From the Sidelines of 90266: Renters Still Waiting to Buy
Recently I have had the opportunity to have many conversations with well-heeled renters in the Beach Cities. By well-heeled, I mean they have savings, incomes and credit to qualify for home ownership, but maybe not at the $2.6M, which was the median price of a home in Manhattan Beach last month, a stunning 32.5% increase in the median price from June 2016. Many of them are considering starting a family or have one to two young children. What do they all have in common? 5-10 years ago, they fell into one or many of the following categories:
A) they didn't live here
B) they didn't have the down payment for a $1M+ starter home
C) they didn't have the vision to buy in less desirable parts of the Beach Cities as an investment to move up from; they wanted the Sand or Tree section home with 3+ bedrooms, priced $1.7M+ back then
D) they couldn't believe prices could actually keep running up year over year at such a vigorous pace, which they have continued to do... each and every year
One thing they all have in common now is fear over affordability of current market prices. "How can they keep going up?" is the single most common question I get. And then follows the assumption that the market must be going to crash soon because surely a 1990-built mediterranean 4 bedroom home in the tree section can't cost $2.6M needing $100K+ of upgrades to take it into this century, right?
Here is a snapshot of median home price value for the most current month and % change vs. the same month last year, strongly articulating the sentiments of local aspiring home owners. There are many points of conversation from this one chart. The first one I would highlight is Hermosa Beach [90254] is a phenomenal value. For entry into the local market, the Hermosa Hills east of Pacific Coast Highway and the south Hermosa valley are great areas to look at. North Redondo Beach, the 90278 area code, continues to have strong growth in home values. With a median price around $1M, many of these homes are townhomes, which may be attached or detached, but have an average of 3-4 bedrooms and great elementary schools. Could this area could be a solution for my well-heeled renter friends so they can stop paying someone else's mortgage and start building equity?
What advice do I share with my friends? I look to the experts on the economy and housing market to find what I feel are intelligent outlooks on the current market and the crystal ball of what's potentially to come. Observations I have from the experts:
1. We have had strong jobs growth for several years.
2. The lending market has slowly loosened restrictions for buyers since the crash of sub prime mortgages, providing more options than recent years but still requiring solid qualifications for loans.
3. Inventory remains tight. There is more buyer demand than there are willing sellers.
4. Today, reasonably priced and desirable homes go under contract, usually with multiple offers, in under 2 weeks on market.
So from these and other variables, 2017 continues to see solid growth in home values in our local market. If you are still renting, consider your options and talk to your realtor for recommendations. Don't have a realtor yet? Contact Liz Bird.
For further insight from one expert, I recommend a recent article 'U.S. Market Needs More Homes To Sell' from Lawrence Yun, the chief economist for the National Association of Realtors.
*all data sourced from CRMLS Infosparks
