Manhattan Confidential, our local consumer blog, posted an article today about the decline in sales in Manhattan Beach and the Beach Cities. The post points out two things... the number of sales began to decline in 2002- 2003 ( higher prices mean fewer sales) and 2006 was when buyers started saying no and the market started cooling. Fast forward to 2009 and we have a real estate market that is trying to recover from a lousy economy and a tough lending market. Yet with all the chaos of the last few years prices, with a few exceptions, are still on the high side.M/p>

The issue for many Beach Cities' buyers is that while prices have fallen a lot in Manhattan, Hermosa and Redondo; they don't seem to be down as much as many believe they should be. Every news source is telling potential buyers that California has the largest number of foreclosures in the nation and prices are dropping like crazy. The media posts a new statistic every day on how much real estate prices have dropped in California. There are a glut of articles about buying foreclosures and short sales. So why are prices still so high in the Beach Cities?Last Sunday the LA Times had a terrific front page article that addressed the issue... why some markets are not acting in the way buyers expect. The main thrust of the article is that while prices are down overall, they may not be down as much in the more desirable areas.... i.e. The Beach Cities as say in Riverside. This scenario is very frustrating for buyers and for sellers. Buyers believe that sellers should accept lower prices for homes that have been on the market for long periods of time. Sellers/Banks, on the other hand, want to sell for as much as they can, especially when facing a loss. 

While not everyone thinks this is the time to buy... there are a lot of folks who are willing to take a chance and buy now. Most of these buyers don't think we have reached bottom but believe lower prices along with some very good long term interest rates mean it might make sense to buy. The problem is that there is still a big disconnect between where buyers believe prices should be and the prices that many home owners or in some cases banks are willing to accept. Many of my clients are especially frustrated with the prices that banks are setting for short sales.

While we don't have a huge inventory of REO's... there are a number of short sales in all the Beach Cities. Many of these are new construction that didn't find buyers. A number of builders have received NOD's. Logic would seem to say that as these homes have been on the market for a year or more that Banks would be wise to be fairly aggressive about accepting offers from well qualified buyers...but that isn't what seems to be happening.

We have seen an uptick in sales in the last month. This may be a seasonal reaction... spring is historically our buying season. It could be low interest rates. It could be that buyers are seeing a little light at the end of the tunnel in the economy and the housing market. Personally, I think prices still have a way to go before we see the bottom... but the bottom might not be as low as was predicted a few months ago. The kicker for our market will be foreclosures. If we see a spike in the number of foreclosures over the next 6 months then you can expect to see prices drop quite a bit. If we continue to have relatively few foreclosures prices will continue to be soft but will more likely be flat.