Redondo Beach Market Update: 2017 Year in Review




As we embark on 2018, there are a lot of questions these days about housing and home ownership.
  • Are we in a bubble? 
  • Will inventory improve?
  • Should I sell now or wait?
  • Are interest rates going up?
  • Is it better to rent than own?
  • What about the new tax laws?

These are all great questions (scroll down for the answers) and while a) everyone's situation is different and b) no one has a crystal ball, the Redondo Beach Real Estate market just turned in a very strong performance in 2017. And, even with all the uncertainties in the current environment, we can still expect a very strong 2018 as well.

Let's take a really deep dive into the numbers and trends we saw in 2017 and compare those to prior years and the other Beach Cities of Manhattan Beach and Hermosa Beach.

REDONDO BEACH 2017 SALES

North Redondo Beach finished the year with a total of 519 sales, up from 491 in 2016 and 533 in 2015.

South Redondo Beach recorded 412 closed transactions during 2017 which was a decline from both the 448 the previous year and the 421 during 2015. But prices were up considerably.

By comparison, Manhattan Beach saw 423 closed sales during 2017 and Hermosa 206. For Manhattan Beach that was an increase from 391 during 2016 and Hermosa Beach a slight decrease from 226 the prior year.

Good numbers all around the Beach Cities when you consider that these are all at higher prices than we've seen before.

Here's the distribution of sales throughout the year in 90278:




There should be little surprise that the strongest months were during the traditional Spring/Summer selling season with the first quarter showing a nice ramp up and the 4th quarter flattening out (most likely due to seasonality and uncertainty over the new tax laws).

The median price in North Redondo Beach for the full year was $950,000 up from $875,000 during 2017 and $825,000 during 2015. That's an increase of just over 15% in 2 years with almost the same number of units sold.

By comparison the median price in South Redondo Beach for 2017 was $1,222,500 which was up from $1,060,00 the prior year (+/- 15%) and $950,000 during 2015.

So basically two years ago South Redondo Beach had a median price of $950,000 which is where North Redondo ended up in 2017. South Redondo showed a price increase of about 29% in two years.

Why the difference? While South Redondo definitely has some lower price "entry level" condos at Brookside Village, the high end is simply much higher than North Redondo Beach. Additionally for many Buyers looking for a "beach" substitute for Manhattan or Hermosa, 90277 presents a very attractive alternative.

Here's how the median price point looked in North Redondo Beach on a month by month basis:



As sales increased median prices stayed relatively flat but peaked when inventory dropped off (not surprising).

SFR VS CONDO/TOWNHOME


In North Redondo Beach there were 197 Single Family Residences sold and 322 Condos/Townhomes of which 118 were "detached" as in no common walls. Almost all of those would be 2 on a lots.

In South Redondo Beach 187 SFRs sold and 225 Condos/Townhomes. Of the latter, 58 were detached units.

This compares to the prior years as follows:

N Redondo 2016 294 Condos/Townhomes
N Redondo 2016 195 Single Family Residences
N Redondo 2015 318 Condos/Townhomes
N Redondo 2015 214 Single Family Residences

S Redondo 2016  266 Condos/Townhomes
S Redondo 2016  179 Single Family Residences
S Redondo 2015  254 Condos/Townhomes
S Redondo 2015  167 Single Family Residences

(Please note, mobile homes not included above or Riviera homes with Torrance mailing address.)

For 2015-2016 we saw roughly 90-100 more Condo/Townhomes sold than SFRs but that trend changed in 2017 with the gulf between SFRs and Condo/Townhomes narrowing in South Redondo Beach but widening in North Redondo. What's going on?

To start with, as a function of density, there will almost always be more Condo/Townhomes sold than SFRs simply because you can fit more units into the same space. Additionally the price point should be more attractive.

So why would the difference is unit sales change in 2017 from previous years/

In North Redondo Beach, there was a lot of 2 and 3 on a lot construction, arguably more than in South Redondo so there are simply more units. In South Redondo, with the upper price point increasing, fewer buyers are available.

NEIGHBORHOODS

Following are the sales by neighborhood according to their MLS designations.

North Redondo Beach Homes



MLS AREA 151 Villas North 166
MLS AREA 152 Villas South 204
MLS AREA 153 El Nido 51
MLS AREA 154 Golden Hills 95

Often we will find Areas 151-152 more closely balanced but during 2017 there was just more inventory at an attractive price point available South of Artesia Blvd (152) than North.

Most years El Nido has the fewest sales and 2017 was no different. Tall & Skinny homes in the Golden Hills remain in high demand.

South Redondo Beach Homes


MLS AREA 128 Hollywood Riviera  90
MLS AREA 155 N of Torrance Blvd 103
MLS AREA 156 S of Torrance Blvd  113
MLS AREA 157 W of Pacific Coast Hwy 105

Compared to 90278, 90277 saw a lot more balance between the neighborhoods.

Many are speculating that Area 155 which stretches north of Torrance Blvd to 190th St see the benefit of extraordinary price appreciation over the next few years as the fate of the waterfront and the AES plant are resolved.

NEW CONSTRUCTION

New construction remains the driver of price acceleration because presumably no one will pay more for a resale than a new home if all the other factors are the same (which they never are).

The initial list pricing for much new construction is simply staggering. I emphasize initial because many of these properties are selling at a discount to where the builders initially list them. Which is quite often, high. And new construction is selling - in many instances even before the homes are completed.

During 2017 in North Redondo Beach there were 76 newly built homes sold. That's 14.6% of the total sales. Prices ranged from $950,0000 on the low end for a 3 on a lot on Mathews up to $1,890,000 for a new construction Golden Hills traditional floorplan SFR on a 5215 Sq Ft lot.

Of the new homes built, only 10 were SFRs and the balance were townhomes with most of them being detached 2 on a lots. The median price of N Redondo new homes was $1,260,000.

If you will be shopping for new construction in North Redondo in 2018, expect to pay upwards of $1.1M for a three on a lot and over $1.4M for a two on a lot. New Tall & Skinny properties sell for $1.4M plus and traditional SFRS $1.8M up.

In South Redondo Beach there were 42 new homes sold (just over 10% of sales) ranging in price from $1,260,000 up to $4,550,000 for a condo on the Esplanade. Well that one was kind of an outlier, the next highest sale was $3,250,000.

The median price of South Redondo Beach new construction was $1,582,500. Eleven of the properties were SFRs and the balance either 2 on a lot townhomes or condos.

New Contemporary Construction Redondo Beach CA


IS THIS A BUBBLE?

This is the big question a lot of Buyers and Sellers are asking, albeit for different reasons.

Buyers are afraid of seeing their 20% down deposit vanish if the market tanks and Sellers might start to wonder if they should sell now while prices are at all time highs.

I think the bigger question is whether the price appreciation of the past few years is sustainable or not. I do not think it is and believe we may see some leveling off. That doesn't mean that prices necessarily decline. Possibly homes take longer to sell and prices flatten out.

As long as rents remain at the current levels, home ownership will remain extremely attractive for many even if the tax incentives aren;t quite as advantageous as they were previously.

The reason this does not feel like a bubble, at least to me, is because I don't see a lot of entirely speculative buying. Homes are being bought either as primary residences or investment properties (remember what I said about high rents).  In the prior run up many people over extended hoping to sell the property they just acquired as soon as the ink was dry on the sale.

And, at least through 2017 we are seeing substantial down payments. So barring some major external shock to the system, this is not the mid aughts all over again. Now if you ask me if Bitcoin or the stock market is a bubble, entirely different discussion.....

WILL INVENTORY IMPROVE?

The short answer, probably not. If we are lucky, it doesn't get worse. Here's why.

All the factors that created the perfect storm of the ongoing Seller's Market will continue unabated with new twists due to the new tax laws. Specifically, for those with a current mortgage of $1M who are grandfathered in, selling and buying a new home will most likely put them considerably above the $750K threshold which may keep more people in place. One of the factors suppressing inventory has been that there haven't been as many move up Buyers as usual with many of those that do keeping the first home as an investment property. Now, people may elect to just stay in place.

This has been an ongoing CA problem over the last few years with the state consistently 100K new homes short of where we need to be to sustain population growth.


SELL NOW OR WAIT?

My advice has consistently been: "If you know your current home will not serve your purpose long term there is no reason to wait. Sell now." Or put another way, wait for what?

There's a tendency among both Buyers and Sellers to say nothing of Realtors, to believe that the current market conditions are likely to continue in the direction favorable to your position indefinitely.

So if prices are going down, that trend will continue indefinitely. Likewise if they are going up. But truthfully that doesn't always hold.

So if you would be waiting to sell because you think prices will be higher 6 months from now, well maybe or maybe not.

All we know in Real Estate are the present market conditions.


IS IT BETTER TO RENT THAN OWN? WHAT ABOUT THE NEW TAX LAWS?


The rent vs own question has never been more crucial than right now. The new tax laws allow a very generous deduction without the benefit of home ownership. Conversely your property tax write off may not be quite as valuable as it was prior to being capped at $10,000 (inclusive of state taxes).

There's probably a "sweet spot" where there is a benefit to own rather than rent and above or below that number there are trade offs and diminishing returns.

2017 REAL ESTATE NEWS


The multi-year plan to revitalize Redondo Beach’s waterfront was torpedoed on March 7 when voters passed Measure C, a rewriting of harbor-area zoning that effectively outlawed CenterCal Properties’ hotly debated development plan.

CenterCal planned to build 19 buildings over 36 acres of waterfront, for a total of 312,289 square feet of new development.

Objections to the size of the project spurred 57.3 percent of voters to approve the harbor zoning rewrite, proposed by Rescue Our Waterfront leaders Martin Holmes, Wayne Craig, and Nils Nehrenheim.

Longtime anti-development activist and two-term City Councilman Bill Brand won the Mayoral election that same day, while fellow activist Todd Loewenstein won the District 2 council seat and  Nehrenheim won the District 1 council seat in a runoff.

In response to the Measure C vote, CenterCal has sued the city the City in both Los Angeles Superior Court and federal court. The Coastal Commission has yet to weigh in on the legality of Measure C. The City is also being sued by Measure C author Jim Light over the approval of CenterCal’s Environmental Impact Report.

“That’s what happened when you push a project that the public doesn’t want, and the public pushes back,” said Mayor Bill Brand.

City partners with County, State Reps on an effort to purchase AES Power Plant


Mayor Bill Brand couldn’t wipe the smile off of his face on Nov. 19, when he and the Redondo Beach City Council joined LA County Supervisor Janice Hahn and State Assemblyman Al Muratsuchi in announcing a plan to purchase the AES power plant site.

“I feel very optimistic. It’s been a long, hard road to where we’re standing now, there’s a long road ahead, and it’s worth celebrating,” Brand said.

Valuations of the property have swung between $50 million and $250 million, depending on factors such as remediation. But the plan would most likely involve the City acting as an involved third party in a deal between AES and a developer.

“We’re certainly not going to do a fire sale,” said AES Vice President Eric Pendergraft.

The proposal is likely to include a special financing district, as well as funds generated from a land bond planned for the 2018 election.

While the City may get a letter of intent from AES in the next six months, real estate consultant Larry Kosmont said the project as a whole could take 10 years.

“We’re on the front end of this one. Structural, physical change doesn’t come quickly,” Kosmont said.


Thinking of Buying or Selling in 2018?

Call or Text Ellis Posner @ 310 975 5139 first.

Sold By Ellis Posner in Redondo Beach 2017