Which city leads the South Bay in price growth over the last 5 years?

Are you wondering which beach city has seen the biggest rise in prices in the last 5 years? My first guess was going to be Manhattan Beach with all the news, reality show appearances, and athletes and celebrities moving to town recently. Well, I was wrong, Hermosa Beach, the once quiet little beach town has risen to the top of price appreciation since the market rebounded off the bottom in 2010. The median price for a single family home in Hermosa has risen 59% to $1.815m, while Manhattan Beach "only" saw a 47% increase to $2.15m. Redondo Beach was just behind Manhattan with a 46% rise to $1.273m over the same period.
 
 Overall it has been a good 5 years for all real estate in the South Bay. If you have been a buyer sitting on the sidelines, you might not agree that it has been all good news, as your rents have likely risen over that same period, while the dream of owning your own little slice of beach real estate has grown dimmer. As a homeowner, you may be asking yourself how long this run can continue? After listening to the economists and financial experts, I have concluded that we still have some room to grow in the next 18 months. Beyond that, it's anyone's guess. It's likely that we will see interest rates continue to rise over that same period, making it more expensive to own a home if you are not an all cash buyer. On the other hand, inventory still remains low with a 2 month supply, so sellers are still largely in command of the local housing market.

 Where can a buyer find a deal? If you have been priced out of Hermosa or Manhattan Beach, the next best place to look if you want an ocean view or quick walk to the beach is going to be Redondo Beach. Redondo offers many options including more townhomes and smaller beach cottages. I expect the prices in Redondo to outpace its cousins to the the north over the next 18 months as buyers continue to spill-over to more affordable options. In addition, Redondo schools are continuing to rank highly so families looking for a solid public school option will naturally be attracted to areas with strong school districts like Redondo's. El Segundo, Torrance, and Palos Verdes all offer great options as well depending on your budget and needs.

 In general, it has been a great run for real estate over the last 5 years. History tells us these bull markets won't go on forever, but I am optimistic that we still have more time left and that when the market turns, it won't be as catastrophic as the last bear market.

2010 Reflections

It was the best of times, it was the worst of times. . . . Corporate earnings skyrocketed, stock markets hit 2 year highs, but the real estate market in the South Bay stumbled along, not sure if it was coming or going. We saw some real steals this year - mostly the result of distressed sales. We also saw things drag along painfully if you were not willing to sell your house in a fire sale. What does all of this mean. I'll sum it up by simply stating, we're still in a great buyer's market. Why?

First, affordability. While you would likely be able to rent a home on the walk street of your choice for less than the cost of a mortgage payment, there are many neighborhoods that call for careful analysis. Many neighborhoods in Torrance, North Redondo, Lomita and Hawthorne are seeing prices that would have a mortgage payment lower than rental costs if you can afford a down payment. This leads me to my second point, it's the interest rates, stupid. That may be my greatest understatement. Clearly, the general economy isn't helping, but with historically low interest rates and increasing signs of a recovery underway, this buyer's market may be a lot like a green traffic light - it won't stay green forever. Third and finally, inventory. Sure, we're not shooting fish in a barrel, but that's part of the reason you have great opportunities. Most families don't want to pack up and move in the middle of a school year, but there are still many other "special cases out there." People still get new jobs, get married, get divorced, and of course, "move on" - all of which can create a buying opportunity. No matter what the situation, I don't tell anyone to buy something that they don't want to live in for at least 5 years and don't turn green every time the mortgage is due; but if you look closely, you just may see that there is a diamond in the rough.

Finally, let's take a quick look at investment real estate. In 2010, we saw the following listings close: 1) 2204 CARNEGIE LN , Redondo Beach 90278; 2) 4717 W 164th ST , Lawndale 90260; and 3) 948 Cedar ST , El Segundo 90245. 2204 Carnegie was one to remember as these units sold for $1,270,00 in 2008. It featured 4 upgraded 2/1 units with a garage for each totalling 2900', this one sold in October for $849k. Figuring a conservative $1400/unit/month and a 30% expense ratio, the cap rate is 5.5. Not bad for North Redondo Beach. 4717 W 164th was another diamond in the rough. This one needed some work, but with a reported NOI of $22.8k and a selling price of $359k, this gives you a 6.4 cap and with 25% down, you're pretty close to breaking even each month and maybe even seeing a small cash flow. Finally, El Segundo has some gems. 948 Cedar is clearly a functional updated triplex and conservatively has a 5.4 cap rate and likely a steady demand for rentals. With low rates, foreclosure pressure, and an overall increase in the renter pool as a result of foreclosures, those who patiently waited are seeing solid investment opportunities ripe for the picking.

If you haven't figured it out by now, I'm an optimist. The way I see it, there's always an opportunity somewhere, you just need to spend some time and hard work and find it.

Stay dry. Kd

Neighborhood Spotlight: El Porto, 90266

Now that the summer has ended (and what little summer we did have!) and the kids are back in school, I plan on periodically describing a local neighborhood and focusing on the pros and cons of living there.

The focus this time is on El Porto, the neighborhood at the north end of Manhattan Beach. Once an unincorporated part of LA County, El Porto is one of LA County's top surfing meccas. El Porto consists of roughly 20 street's just a stones throw from the water. Lots tend to be smaller and mortgages/rents are a little more affordable than the rest of Manhattan Beach; but you still get beach-close living with ocean views. On the downside, El Porto is adjacent to the Chevron refinery and one of the few beach front parking lots in Manhattan Beach - that helps explain the crowded surf and sand. However, if you're commuting north, you'll get a head start on the morning commute with easy freeway access and you'll be home that much faster. As for the real estate, El Porto offers many opportunities to buy a beach house, often with income options with the many duplexes in the area. The area still holds many fixers with sweat equity opportunities, and newer properties for those who want to move right in. Finally, with El Porto living you'll enjoy walking to the beach, restaurants and quick bike path access, along with tapping the benefits of the Manhattan Beach school district for the kids.

As for listings as of mid-October, 124 Moonstone Street, a 1,279 sq. foot 2/1 and 1/1 duplex beach bungalow is listed at $899k. It was listed by Fred Zuelich with Shorewood Realtors in early August and has seen one price drop from $925k to $899k. It gets you a vintage 2 bed, 1 bath classic beach bungalow with rental income in the $1,200/month range. That'll help pay the mortgage while you walk to the beach and pull into El Porto's barrels.

That's it for now. I think it's a great time do some bargain hunting and take advantage of the slow down in the real estate market and the record-low mortgage rates.

Kd

Back in Action - What's new around the beach and where's summer?

Happy Summer! We're now a few weeks into the Summer and if you're like me, you're wondering "When is summer going to start?" The feelings are two fold. Not only is the weather doing it's best impression of June, but the South Bay real estate market isn't doing a whole lot better. To put this to numbers, I searched sales under $2 million in the beach cities from Hollywood Riviera to Manhattan Beach. The period from January 1st to May 1st (4 months) shows 154 sales - Ave. price $1.08m; 2116 sq. feet; and 88 days on the market. Keep in mind this period covers US Tax incentives. From May 2nd to July 7th, in the same price and location range, there have been 90 sales - Ave. price $1.22m'; 2384 sq. feet; and 77 DOM. What do these numbers tell us? There has been a slight improvement in sales, but there is still a CA tax incentive available. The summer months are historically the best time to sell a house, but we're not seeing the increases we should expect with current record low interest rates and incentives.

I know that sounds a bit pessimistic, but like my hopes for some summer sun, I too am hoping for better sales numbers. On the flip side, if you're a buyer, this market continues to be a great opportunity to own real estate at the beach. As I mentioned earlier, we are seeing historically low interest rates and there are still many great houses to buy. To illustrate this, I want to point out 3005 Manhattan Avenue , Hermosa Beach 90254. Originally listed at $1.295m, it has been reduced to $1,049m; it is 1700 sq. feet on a 2450' lot with some ocean views and a block to the beach. Yes, a block to the beach! Granted, it is on Manhattan Ave and you do have some morning traffic outside your door; but what other SFR can you find that close to the beach with 1700', 2 car garage on a full lot? I think this one has potential.

That's it for now. Pray for sun and surf and keep you're eye on the market, things can change quickly!

Best Buys Update: Milne in Escrow

In consistency with the surrounding neighborhood, Milne is in escrow after about 2 weeks. The good ones go fast! This is a great reminder that if you want a good property, you'll need to have all your ducks in a row - pre-approval, liquid assets ready for a down payment, and know your market. By the way, the previous week's under $660k, 2401 Marshallfield LN , Redondo Beach 90278 has an offer and is in Back-up Offer status on the MLS.

Here's a bonus Best Buy for the week. Listed at $689k and located West of Main on a 6750' lot in El Segundo is 232 W Oak AV , El Segundo 90245 listed by Kirk Brown of Main Street Realty. It's just over the $660k threshold, but maybe with some good negotiating you could slide right in there.

Have a great week and keep an eye out for those opportunities.

KD

More South Bay Inventory and better pricing

I introduced my deals of the week in my last blog, and despite my small following, maybe the market has responded positively (I don't really believe this but just humor me for a while). This week has brought a new deal of the week by virtue of two very quick price drops in no less than 15 days on the market (DOM).

$1.2m and under:
The property is 2900 Oak Avenue in the Manhattan Beach Tree Section.

It is listed at $849k but started at $965 on January 22nd. 1709 Oak sold in December at $990k - granted the house does not back up to Sepulveda and boasts an update with additional 3/4 bath - but $849k isn't to far off at $755/ft. With the extra money you can do some updates and add a bath. When you consider 1801 Elm sold at $805k at a frenzied auction, and it practically needs to be torn down, 2900 Oak looks even better. Now if you want a close second, take a look at 3212 Palm listed at $899k by Tony Barberi of Remax. It's a fixer and only has a one car garage but it's in a better location. Recent sales on Laurel and Pacific tell me this might go a little lower, but I'd throw out the comp on Poinsettia as that sold under $800k and seems a little fishy. Finally, for those looking for another starter option, 3004 Oak, listed at $799k boasts a pool and although it too backs up to Sepulveda, it has a nice wall blocking most of the noise and sights of Highway 1.

Under $660k:
As for the real deal of the week, I'm big on 4721 Milne Drive in South Torrance. It's a fixer on a 9000' lot, but is a very liveable 1078' with 2 beds and 1.75 baths.
You don't see too many places in this area of Torrance under $700k, let alone a 9000' lot under $600k. It may be tough for standard FHA financing but it may be worth considering a FHA loan with a rehab option. The neighborhood borders the famed Christmas Tree section and you can walk to Sea Aire Golf Course (that's where I had my only hole in one - when you see it you won't be that impressed with my golf game - it was a worm burner). Recent sales in the neighborhood include many in the neighborhood ranging from as low as $560k and as high as $865k. The lot sizes were all generally smaller but most of the places under $600k were on the market less than a month and many less than a week.

Finally, on the financing front, the word from David Curry at Platinum Capital is that things are getting easier on loans up to $1.5m, with rates under 6% with 20% down.

Have a great week and stay dry.

Best Buys

I figured it would be nice to identify some of the best buys in the South Bay. Since I'm still not that comfortable on the stability of the market well outside of agency conforming loans, although I'm hopeful this will change soon, I'm choosing to focus on the best buys under $1.2m and under $600k. This will greatly limit the neighborhoods accordingly, but my hope is that this will help readers weed through the new listings that we'll see through the year. Since the South Bay is a vague term, I'm going to keep the search between PVE (Valmonte and Malaga Cove) to El Segundo and as far inland as Anza Blvd. in Torrance. Here are this week's nominees:
$1.2m and under:
555 S Helberta AV , Redondo Beach 90277, listed by Rae Lord of Coldwell Banker has a nice 1400 3 bed/1 bath ocean view listing in a nice neighborhood of South Redondo on a 6600' lot. There are many $1mil houses in the neighborhood and an ocean view with a walk to the beach is hard to find for $889k. The one that got away is 220 Ave A listed at $859k. This is one of the coolest little craftsman homes in the avenues.

Under $660k:
2401 Marshallfield LN , Redondo Beach 90278 listed by Hady Chahine of Shorewood Realtors has a nice 3/1 on a 5000' lot listed at $569k. Not bad for a short drive to the beach and close to the main arteries for a freeway commute.

That's it for this week. Keep a smile on your face and your rain coat nearby just in case.