Calming? Maybe Later

By Dave Fratello | June 24th, 2013

For several weeks we've heard a hopeful buzz going out among agents and other market observers.

The rub is something like this: After a crazy Spring, we've peaked, inventory is going to grow now and the shocking upward pace of price increases will flatten out. When buyers have more choices, you will see fewer bidding wars. You can already see this calming in the $2.5M+ segment of the market.

We listen patiently. We believe that many who promote this line of thinking are wise, and that the statements are based on how cycles have run historically.

On behalf of our buyer clients, we're hopeful. We'd love to see that world come together, where things are a little less crazy.

But to work in Manhattan Beach real estate now is to see something entirely different on the front lines. Bidding wars aren't gone, they're routine. You have to plan for them. And even when you do (as in our recent experience at 2200 John), your highest expectations of what other buyers may do are often met or exceeded.

Take a peek at just some recent deals (click on any address to view property pics & details):

228 18th St. listed at $3.5M and got more than 10 offers; they've amended the list price while changing the status to "in escrow," now showing $3.8M. So much for that slowdown at the higher end.

2200 John listed at $2.499M (a mirage of a start price if there ever was one) and ran up over $2.8M with several bidders at the table. (They have changed the list price to $2.849M now that it's got a deal.)

At least there we can say that the final deal price was within range of what we could imagine. (See "Another John St. Bidding War.")

506 21st drew 10 bidders, a mix of people looking at just the lot and hoping to utilize the well-built original cottage more or less as is. The start price of $1.250M was probably a mirage, too, but several buyers had the same general idea of what it should be worth: More.

1560 10th St. was, we believed, charming but hobbled by having a small lot (3700 sq. ft.), no real garage, kitchen and baths needing updates and a relatively high start price ($1.389M). Hey, that's what our clients said. But it has a deal within a week.

2401 Blanche is certainly hobbled by location – at the juncture of 5 streets – and the house is a bit difficult, with no yard. The $1.379M start price seemed lofty. But that just meant it took 3 weeks to sell instead of one.

916 11th in the Hill Section is huge but very 90s, and the location east of Poinsettia and across from a parking lot doesn't exactly sing. But a huge lot (7500 sq. ft.) and lots of upside potential drew buyers in pretty quickly, even with the $2.450M price tag.

301 2nd is an ocean-view TH that could bear some further updates. It last traded 100 years ago in 2010 at $1.625M.  Several buyers came to the party this year, and you can watch it rise from this year's start price of $1.779M.

316 23rd is a modern on a half lot that has been one of MB's longest-running listings. At some point they cut from $2.995M by $100K, but that didn't draw a buyer. Recently they boosted the price up again by $100K... and that did draw a buyer. (Well, they got one afterward; you can work out the causality on your own.) So where's that calming at the high end, again?

These disparate sales tell us that demand is still very strong, and you don't even need to have a prime property or great price. (Though those things help!)

Is this a chronicle of calming? Doesn't feel like it.

Interest rates appear to be rising now, and probably for good. (Meaning there's no "reverse" feature on this expected uptrend.)

That could calm everyone down (after it freaks everyone out a while), but even rate hikes are being cited now as a reason why demand may kick up before it flattens out. (The figuring being that buyers will say to themselves, "Better buy now while we can still borrow at historically low rates.")

It's Summer. Time to calm down and enjoy the long days and lazy nights, right?

Maybe later.

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