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.

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.

Beach Cities: Sales Volume 2005-2012

It's been awhile since the local media had positive things to say about the local housing market, let alone gushed like a fountain on the current trend in California real estate.

The Daily Breeze has published three articles this week touting the changes in the Southern California real estate market.

The graph above shows the number of home sales in the South Bay-Beach Cities of Manhattan Beach, Hermosa beach, Redondo Beach and El Segundo from 2005-2012. The low point in sales in the Beach Cities seems to be 2008. While we are not back to the boom times of 2005 the number of sales is close to those of 2006 and 2007 before the market took a major dive.

If you are looking for a sweet little Manhattan Beach tree section home under $800,000, that isn't a tear down, you are likely out of luck. The same is true for a home under $475,000 in North Redondo. Ready to make a deal on a short pay or foreclosure? Better look farther east as there are only 9 in all the Beach Cities; 2 in Hermosa and 7 in Redondo, none in El Segundo or Manhattan Beach.

These stories don't come as a big surprise to folks who have been house hunting in the South Bay Beach Cities in the last 8 months. While multiple offers are found in all the SoCal housing markets the Beach Cities are seeing 10-20 multiple offers on a home as more the norm these days than the exception.

Inventory remains very low in the South Bay-Beach Cities. There are only 95 single family homes for sale on the MLS in Manhattan Beach, Hermosa Beach, Redondo and El Segundo combined. If you think you might have better luck finding a town home or condo you are going to be very disappointed as there are only 58 of them listed in all the Beach Cities...

A total of 153 properties are for sale in Manhattan Beach, Hermosa Beach, Redondo Beach and El Segundo. This is lower than the number of properties for sale in Manhattan Beach in April 2008. Of course these numbers reflect on the homes that made it to the MLS. A number of properties sold off market. Networking among local agents remains an active sector of the market. How the times have changed!

The South Bay Beach Cities haven't seen the 20% increase in home prices that were posted in other areas for a number of reasons. While we lost a lot of value in the local housing market, we weren't hit as hard as other places in California or the nation as a whole. Looking at the graph above you can see that the total number of sales began slowing increasing in 2009. Most housing markets didn't see sale volume increase until the last few years.

So what about prices? The numbers are mixed for the Beach Cities depending on the mix of what was sold.

The graph above shows single family home prices in the Beach Cities for 2012 compared to 2011... Prices were on the rise in all the Beach Cities with the exception of Manhattan Beach where the median price was virtually the same... but more about that later. In the next few days I'll be posting information about home prices in the Beach Cities.  

Yesterday I reviewed what I had written last year about where I thought olargeur local real estate market was headed in 2012...  Boy was I wrong.  2012 was not another slow year in our local  South Bay-Beach Cities real estate market. 

2012 started off strong and never slowed. Inventory remained low all year as fewer short sales and REO homes hit the market.  Many sellers,  still slightly underwater, found themselves unable to make a move without losing money.  Other  Beach Cities' sellers considering moving up decided to wait  hoping the value of their homes would increase allowing them to move up to a new price range.  All these factors contributed to a year of low inventory.

Buyers who were finally ready to enter the market found themselves facing multiple offers and all cash buyers also anxious to purchase now. It wasn't unusual for a buyer to have made offers on 5-10 properties before finally beating out the competition on a home.  Residential income property buyers also saw 2012 as the year of multiple offers on the few properties available.

The turn in the market caught many buyers unready for the change in market forces.  Local South Bay-Beach Cities' real estate networking groups were the first to realize what was happening in the market as off market sales soared. Buyers were perplexed with the change while sellers were estatic.

2012 was an intersting year in that while sales increased in all the Beach Cities, prices didn't shoot up as much as might have been expected considering the low inventory and multiple offers. In fact  some aspects of the market saw lower prices in 2012 than in 2011 even as the sales volume increased.

So what will 2013 bring for buyers and sellers in Manhattan Beach, Hermosa, Redondo and El Segundo?  Once again I'll go out on a limb here and predict that inventory will increase only slightly but so will prices as buyers compete against each other in a changing market . Mortgage loan rates will remain stable but getting a loan will be a challenge as the FEDS keep trying to "fix" a market that no longer has the same problems as  2008.  Appraisails will remaine an issue mainly because there are simply not enough comparables for appraisers to use to establish value.

As always our local South Bay-Beach Cities real estate market will be a challenging one..

Happy 2013,

Kaye