has had the “weakest” performance for the South Bay’s most affordable beach city.
See the numbers for median price in the first three quarters of the year:
- Redondo Beach Median Prices: UP +2.07%
- Q1 – Q3 2020: $1,087,000
- Q1 – Q3 2019: $1,065,000
By far, the most disappointing growth of all four areas. Despite being the most affordable city covered on the blog, Redondo Beach has underperformed price growth relative to other areas.
Condo and town home prices have really dragged down the city’s values when you get into the more detailed numbers. In fact, much of it can be attributed to condo and town home sales in South Redondo.
To be fair, all other areas and asset classes have shown growth in the city, albeit, still slower than other cities.
When it comes to sales, Redondo Beach has struggled immensely.
- Redondo Beach Closed Sales: DOWN -16%
- Q1 – Q3 2020: 510
- Q1 – Q3 2019: 607
That is about as disappointing as it gets for a large city. Inventory is down, but not meaningfully enough to justify a big double-digit drop in sales.
As mentioned in past blogs, this does not bode well for the city government as Redondo Beach depends on its real estate transfer tax revenue to help run government operations (no other city in the blog collects a documentary transfer tax).
Hopefully, the Redondo Beach market is just lagging the performance of its peers and catches up in the 4th quarter.
Since the city is so large, below is separate pricing between South and North Redondo:
- 90277 Redondo Beach Median Prices: DOWN -10.88%
- Q1 – Q3 2020: $1,136,500
- Q1 – Q3 2019: $1,149,000
- 90278 Redondo Beach Median Prices: UP +5.80%
- Q1 – Q3 2020: $1,057,500
- Q1 – Q3 2019: $999,500
As you can see, the main drag has been South Redondo (specifically condos and townhomes), which dragged down pricing in 90277 zip code. For those interested in a larger breakdown, shoot me an email and I am happy to provide it.
North Redondo homeowners should be pleased with their area’s performance when subtracting out numbers from the south side of the city.
I have been waiting to pull the first three quarter numbers for a long time.
This large set of numbers considers good times before the virus, scary times during the stay-at-home order, as well as the strong recovery.
Even though seasonal trends have been thrown out of whack, I believe taking 75% of 2020 and comparing it to the same period in 2019, gives us an exceptionally reliable picture of what is happening in our local markets.
You should be able to take this data to the bank and use it to make good buying and selling decisions.
Virtually all the numbers are positive with exception of some disappointment in areas of Redondo Beach. That is really great news.
That said, we are not out of the woods yet.
A contentious election is right around the corner, a potentially scary flu season during the coming winter, and perhaps another round of layoffs and unemployment without more government stimulus.
Stay diligent, stay thoughtful, and stay well.