Bull Market(s) Celebrate 8th Year

By Dave Fratello | March 9th, 2017

They say today, March 9, was the end of the financial market collapse in 2009, and the beginning of an 8-year bull market. (So far.)

The hemorrhaging ended in '09 thanks to a series of actions by monetary authorities and the political branches of government. The world wasn't cured overnight, but the patient became stable.

The S&P index is up 250% since then, and DJIA up 300%.

Manhattan Beach real estate stabilized shortly after the financial markets did in 2009. The accepted wisdom here, and the evidence, says that our market stopped declining in Q3 2009. By Fall 2009, buyers were more confident and opportunistic. The year 2009 was the first of 4 consecutive years where each year saw more homes sold in Manhattan Beach than the year before. (See this post for more data.)

So you could say Manhattan Beach has had its own 8-year bull market, too.

Median price data now show a very substantial increase in local real estate values.

The math is pretty simple. Look at the full-year median price for 2009, $1,375,000, and last year's full-year median, $2,075,000. That's a clean $700K increase.

We're up 51% from 2009 till now.

That's no 250-300% like you saw in the financial markets, but these are different types of markets.

Now, here at MBC, we do have some experience with median prices not telling the whole story. (How could they?)

For instance, in "How Prices Have Bounced Since '09," a Sept. 2014 post, we found some difficulty proving that the market was rising fast with reference only to median price data. Paired sales (2009/2014) of the same homes showed much larger gains than medians did.

Today, we took a quick look at some 2009 sales in Manhattan Beach to find some homes that have sold again very recently. From just a few that we spotted right away, we saw confirmation of 50-60% price increases from 2009-2016. Perhaps we'll present some of those in a separate post in the future.

One thing's for sure, we're up.

Now, the question everyone's got for both markets – the broader financial markets as well as MB real estate – is, roughly: How long can this bull run?

(Lame comment we saw in a market news story: "there's not a matador in sight." Ugh.)

They may be a bit of a sugar high driving the financial markets these days. But there's also no doubt that the previous president left office with the economy stronger than it had been in a long time. So the markets "should" be up over this span.

Interest rate changes could affect both the broader financial world and real estate.

The Fed is feeling confident and, at the same time, warning publicly that rate hikes and other steps (er, "scaling back accommodation") may be imminent, and won't be "slow."

A real estate market blazing along with fuel from cheap money could take a hit from mortgage rate increases. We've seen a quarter to one-third of a point increase in mortgages recently, which can have real impact when rates are hovering close to 4%.

But we're not going to panic here, as the MB market continues to feel stable and to attract solid buyers. (Hmm, "solid buyers." Is there an award for understatement?)

Also, there is some value in the received wisdom that real estate markets like MB's don't drop first and don't drop as much as real estate in other areas when there is a turnaround in the cycle.

Most other regional markets are only now fully heating up. So if you are to go by the notion that luxury/coastal markets are always last to reverse, there's time to wait and see what happens elsewhere first.

Not 8 years ago, but 10 years ago, MB Confidential was launched with an observation (prediction?) that "home prices are dropping in Manhattan Beach." They did. And then they recovered, for 8 years running so far... a process we've documented throughout this runup.

Today doesn't have to be an inflection point, just because it's an anniversary. There's some kick left in that bull, we'd bet.

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