Redondo Beach Market Update
Whether you are are Buyer or Seller, the big news is that there is no big news. Or to put it another way, "the song remains the same". Inventory is low, many properties are selling with multiple offers, prices are being pushed further higher by persistent low inventory and increasing rents. And there is no change in sight.
So let's take a deeper look at some of these factors.
Persistent Low Inventory is a National Issue
This is one, but not the only the main driver of the escalating prices we have seen in Redondo Beach over the past 18-24 months. I have previously written extensively about the micro market inventory levels, absorption rates and the like. For a change, let's take a look at the big picture.
Overall, the number of homes for sale in America has been falling steadily for the past year, but the situation is apparently getting much worse as demand heats up.
"The inventory is reaching historic lows. It's never declined faster than it did last month. It's freaking us out — it's affecting our business; it's limiting our sales," said Glenn Kelman, CEO of Redfin. "We're going to be fine in terms of market share, but I think the overall industry for the first time is seeing sales volume really limited by the inventory crunch." He blames the lack of inventory on a new dynamic in housing.
"It's a new landlord nation where everybody is renting out their basement. When somebody moves up they don't sell their old place, they rent it out to somebody else, and it's because they want to keep that 30-year mortgage for 30 years, and it's because they can easily find somebody on Airbnb who will take the place," Kelman said.
Add to that the number of people who will now consider having a roommate or even roommates even when they could most likely afford their mortgage payment entirely on their own. Remember, we are now in a "sharing economy".
Homes in April sold the fastest since we've been tracking the market. The typical home went under contract in just 40 days, 10 days faster than April 2016. As a result, 1 in 4 homes sold above their list price. (In the Beach Cities, over 50 percent of the homes that go into escrow during the first 30 days are at or above list price.)
Home prices continue to move higher as well, but, "It's not a bubble," said Kelman emphatically, who cites tight credit as keeping the bubble at bay. Add to that the equity most people have in their homes as a result of larger down payments and many new owners having additional equity by the time their escrow closes 30-45 days later.
On the single-family side, homebuilders are still putting up 18 percent fewer homes than the 25-year average and overall inventory levels have declined from previous years. I've recently rad a statistic that for every 1,000,000 new homes needed nationally, only 620 are being built. 'Nuff said.
Rents Are At All Time Highs
Here's the good news for renters looking in the Beach Cities: it is not the most expensive neighborhood to rent in. That might be little comfort. (For the record, Venice is the most expensive beach community in LA.
Median monthly rent this spring in Los Angeles County is $2,600 for a two-bedroom, according to listings site Trulia. And that's pretty much what you can expect to pay in Redondo Beach. A three bedroom most likely around $3500.
The California Housing Partnership Corporation recently parsed U.S. Census Bureau Data to determine just how bad it is in L.A. for a new report, "Los Angeles County Renters in Crisis." It concludes that the county needs an additional 551,807 more affordable units to meet the needs of the lowest-income renters. That's far more than the 382,000 new units recommended by Harvard's Joint Center for Housing Studies last year.
We're in a real crisis in terms of meeting this need," says Lisa Payne, policy director of the Southern California Association of Non-Profit Housing, which co-presented the report. "It's not complicated. People need a home. We need to invest in creating and preserving affordable homes."
Payne says the report — which documents a 32 percent increase in rents in the county and a 3 percent decrease in real median income since 2000 — shows that those 551,807 units we need could house folks who are on the edge of homelessness today. "These are people who are housed, but they're housed in places they can't afford," she says. "If you're overpaying, paying more than 50 percent of your income on rent, or doubling or tripling up on roommates, you're one unexpected event from being thrown out."
The big driver I see is that many people are paying over 50% of their income for rent. At some point those folks just decide that whether they cash out their life savings or get a family "gift, the time has come to become owners rather than renters. Makes sense to me!
The Song Remains the Same
Yes, if you are a buyer you may be singing the "low inventory blues" (another famous Led Zep tune). Maybe you have made multiple offers and lost out. It is a tough time to be a buyer for sure.
Here's a few "Buyer Pro Tips".
- Get a Pre-Approval from a direct lender who has seen your entire file.
- Work with a Realtor with a proven track record of success locally. Don't rely on just making an offer through the listing agent or whoever is at the open house.
- Don't become addicted to your mobile app and chase after all the newest listings. Everyone is doing the same thing. Take another look at the properties that have been lingering on the market and if price seems to be the only issue, make an offer, even if it might strike you as a low ball offer.
If you are thinking of Selling and holding off because prices are still on the rise, that may well be a strategy that others are pursuing as well. If you wait too long, you may have a lot more competition and the environment may change, ie interest rates could go up. If the home you are in will not work for you and you know you have to move, best not to wait.
The Weekly Dance
Here's the dance we're all doing around new listings.
Every Thursday, the day of the Broker's Open tour (or" caravan") in Redondo Beach, the serious Realtors who are working the market tour new listings between 12-2 PM. Many agents hold their listings until Thursday morning before putting them into the multiple listing service. Recently I've even seen some new listings hit on Friday or Saturday AM. (FYI, the associations have recently changed their guidelines as to days on market and some have even redefined it to mean days of marketing, lol).
Over the weekend any "hot" listing meaning priced to sell, will have jammed open houses. Many listing agents set offer deadlines on Monday or Tuesday and then send out multiple counter offers. By Weds or Thursday you can expect to see the prior weeks hot listings in escrow and the cycle or dance starts anew.
If you are a Seller, the single most important thing you need to know is to price your home to sell with multiple offers the first week on the market. Why? That's how Buyers are trained. The old "test the market", "leave room to negotiate", check that at the door, Your front door preferably.
If you are a serious Buyer - and you know who I am referring to here, work with a Realtor who can get you into the properties you want to see before the weekend if possible or if not, will go with you to the OH and come up with a winning strategy as well.
Don't worry about where your living room couch goes or what might be wrong with the property. You will have plenty of time to find out during escrow. But lets get there first!