What’s the story in the South Bay? Here though, although sales volume has plummeted, home prices in the South Bay, particularly the more expensive markets of the Palos Verdes Peninsula and Manhattan Beach/Hermosa Beach, have not been nearly as severely affected. For instance, it was widely reported that the Median Sales price of homes sold in Southern California plunged 27% compared to a year ago. The median price, can be extremely distorted based on the mix of homes sold. If more smaller homes are sold than larger/more improved homes, the median price will be distorted downward. Average price per square foot tends to be less affected by the mix of homes sold. The average price per sq. ft. for homes sold in the second quarter 2008 compared to the 2007 second quarter has only fallen modestly in the South Bay beach cities.
|Location||2008 2nd Qtr.Sales Price /Sq. Ft.||% Change From Prior Year
Sales Price Sales
|Palos Verdes Peninsula||$571||( 5% ) ( 22% )|
|Manhattan Beach/Hermosa Beach||800||( 4% ) ( 32% )|
||482||( 2% ) ( 24% )|
|Torrance||431||( 7 % ) ( 39%)|
|San Pedro||388||( 8 % ) ( 32% )|
In comparison to cities outside the South bay, an example would be Hemet, where the median home price for homes was down 48% compared to a year ago.
Interest rates are also at an historical low. Even if prices fall an additional 10%, therefore decreasing the mortgage required to buy a property from $500,000 to $450,000, if interest rates increased from 5.6% to 6.6%, the mortgage payment on the $450,00 mortgage would be the same as the previously required $500,000 mortgage. Inflationary pressures continue to increase, due to increases in gas and food prices. With increased inflation, comes higher long term interest rates. With the instability in the mortgage markets and the source of funds for new mortgages becoming strained, there is a high probability of higher mortgage interest rates in the near future.
Whats happening in our South Bay Cities?
Inventory – The average number of days on the market for properties sold in the second quarter of 2008 in the South Bay has increased to approx. 65 days, an increase from approx. 50 days a year ago. We have about a 7 month inventory at this time for the Palos Verdes Peninsula. For most of the last 2 decades, Los Angeles County has averaged an 8 month inventory.
Sellers reluctant to adjust to todays “picky buyers”, are having a harder time finding a willing buyer. Homes well located and presented and priced right sell!
Sales Activity:Palos Verdes Peninsula – 123 single family residences were sold during the second quarter of 2008, compared to 158 during 2007 ( a 22% decrease). The inventory of homes as of 6/30/08 has increased 34% from this time last year on the Palos Verdes Peninsula to 270 homes. This equates to a little more than a 7 month supply.
Home Prices (Average Price Per Sq. Ft. ) Palos Verdes Peninsula- During the second Quarter of 2008 the average price per sq. ft. of homes sold showed a decrease of approx. 5% over the comparable period of 2007 (to an average price per sq. ft. of $571), but a decrease of approx. 7% from the peak during the third and fourth quarters of 2007.
Home prices for sold properties, on average in the South Bay, have been approx. 95% of the list price during the 2nd quarter of 2008.
Interest rates and Financing See our web blog for rates – Interest rates on jumbo 30 year fixed rate mortgages (loans in excess of $729,750 ) have increased over the last quarter to an average rate (As of 7/11/08) of approx. 7.2% from 7.1%, and are significantly higher than conforming loans (loans of less than $417,000) which are at approx. 6.1% (which rate increased about ½% over the last quarter). The spread between loans below the old conforming loan limit of $417,000 and over the new jumbo loan cutoff of $729,750 is now approx. 1.1%
Conforming Jumbo Loans are offered at approx. 6.25% ( As of 7/11/08)! Keep in mind that these new increased “Jumbo Conforming” loans are due to expire at the end of this year, so now is a great time to consider buying a home, especially a condominium in the South Bay and the Palos Verdes Peninsula. When the conforming loan limits drop back to $417,000 at the end of this year, loans in excess of this amount will be at a much higher interest rate ( Jumbo loans currently are at an interest rate of approx. 7.2% as of 7/11/08).
The Federal Reserve Bank has recently significantly cut short-term rates, however long-term rates have remained stubbornly high due to bond market changes. Problems in the sub-prime mortgage markets has led to less investors interested in investing in mortgage-backed securities (which provides funds to make new jumbo loans), resulting in an increase in the “spread” over underlying Treasury note rates for mortgage rates. Lenders have tightened their lending requirements, making it more difficult for buyers to secure 100% financing. FICO scores over 700 are expected.
How can you get prepared to buy or sell in this market?
Hire a Realtor with strong internet presence both locally and across the country. Don’t miss this very important sales tool. Most buyers begin there search on the internet today.
Maximize your homes best attributes for an optimal selling price and fewer days on the market. Ask For Help!!! My website is filled with ideas to get your home ready, or it can be professionally staged. Now may be the best time for the foreseeable future to put your house on the market while the conforming loan limit is higher during 2008, rates are low and buyers are re-entering the market. In the future, interest rates may increase, tax reform measures may be passed, and the market may continue to cool.
Want To Buy A Home or Investment Property?
NOW IS THE TIME TO BUY!!!! Buyers sitting on the sidelines trying to call the bottom of any market will find it to be extremely difficult. If you are buying a home to live in, not a speculative investment, you should be buying for the long term. Today’s market gives buyers and sellers the opportunity to negotiate a reasonable deal for both parties. If buyers wait until the market turns, they are going to again be competing with multiple competing offers for the home of their dreams.
Unless you are moving again soon, real estate in California and along the coast especially will bounce back even stronger. If the seller must move or is motivated, there’s a deal to be had. These are the properties to look for.
If you are a seller, be aggressive with pricing and make sure your home sparkles! You home will sell faster and you’ll get a better price in the end.
Go to maureenmegowan.com for the most up to date real estate and local information available! Thanks for reading this. We hope it helps your decision makeing. Call us for more in depth help for your property.