If you are trying to buy or sell a home in Manhattan Beach then you know how crazy the market is now.  it is only April 23 and 36 properties have already closed escrow in Manhattan Beach.  There are seven days left so this could be a record month for closed escrows and median sale prices if the pace continues. 

As I noted in my post on first quarter sales in The Beach Cities; there are a number of opinions about  the stability of the current market.   The LA Times has an interesting take on the lack of foreclosures and they may be right about the temporary effect of new laws in CA dealing with foreclosures.   

As Manhattan Beach  really didn't see much short sale or foreclosure activity, even at the low point of the market.  While real estate values  in Manhattan Beach  certainly lost ground, our market was not hit as hard as others in Southern California.  In fact coastal communities in general have seen a strong  resurgences in property values in recent months.  Cash buyers are a strong force as well as buyers with larger than normal down payments and strong financial statements.  Low interest rates continue to keep things lively.

The biggest issue in Manhattan Beach, Hermosa and Redondo is lack of inventory.  What will push an increase in inventory is when sellers believe they can get a price that will justify selling their home.  Some sellers are thinking about cashing in on the current "hot" market and then waiting to buy a new when the market cools a bit in the fall.   Other sellers are willing to sell if they can find a new place to buy which is why off market sales are going strong.  Realtors are networking  with each other to meet their clients' needs.   In fact pocket listings are creating a lot of interest at the State and National level as inventory remains low and  multiple offers  are the norm.

I do think we are going to see the market calm down a bit in a few months as more inventory hits the market.  An increase in interest rates would bring a change to the market.  There is still a long way to go to reach the price levels of 2006-2007 but things are definitely on the upswing.

The current snapshot gives you a good idea of just how low inventory is and where prices are as of April 23, 2013.  There are  33 homes and 7 townhomes/condos currently for sale in all of Manhattan Beach.  It wasn't long ago when there were double that number for sale in just one area of Manhattan Beach... Times are definitely changing!

Manhattan Beach: Market Snapshot April 23, 2013:

It started last year as buyers snapped up dwindling inventory in the hopes of getting a home while prices remained down and interest rates remained at historic lows.  REO's and short sales disappeared in the Beach Cities as buyers snapped up up some great bargains.  Inventory began to dry up as fewer homes came on the market.  Now a few months into 2013 we are seeing the effects of a lack of inventory coupled with a well qualified group of buyers.

Some folks are already crying bubble while others look at the current market as a function of supply and demand.   No matter what your personal opinion is about the current market,  it is a market on the upswing.  Off market sales are so prevalent that CAR has now gotten into the discussion about pocket listing.   Multiple offers are the norm not the exception... even for properties that couldn't find buyers a few months ago at lower prices.  Cash is king and a number of buyers in  Manhattan Beach and the Beach Cities have a lot of cash. 

A quick review of inventory over the last three months in Manhattan Beach and the Beach Cities is self explanatory... The following information is based on single family homes, townhomes and condos. 

January - March  2013 Beach Cities listings:

January-March 2013 Beach Cities Sale Volume:

January- March 2013 Beach Cities Median Price:

As of April 15, 2013 the upward trend in sale numbers is continuing.  There are more properties in escrow than are currently on the market for sale.  The FED's have indicated that they will continue to keep rates on the low side. Hopefully we will see an increase in inventory as homeowners  decide that now may indeed be the time to sell.

 Not long ago the biggest issues buyers faced were deciding which property, out of the many choices available, would best meet their needs,  trying to get a local appraiser who knew the Beach Cities market,  waiting for the short sale lender to approve the price and  hope the lender of their loan would not take forever to get it approved.

How times have changed...   Today the most difficult obstacle facing home buyers in our local South Bay-Beach Cities real estate market isn't financing or lender approval of the sale or even the appraisal.   The toughest issues are finding a property that is still available  and figuring out how to get an offer accepted.   It is not unusual for a well qualified  buyer to  spend months  trying to buy a home because of the stiff competition.

While it is not unusual for luxury buyers to  have 50%-60% down or  pay all cash for a property,  it is new for all segments of the market to have a high number of  buyers with huge down payments or the resources to pay all cash.  These ultra-qualified buyers make it very difficult for the well-qualified buyer to get an offer accepted.     First time buyers with  minimal down payments are being squeezed out of the market.   When  sellers have  multiple offers to choose from it only makes sense that they will pick the one that has the best chance of closing and an all cash offer or one with a very high down and few contingencies will likely win the bid.

The last time I saw a market like this was in 2003-2004.  While I doubt we will see the huge price increases that occurred then, prices are definitely on the rise.  Overbids are the norm not the exception especially in the entry level  in Manhattan Beach,  Hermosa,Beach  Redondo  Beach and El Segundo. The competition is fierce at all market levels for homes that are priced near market value.

So what can a buyer do to increase  the chances of getting an offer accepted?  Here are 5 things that may make a difference.

1. Know exactly how much you can afford.  If you need a loan talk with a lender.  If you are paying all cash talk with your accountant.  If you can only spend $900,000 don't look at homes that are over $1,000,000 with 8 offers and hope the seller will take less.   The same principle applies if you can afford $3,000,000, don't fall in love with a $4,000,000 home.  Staying on budget may mean lower expectations.  In the long run living within your budget makes more sense then buying more home  than you can afford and losing your home to the bank.

2.  Have all your documentation in place.  If you need a loan get pre-approved not pre-qualified.  Have the lender run your credit and do all the verifications before you submit an offer. If there are errors on your report you want to fix them long before you are in escrow. You want the only condition to be finding the house and the appraisal.   Having a large down payment increases your chances of obtaining a good loan at a great rate, however  it doesn't guarantee it.  You will still have to qualify for a monthly payment. If you are paying all cash be sure you have proof of funds ready for the seller to review.  A future insurance settlement isn't proof of funds.!

3. Know the current market where you want to buy.  If you are using information from 2012 you don't have the right tools to evaluate what a property is worth in today's market.  You need to know what has been happening over the last 2 months to see where trends are moving.  Pending sales are your best gage of the market.  How long did the home take to sell?  Were there multiple offers? Are there similar properties in the same price range or have prices increased?  If there are 15 offers on a property then coming in $40,000 under the list price may not be a wise decision.     However if the property has been on the market for 6 months with no offers then a lower offer isn't out of the question.

While you don't want to get caught up in the multiple offer syndrome sometimes your best strategy is to offer over the listed price.  If you make this choice one of the things you should think about is... if you offer more can you find another property at the higher price that better meets your needs.. if the answer is NO,  then offering a higher price may be a good solution to getting the property that you really want.

4. Don't panic...be patient!  Even in this market the right house will come around but it may take  time.  Don't give up all your rights just because there are multiple offers and you are frustrated.  If you are paying all cash or have 50% plus  down then removing the appraisal contingency is not a bad idea. However it is not smart if you have 20% or less down and no extra cash to cover the shortfall if the appraisal comes in low. In this market most sellers will put the house back on the market instead of accepting a lower price due to a low appraisal.  If you are obtaining a loan removing the loan contingency is not a good idea unless you can pay all cash.  If you are not a contractor buying at lot value don't give up your right to inspect the home.  Shorten the inspection period to 7-10 days rather than 17 but don't give it up.  Even contractors  can get fooled. 

5. Find an agent you can trust..  You should have an agent who represents you.. the buyer.  A good agent will  save you money and steer you clear of many pitfalls.  While it is legal to act as dual agent and the agent  must give the highest fiduciary care to both clients; it can sometimes be difficult if a major problem occurs to make all parties feel their side is properly represented.   It just makes sense to have an agent who works only for you.  In California you can be represented by your own Buyers agent who doesn't work for the seller... although a buyer does owe a fiduciary duty to all parties as does the listing agent.  In California agency is not dependent on who pays the brokerage fee.

Following these tips won't guarantee you beating out other offers but they will give you a better chance of getting the home you want.

Inventory levels for single family homes, townhomes and condos in Manhattan Beach January 2007-2013

It wasn't all that long ago when those "in the know" said that The Real Estate Market in Southern California was toast.  Multiple offers and offers above the list price  were no more.  People who bought property were crazy and wasting their money.  Prices were going to decline and there was nothing special about property in Manhattan Beach or any of the Beach Cities for that matter.... and they were a little right and a little wrong from 2007-2011.

 But a funny thing occurred during the Spring of  2012.. as it usually does in the Southern California coastal real estate market.. the bottom of the market was here and gone before a lot of folks  realized what had happened.  Historically the Beach Cities real estate market has changed numerous times over the years.  Sometimes prices only move a bit up or down and sometimes they move a lot.  Sometimes the market is stagnant for long periods and other years it moves like a Yo Yo.  The only thing you can really count on is that the South Bay-Beach Cities real estate market is always changing.

While prices still seem to be fairly stable I think you can count on that changing soon.  New properties hitting the market have multiple offers in days not weeks.  Networking among agents is pushimg off market sales to a point that many MLS organizations are thinking about serious sanctions against members who don't put listed properties on the MLS.

8-20 offers on a home is the norm not the exception at the entry level.  Higher priced homes are also seeing bidding wars as buyers scramble to buy before the market  revs up even more.  All cash buyers are at every price level.    Buyers have been stock pilling cash for a long time and want to buy now before prices really start moving upward. 

Two things seem to be pushing the market... low inventory and  pent up demand by buyers who have been waiting a long time to make a move.   If you look at the chart above you can see how much  lower the current inventory is compared to previous years.   The threat of shadow inventory seems to be a thing of the past as more lenders are doing loan modifications and short sales.  Supply and demand have always been the driving forces of  markets.

The big question for many qualified buyers is how to get their offer accepted  amid all the other offers on the table... but that's a topic for another post... Buying in a Seller Market.

Once again South Bay-Beach Cities real estate seems to be the topic of the day at any gathering of more than one person.  Everyone wants to know what is happening in our local market.  While buyers at all price points are seeing a major lack of inventory and multiple offers; it is really tough for buyers looking under $1,000,000 and not much better for those in the $1,000,000-$1,500,000 range.

The chart above really gives a detailed picture of how low inventory is this year compared to previous years.. There are 143 homes for sale in Manhattan Beach, Hermosa Beaach, North Redondo, South Redondo and El Segundo.  While this is not a totally accurate picture because of  inventory that might be on the market if the sellers can find a home to purchase it  does show what the problems are facing home buyers.

I have clients who bought a few years ago in Manhattan Beach and did a major upgrade to the property.  Last year I gave them an update on the value of the home which  put the value about even with the cost of the upgrades added t  the price they paid..   Now less than 9 months after my  last estimate  the current market value of  their home is worth well over the estimate from last year.   The rise in value isn't limited to Manhattan Beach but rather is happening in all the Beach Cities.  If you bought since 2009,  despite all the talk about the market never coming back,  you likely made a very wise financial choice.   

As promised here is the follow up my post on the number of sales in the South Bay-Beach Cities from 2005-2012.  Looking at median prices in the South Bay-Beach Cities you will find some curious statistics.  While the number of sales shot up from previous years prices didn't see the same effect.  As an example, the median price of a single family home in Manhattan Beach was the same as it was in 2011 and actually lower than it was in 2010.  In Hermosa Beach the price was up over 2010 and 2011 but lower than it was in 2009.

I think this year you are going to see prices rise over last year if inventory continues to be on the low side.  While I don't anticipate double digit increases I think you will definitely see median prices rise in all the Beach Cities as buyers scramble to find  homes.  You can expect multiple offers not only on homes that are priced right and in good locations. but  perhaps even on  some marginal properties.