Graph by Dave Fratello/MBConfidential.com
by Mark McDermott
Neither calamity, drought, nor plague can stop it. Though we’ve not yet seen swarms of locusts to go along with the forests in flames, and the most devastating global pandemic in human history, data suggests that pretty much nothing can slow the Manhattan Beach real estate market.
Last month, Manhattan Beach once again achieved a record high in median home prices, reaching $2.9 million. This comes on the heels of another, bigger record — during 2020, despite months of lockdowns, $2.563 billion in real estate transactions occurred in Manhattan Beach.
The new record, median home price reflects an increase of $425,000 over the course of the last year, and a $100,000 increase over the previous record, set a month earlier.
Realtor Dave Fratello, on his site MB Confidential, analyzed these booming trends and also noted that through mid-August inventory was at its lowest point over the last five years, with 62 homes on the market. This means that price pressures are likely to keep setting new median price records and the normal summer lull will likely not occur.
“The numbers may look silly, but all over Manhattan Beach, you see willing buyers with money lining up to pay these prices and competing against one another to drive prices up further,” said Fratello.
Jerry Carew, owner of 3Leaf Realty, is a real estate broker also known for his data analysis. He acknowledged that Manhattan Beach’s market is booming but also noted that this boom is not unique to the city.
“Right now, there are record sales everywhere,” Carew said. “Every agent is a superstar. We are creating a new record every time we sell something, going, ‘Woo hoo, we’re number one.’ It’s all very robust….If you go to France, Holland, Ireland, etc, the markets are also really, really good. Inventory is low, prices are high.”
Carew said one factor impacting markets everywhere, is a scarcity created by the pandemic-driven shortage in construction materials.
“It’s a bear to get things done because the supply chain is battered,” he said. “So it’s a common story throughout. Needless to say, Manhattan Beach, instead of doing just good or better than normal, is doing exceedingly well. But Manhattan Beach suffers less when everybody’s suffering, and does better when everyone’s doing good. So it’s the leading ship when the waters go up or down.”
Another key factor at present is the low interest rates available to buyers.
“To see the numbers people are getting on mortgages… those numbers are very low, and may support a degree of insensitivity to price for some buyers,” Fratello wrote in his analysis.
“Interest rates are really low,” Carew said. “I mean 2.75 percent, you haven’t seen that in a long time, so you can buy a house that you couldn’t have before because of the rate. The price might have gone up, but the rate cut down more. That affects how much you pay monthly, and so that’s driving the market too.”
As a result, even with low inventory, sales of homes are robust. Fratello called this one of the dominant trends of the year locally.
“This summer, with 135 sales, beats the boom year of 2017 and the surprisingly strong year of 2018,” he wrote on MB Confidential. “We already knew 2019 was the doldrums, and that shows in data showing only 74 sales then. 2020 was bouncing back with 96 sales in this period.”
Carew said housing needs also changed during the pandemic.
“I’ve had lots of clients, and my staff, now the parents are working from home and kids are schooling on Zoom at home and their space just wasn’t big enough for that sort of a setup so they moved to bigger houses,” Carew said. “You know, a yard became way more important than it was in the past. Because, in the morning, the kids go to school, the parents go to work, maybe there’s one person at home, maybe not. But now everyone is home, so that’s a different space you need.”
This has prioritized single family homes more than other types of housing, and larger homes, both which are the dominant housing stock in Manhattan Beach. But Carew noted that other nearby areas are also setting records for single family home sales, such as North Redondo, where a home recently sold for $3.1 million and where even smaller homes are routinely selling for well over $1 million.
“Anything decent is well over a million,” Carew said. “I sold a small single family home for $1,580,000 recently — practically $1.6 million, and it was 1,500 sq. ft. in North Redondo. Things have changed dramatically.”
A lingering question throughout the real estate community is if the bubble is bound to burst. Fratello doesn’t see an end in sight, and actually expects more records to fall. Carew isn’t so sure but does have faith in the somewhat unique resilience of the Manhattan Beach market. He also notes that unlike the 2008 recession, when questionable home loans came back to help crumble the market, current loans are extremely stable. That said, he believes the current market is not entirely sustainable.
“When it’s going up, people think it will never stop going up, and when it’s going down, people think it will never stop going down,” he said. “And the answer is what goes up must go down, and what goes down must go up…. But if anything, I think it will be a correction, not a crash.”
“When the market crashed in 2007, it went down in Manhattan Beach like everywhere else,” Carew said. “But it went down last, and it came back first. So it is a more resilient market because the demand is there. People want to live here. There is no doubt about that.” ER