New homes in tree section buoys neighboring homes
by Tony Cordi
The multiple listing services for the beach cities carves up Manhattan Beach into six distinct areas. The tree section generally has a higher percentage of homes for sale that is new buildouts and makes for an interesting study on the effects of the building activity on home prices here. Not surprisingly, the number of new buildouts has had a significant impact on median home prices for this area. The national financial crisis of 10 years ago practically shut down the new building and, as a result, lengthened the recovery time of home prices here to pre-crisis levels.
In 2000, there were 167 home sales in the tree section with a median sales price of $820,000. Of these transactions, 24 were for homes that were built within the prior two years. Over the next several years, this pattern of buildout activity would increase slightly and in 2006, before the financial crisis took hold, close to 22 percent of homes sold had been recently built. At $1.7 million, median prices were double what they were back in 2000, while at the same time the sales volume had fallen off by about 28 percent.
Prices would hit a pre-recovery peak the next year in 2007 at $1.9 million on declining sales volume. It would not be until 2014 that median sales prices returned to these levels. For several years, prices would decline and steady before hitting a low point of about $1.42 million, which represents a 24 percent drop from the peak back in 2007. The run-up in prices through 2007 had triggered a rise in building activity that would manifest in 31 sales of newly-built homes in 2008. Without these new home sales, there might have been an even sharper decline in sales prices over the ensuing years.
In 2009, the number of transactions fell to only 75, a sharp drop from 2000 and a level not seen since before 1995. The number of recently-built home sales dropped from 31 down to 18. In 2010, the number of newly-built homes would drop in half from the previous year and in 2011 only one new home was sold.
The financial crisis took its toll on housing and on real estate prices throughout the country. In the tree section, developers would move to the sidelines as seen with the near complete fall off of new buildouts in 2011, from a high of 31 in 2007. From 2012 through 2015, there would only be seven to eight new buildouts sold annually.
Last year the number of new homes built had tripled from the prior year. It is noteworthy that if the new home sales were stripped from the analysis, the median home price in 2016 matched the price in 2015. It was the 22 newer homes that were sold at a median price of $3.3 million that lifted prices to the tune of over 12 percent from 2015. New building activity propels the market.
The sales volume levels thus far this year are tracking last year’s though with a modest increase in the price of about 5 percent. There have already been 20 recently built homes sold this year at a median price of $3.49 million.
The number of current listings in the tree section represents about two months of inventory with the newer homes listed at $3.6 million. While year-to-date sales of older homes were just under $2.2 million, similar homes today are listed at $2.45 million. Building activity in the tree section has returned to healthy levels and with this has come stronger prices.
by Tony Cordi