What has seemed like an encouraging Spring market now faces two different, conflicting challenges.
The first is extremely familiar to those tracking the market: Low inventory. As of the end of March, we were at 29% of the inventory of the last "regular" year, 2019, for this exact time of year, and just 40% of the inventory at the end of March for 2020 and 2021. (See more data, and links, at the end of this post.)
So, for all the feeling that there are "more" listings emerging and more choices for buyers, it's all relative... to earlier this year.
But the new challenge is in rising mortgage rates. How this issue plays out in the market is TBD.
You're going to find 1,000 different ways of measuring and charting mortgage rates, and 1,001 opinions on where they are going or what impact rates might have in home sales. There is no one program, or loan type, or rate one can track that properly tells the story of a typical Manhattan Beach buyer's choices.
And yet.
We found this chart to be simplest for what we're trying to discuss. (It's from themortgagereports.com.) It's telling you that we all got accustomed to 3% (or sub-3%) rates last year, and that those kinds of rates are behind us now. We're in the 4's.
For a relatively typical mortgage in this area, that can mean a payment increase of $1,000-$2,500 per month under current rates versus what was available recently. (Obviously the amount will vary by the borrower, program and loan amount.)
Low rates might have led buyers in the past year-plus to throw $50K, $150K or $500K more into an offer on a property than they anticipated, partly because the monthly payment wasn't heavily impacted.
Now, quickly, buyers' purchase plans are being impacted by high prices and higher monthlies. Loan qualification can even be challenged.
So sellers are going to quickly adjust by lowering prices, right?
Haha, we just had to say it.
The historical rule is that home prices can rise quickly, but they are very slow to reverse.
Sellers will take less only when they have to. They know what their neighbors got and they want that much, or more.
And today, sellers retain the low-inventory advantage. They don't need to care if many buyers have rate/affordability problems, since a seller only needs one buyer who doesn't.
We're not even sure that these new rates are here to stay. We've had multiple rate worries and panics over the past 8-9 years, and we always got to the other side of them with lower rates, somehow.
Rates are rising now partly due to efforts to counter inflation. (Not specifically home price inflation, but y'know, we've really had that.)
A booming economy with historically low unemployment is still running hot from early-pandemic cash injections of up to $7 trillion. That's why you should see rates rise, if slowly.
Now, we're not going to bank on the negative. We've just got too many memories over recent years of rate fears turning out to be misplaced.
But case-by-case, rates are becoming an issue.
It's conceivable that Q1 2022 could turn out to have been a high point in the market that we'll look back on in future months and years.
But Manhattan Beach usually doesn't see home price drops until other markets do, first. So watch this space.
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We always like to look at a few new closed sales from each market update period. Here are a few notable ones.
1807 6th (5br/5ba, 3483 sqft.) is an East Manhattan home on a 5K sqft. lot, a 2001-built Mediterranean.
It listed a few bucks under $3M and just closed for $3.053M.
The home is not very updated, and has been a rental.
As we noted when it came out, this home was smaller than a very recently sold neighboring house that was on a quieter street: 1806 5th (6br/4ba, 3873 sqft.), which got $2.950M ($51K overbid) after listing in November last year.
But 6th still drew all the attention and went up.
It's now the first pre-2015 SFR on a 5K lot ever to crack $3M in East Manhattan, with the exception of one that was ultra-remodeled.
This is at the same time as 2104 Harkness set a record for a resale of a pre-2019 home in Liberty Village at $2.895M. (See "When $200K Over Seems Reasonable.") It's actually a 1990 build, so, wow.
A street-to-alley lot in the Tree Section fairly near the Sand Dune at 625 33rd just closed for $2.680M.
That's $181K over asking ($2.499M) and a solid notch higher than a few similar ones from last year.
Just a block lower at 571 33rd, they got $2.250M in May last year. That is already a building site.
Meantime, in a very different part of the Tree Section, at 693 19th, they got $3.100M (+$101K) for a 3300+ sqft. home that's very dated, with a poor floorplan. It's a major remodel or there could be a new build in the future there. FWIW, that one hung around in escrow for 4 1/2 months.
Lastly, there was a big Strand sale this period, at 4320 The Strand (3br/6ba, 3592 sqft.).
That house is a heck of an accomplishment, a bold multi-level modern on a partial lot of just 1588 sqft.
Talk about making the most you can out of something. Spectacular. And the price, yes, that too: $10.755M.
We only have this one MLS exterior photo now, but for the time being you can view the whole property still in 3D at this link. Do.
Here's the rest of our local real estate market update report for the period ending 3/31/22:
> 34 active listings as of 3/11/22 (+5 from 3/15/22)
> 26 SFRs (+3)
> 8 THs (+2)
See the Inventory list as of 3/31/22 here, or see the MB Dashboard for up-to-the-minute data.
Active listings by region of Manhattan Beach in this report:
> Tree Section: 4 actives (+2)
> Sand Section: 18 actives (-1)
> Hill Section: 5 actives (-1)
> East MB: 7 (+5)
We're also providing a report on closed sales by region of MB
Sales data, including PPSF for all properties, are organized by sub-region of Manhattan Beach.
Here's a link to the spreadsheet: "MB Pending/Sold as of 3/31/22".