Market Update

2018: Valmonte Real Estate Forecast – Are we in a bubble? What about taxes? And Should I Buy or Sell in 2018?

June 5, 2018

Spring greetings from our humble abode here in Valmonte. After a bumpy start in the stock market, I write with the prospects of a great year ahead in both the overall economy, as well as the local real estate market. The Valmonte real estate market is coming off a strong end to 2017, and a robust start to 2018. In fact, in the last 24 months, no home in Valmonte has sold for less than $1,000,000! In the last year, homes sold for 98.3% of the asking price, and 1/3 sold over asking! Across the board we saw the days on market drop, and supply remained around 2 months or lower, especially for homes under $2,000,000. Bottom line: it’s still a seller’s market.

Are we in a Bubble?

The short answer is NO! Prices have risen for 5 straight years, but even in Valmonte, the price per square foot is only 1.4% more than previous highs set in 2007. But this market is different; here’s why….

Relative Affordability – Despite the seemingly high prices, housing affordability is 2 to 3 times higher today than during the last market peak in 2006/07. Adjusted for inflation, the average sales price in Valmonte is still nearly $100k less than the last market peak.
Buyers have skin in the game – The last market peak was supported by no-money down and stated income loans. Not this time; lenders typically require buyers to have 20% down payments.
Low unemployment – Job growth is outpacing new housing starts, and even without new jobs, there is still a lack of supply to meet the demand for housing.
Interest rates are still historically low – In fact, interest rates are 2 to 3 points lower in this market cycle than they were in 2006 and 2007. Keep in mind that buyers are buying a payment more than they are a house.
Renting is expensive – Expensive rents are one of the primary drivers motivating first time homebuyers. Even with the reduction in deductible home ownership expenses in the new tax plan, first time buyers are motivated to buy a home.

What can we expect for 2018?

After a wild run to start the year in the stock market, followed by some crazy volatility, here are our predictions for the coming year.

Interest Rates – Interest rates will continue to rise, but gradually. This is sort of a no-brainer, as it’s been predicted for the last several years. But higher rates are pushing hesitant buyers to get off the fence.
Tax Reform – The effects of the newly passed tax reform won’t stifle home buying and selling as some have warned, but it will likely exert downward pressure on supply. Limited supply will make it more challenging for move-up buyers until baby boomers are ready to cash in on their equity.
Price growth – Consumer confidence is at the highest level in over 17 years, and the consensus from economists is that home prices will increase moderately at around 4% in 2018. We expect higher growth at the entry level homes in the neighborhood while the top end will remain relatively flat – so far in 2018 this is the case.
Support from the Bottom Up – The growth that led us out of the market bottom started on the high end with wealthier neighborhoods seeing massive price growth in 2013 and 2014. While those markets level off, the lower priced neighborhoods will continue to push the market up.
Buy Investment Property – The new tax laws won’t hurt landlords; and in fact, it will likely help them. If rising rates and lower inventory reduces the number of first time buyers, landlords will continue to be able to raise rents. Even with a limited supply of multifamily properties and lower overall returns, owning investment property still remains a solid hedge on inflation and is a great way to diversity your portfolio.

If you are wondering how the changing economy affects you and your real estate, give me a call, I’m happy to help!

See you in the neighborhood, Kyle

Real Estate Market

Mid-Summer Musings on Valmonte Real Estate

July 26, 2017

Market climate – Valmonte

There are currently 16 homes on the market, approximately double the amount year-over-year, and near the highest level in the current market cycle
The absorption rate is 4.7 months, and nearing the peak of 6.4 months supply in October 2014
Prices on a square foot basis are near record highs ($734/ft)
Days on Market for the last quarter are at record lows (41 days)
On an annual basis, median sales prices have leveled off in Valmonte ($1.5m)
Homes in Valmonte are selling generally within 1% of the list price

Lot’s of inventory, price drops on the way?

After 5 years of appreciation, the market is showing signs of leveling as the market transitions from a seller’s market to a buyer’s market. The increasing supply is indicative of a “me too” selling climate where sellers are trying to take advantage of higher prices while the good times are around. If the inventory levels hold, I expect prices to decline slightly into the Fall and Winter months when buyer activity tends to dip. On the buyer front, interest rates remain stable around 4%, but the consensus is that rates will rise slightly over the next 6-18 months.

How does Valmonte compare to the rest of PVE?

Valmonte is a micro market compared to the larger Palos Verdes Estates market and for the most part, the trends lines parallel one another across the board. The exception is prices on a per foot basis tend to be higher in Valmonte than that of the entire city, due mostly to the smaller homes and generally tighter supply.

Uncategorized

Realistic Pricing? At Least for a Couple Months Anyway

July 6, 2017

2017 started off great. 13 homes sold in the first quarter within 97% of the asking price. But, as in the past, sellers are starting to feel confident and as a result we are seeing “optimistic” pricing. I don’t blame sellers. I, like many realtors, am an optimist (you sort of have to be in order to survive in this career). We tell our clients “prices are rising,” or “there’s no inventory!” and the “buyers are hungry.” In fact, I took most of these statements from blog posts and articles I’ve written over the past 12 months. Some of it is definitely true. Prices are at record highs in Valmonte and elsewhere – see the chart below.

Buy buyers aren’t dumb, nor irrational. You can make the argument that as prices climb, buyers become more discretionary. When you look at homes over the 6 or 12 month median, buyers have more choices and more things to consider. Take a look at the inventory/supply chart below. It’s based on month’s supply of inventory and compared to last year, inventory is definitely rising. Turnover in Valmonte is the lowest of all the neighborhoods in PV, and the normal scarcity of homes helps push the prices up. Why the recent increase in inventory? The increase is more likely due to a seasonal increase and won’t likely be sustained. Several of the homes on the market are the result of divorce, job relocations, and retirements, as opposed to people moving out of the area because they don’t like it.

There’s some good news in the tea leaves. Price strength is supported from the bottom up. So far to date, the lowest priced home sold was $1,070,000 (3700 PV Dr North). There have been more homes sold over $2m than ever before. But the question everyone is asking, “can it keep going up?” In the chart below, the median sales price (weighted over 12 months) has plateaued in Valmonte while it has continued to rise in all of Palos Verdes Estates. Going beyond the numbers alone, the increase in PVE v Valmonte could be due to the larger homes and new construction in the areas of the city outside of Valmonte like Montemalaga and Lunada Bay. Those areas boast average lot sizes of 14,000′ allowing much larger homes to be built. In fact, in 2017, the average home sale in Montemalaga is $2.7m. However, on a price/foot basis, Valmonte actually exceeds the median price/foot for the entire city.

Median Price/Foot (12 month rolling average – click to select a specific month)

The litmus test: The fundamentals remain – buyers still want to move to nice neighborhoods like Valmonte, and sellers are reluctant to sell until they have to. This creates a supply and demand imbalance that continues to favor the seller, and it doesn’t seem to be changing too quickly.

For more about the real estate market, I encourage you to listen to the Chief Economist at the California Association of Realtors in her recent Q&A at the Teles Properties Headquarters in Beverly Hills. She had some great insights to the current market, what the future looks like, and how the market has changed in the recent cycle.

Real Estate Market, Valmonte Homes

Palos Verdes Estates: Valmonte Home Prices Set a New Record in 2016!

December 14, 2016

As we near the end of the calendar year, we can clearly see that home prices have rebounded from market lows and have exceeded previous records set during the last peak. For Palos Verdes Estates, Malaga Cove posted the highest year over year appreciation for the 4 areas (Valmonte, Malaga Cove, Monte Malaga, and Lunada Bay) with Valmonte not too far behind. Here’s how they stack up on a price per square foot basis for the last 12 months:

Malaga Cove – $921/sq foot (up 21.2%)
Valmonte – $741/sq foot (up 12.8%)
Lunada Bay – $670/sq foot (up 2.6%)
Monte Malaga – $654/sq foot (down 17.4%)

What do the numbers mean? – Each area has its unique features that make it more or less popular given the market demand. Valmonte and Lunada Bay are both seeing a huge increase in new families with young children moving in. Because the lots are typically smaller in Valmonte compared to Lunada Bay, the homes are a little smaller and people are willing to pay more per foot to be on one of the flat tree-lined streets that make Valmonte attractive. Malaga Cove on the other hand boasts panoramic ocean views from nearly every home and buyers are willing to pay a premium for views. Finally, Monte Malaga offers some of the largest homes on the hill so the price per foot tends to drop while the average priced home is typically more than Valmonte or Lunada Bay. I’ve shared a graph below showing the average sales price in each area and you can see how area differs with regard to average sales price.

Keep in mind these are all averages. Supply fluctuations as well the unique qualities of each home that is sold affects these numbers. If all the homes sold in a particular year were brand new with ocean views, I’m sure the numbers would look a lot different. This is rarely the case, so each home needs to be analyzed independently. In all, it’s been a good year for property owners in Palos Verdes Estates. Home prices are continuing to trend upward, supply is still in check, and buyers are returning to the market after the election. The challenges we face in the short term are rising interest rates and lack of supply especially with entry level homes.

If you would like a custom estimate of value for your home, please visit pvehomeprices.com and we’ll send a report out to you right away. If you would like advice about buying or selling a home in 2017, please feel free to contact Kyle directly at 310-483-3998. Happy Holidays!

Real Estate Market, Valmonte Homes

In Escrow: 4209 Via Pinzon, Plus 2 Insights to Today’s Buyers

September 30, 2016

After 2 months of solid activity, 4209 Via Pinzon is in escrow. This is a great home and the buyers are looking forward to joining this great community.

There are 2 things we have learned over the last 60 days between agent feedback and comments during open houses and meeting with potential buyers that merits sharing, especially if you are considering buying or selling a home in the next 6 – 12 months.

The market is still full of buyers, but they have grown more patient in the last several months. This is evident in the increased time homes are taking to sell – not just in Valmonte, but throughout the South Bay and Palos Verdes. With over 300 visitors through the house, it is clear that Valmonte is still generating a lot of interest, but buyers know what they want and are willing to wait for the right property at the right price. 4 months ago, there was half the inventory and a general fear that you may have to wait another 6 months to find a home if you don’t act quickly. That has certainly changed.
After 43% appreciation over the last 4 years, buyers are beginning to ask the question, how much longer can prices go up? This is a rational and understandable question given homeowner’s memory of the market crash from 2008 through 2012. My last post covered this topic in greater detail, but it’s worth addressing again. A recent statement by CAR Chief Economist Leslie Appleton-Young addressed the market by saying “I think we’re getting close to the peak of the market, but we haven’t really had a stellar recovery either.” She went on to address the potential for declines by saying “It’s really going to be more of a slow squeeze than a big drop.” The market fundamentals are still in place for continued price appreciation, but history tells us that growth cycles typically last 4-5 years and we’re already 4 years in.

So what should you make of all this? I’m advising my clients on the sell side that the window of opportunity to take advantage of equity appreciation is starting to wind down, but as long as interest rates remain low, there will still be plenty of buyers around. On the buy side, I’m advising clients that if it’s the right house for your needs and it’s in your budget, it’s worth taking action. And if the house has been on the market more than 90 days, the next few months may be the best time to take advantage of seller frustration and negotiate the price.

If you need help putting a real estate plan together, send me an email and I’ll create a customized plan for your needs.

Until next time…see you in the neighborhood!

Real Estate Market, Valmonte Homes

Did the top end of the market peak?

April 1, 2016

Warning, if you don’t like charts and numbers, you might not like this post. . . . my apologies. As a trained accountant, I like numbers. I like charts even more. Recently, I’ve been reading about and starting to notice a little change in the real estate market. While the entry level price point in most neighborhoods is still white-hot with busy open houses and multiple bids, the top end of the market is not nearly as crazy. In fact, there are signs that prices may have hit their peak.

With all the data available, how can we measure craziness? I like to look at absorption rate, measured as months supply, to gauge the temperature of the market. In the chart below, I assumed $2 million and above represents the top of the market. Now this may be more mid-market in Manhattan Beach, but in Palos Verdes Estates, Redondo Beach, and Hermosa Beach, this is somewhat of a dividing line in the single-family real estate market. The chart below shows that compared to a year earlier, the months supply has increased by at least 30%. In the 4 cities in the chart, this is a direct result of inventories in the $2m plus price range nearly doubling, while the number of closed sales remains mostly flat.

Using the same examples as above, but looking at the price range of $1.5-1.999 million, it’s a different story. Month’s supply in this price range has dropped, year-over-year, to 2 months supply or less. Certainly, rising prices hasn’t helped categorically, but I think the reality of there being more buyers than supply of homes is a better explanation for the drop. The other thing to consider is that in this price range, many homeowners are more likely to be longer term owners and less likely to be looking to move, therefore supply is restricted in this category.

The same goes for the $1.2m to $1.499m price range. Like its cousin above, month’s supply hasn’t changed much on a year-over-year basis. Again, this suggests there are far more buyers in this price category relative to the current supply. I suspect that the multiple bids and heavy competition will continue in this price range until there is a significant change in the market or interest rates jump significantly.

There are some obvious things to point out in all of the charts above. First, there is market seasonality. As we are currently starting to see, there is typically more inventory in the spring and summer months compared to winter and fall, usually dropping to a low around the holidays. I expect that trend to continue this spring and summer; however, it will be interesting to see what happens. For now, interest rates are low so that should continue to motivate active buyers. But what I am really curious to see is if the high end market plateaus, and if it will it spread to the lower price categories? It’s anyone’s guess, and at some point, it’s going to happen. When is the big question. . . .

Real Estate Market, Valmonte Homes

Where did all the sellers go?

March 16, 2016

So we’re flying out of winter and into spring, and by now we should be watching home listings rise like Daffodils with thoughts of new neighbors and summer barbeques lifting our spirits. The part about Daffodils and BBQ’s is on target, but the part about homes for sale – nope. Currently there are only 5 homes on the market in Valmonte – Lunada Bay, Hollywood Riviera, and other parts of the hill aren’t much different. 2 of the current homes are perched above the canyon on Via Alondra and aren’t the most kid friendly homes, and the other 3 require a small mountain of cash to call your own – although they are quite nice homes worth every penny. So why isn’t anyone else selling?

3716 Via la Selva recently listed for $2.45m – former residence of Joey Buss of Lakers ownership fame (maybe there were too many Lakers fans in the neighborhood asking him why the team is in the tank?)

If you’ve been following along with my posts, 2015 was a great year, and I would normally expect that to trigger new sellers looking to take advantage of the higher prices. For the last 2 years inventory of homes for sale has been hovering around 8-13 homes with a high of 18 in the fall of 2014. But inventory has been in a steady decline, both here in Palos Verdes Estates and the surrounding communities since September of 2015. That’s not slowing buyer demand. Interest rates are at or below 4%, and people are out looking for homes.

Why isn’t anyone selling? That answer to that question is like the snake eating it’s tail. Without new inventory, would be sellers don’t have a place to go. In turn, the homes that are for sale are being being driven up to valuations that make it hard for people to make the jump to a new home. As a result we’re seeing homeowners staying put, choosing to remodel and upgrade their existing homes instead of moving. I don’t blame anyone for staying. I’m not planning on leaving anytime soon – we love it here and the kids are not too far off from being immersed in school. For those that are considering downsizing, the process is a bit easier, but lower priced homes have even more competition and in most cases are seeing multiple offer situations.

Now maybe this is all for naught and there are actually lots of sellers in the shadows waiting until summer to sell? I personally know of a couple people holding off until school’s out, but that won’t make up for all the demand. As for the rest of our Valmonte neighbors, please let me know if you are thinking of selling – I have several families that want in on our great little neighborhood.

See you in the neighborhood – KD

3411 la Selva Place – my personal favorite. Asking $2.75m for a 17,000 foot double lot with pool, guest house, and lots of charm – but you need to bring your hammer for this one – it needs some work.

Real Estate Market, Valmonte Homes

SOLD: Second all-time highest sales price in Valmonte

February 11, 2016

The pool at 2921 Via la Selva

I’m not sure if it’s just the weather, but things have been heating up in the Valmonte real estate market, and elsewhere for that matter. In the last week, we have seen several good signs that will hopefully continue into the spring. First, 2921 Via la Selva sold for $3,050,000 ($909/foot down from from $3,295,000 on February 9th). This was the second highest sales price in Valmonte, ever. The home is a Santa Barbara style Spanish ranch home on one level on nearly a half-acre. The home was built in 2007 and features 4 bedrooms, 6 baths with entertaining space that opens to a stone patio and outdoor dining area, guest house, pool (you actually walk on stepping stones across the pool to get to the guest house and rest of the yard), and a rare 3 car garage. All of this backs up to the Valmonte trail and is on one of the best streets in all of Palos Verdes Estates. Pretty much a one of a kind Valmonte dream house.

2544 Via Anita – 4 bedrooms/3 baths – $1,795,000

As for the rest of the recent activity, across the street from the dream house, 2928 Via la Selva, priced at $2,899,000 ($610/foot) is in escrow, and further east near the school, 3728 Via la Selva closed at $1,403,000 ($737/foot) on February 1. If you are a buyer, inventory is still lean with only 6 homes on the market (3108 Via la Selva fell out of escrow and is back on), and 2544 Via Anita is the only new home to see. As for 2544 Via Anita, it’s a nicely finished two story home with the living space and two bedrooms upstairs, with two more bedrooms and a family room downstairs that opens to a deck and nice yard. It’s priced slightly below last year’s average price/foot at $1.795m ($650/foot) which is fair considering the recent updates and spacious living spaces.

I anticipate an improvement in inventory as we move closer to Spring, but for now, it’s slim pickin’s for the buyers out there and prime time to be a seller in Valmonte.

The tree lined streets of the grove in Valmonte – a nice place to be when the sun is shining and the wind isn’t blowing!

Uncategorized

Valmonte Home Sales Keep Pace in October

November 2, 2015

Chugging Right Along October 2015 sales of single family homes in Valmonte kept pace with September and is contributing to 2015 going down as one of the best years in recent memory. In all 4 homes sold in October priced from $1.137m to 1.65m all in the eastern part of Valmonte “where the sun always shines.” Three of the houses were listed on the MLS and took anywhere from 7 to 126 days to sell; the fourth, on Via Valmonte sold off-market for $1.55m. The selling to asking price averaged 94% as all marketed homes required price reductions to sell. As for active listings, there are 10 homes listed for sale in Valmonte, priced from $1.338m for a smaller home on PV Drive North to an updated one story on Via Palomino priced at $2.295m. For the year, the average sales price through October 31st is a record $1.539m – up about 14% from 2014. On top of that, there have already been 49 sales through September 30th this year, compared to 34 homes sold in all of 2014. Historically speaking, on a price/foot basic, prices have rallied 28% from market lows set in 2012 ($509/foot); however, the average price/foot is off 11% from market highs set in 2005 ($729/foot) and 2006 ($728/foot).

What is the take-away from all of this? As the traditional summer selling season comes to an end, there are still plenty of opportunities to buy and sell a home in Valmonte. The lending market is still favorable to well qualified buyers with rates hovering in the 4% range. For those looking to buy, this may be your best chance. Home prices are expected to continue to rise moderately in 2016 and interest rates are likely to see a moderate increase as well. Inventory remains below the “balanced” level of 5 months supply with a current 2.3 months supply, indicating this is still a seller’s market. However, as homes continue to sit empty or with sellers eager to move, this may be the chance to negotiate a good price for your next home.

See you in the neighborhood . . . .

SOLD: 208 Via Alcance – $1.137 gets you this 1800′ fixer

FOR SALE: 300 Alcance – $1.699 remodeled and across from the school

Valmonte Homes

3rd Quarter Valmonte Real Estate Market Report: Spoiler Alert: Prices Are Reaching New Highs!

October 16, 2015

Is it really fall? It’s hard to believe amidst 85 degree weather that we’re getting ready for the days to slow down, stocking up on candy for the trick-or-treaters, and thinking about the coming holidays. But like the weather, the real estate values in Valmonte are headed towards all-time highs. The average sales price through September 30th is a record $1.546m – up over 14% from 2014. On top of that, there have already been 45 sales through September 30th this year, compared to 34 homes sold in all of 2014. Historically speaking, on a price/foot basic, prices have rallied 28% from market lows set in 2012 ($509/foot); however, the average price/foot is off 11% from market highs set in 2005 ($729/foot) and 2006 ($728/foot).

Ericson Beach Real Estate Listing – 3025 Palos Verdes Drive North

How long does it take for a house to sell? Average days on market (DOM) for sold homes is trending downward to 42 days for listings sold in the last three months. This is down from an average of 102 DOM in January. This decrease in DOM can be attributed to seasonal averages. However, compared to 2014, the DOM has actually increased. The longer days on market can be attributed to higher overall prices for the area as well as more available inventory. Closing prices compared to asking price have returned to 98% of asking, an indicator that on average, houses are being marketed at fair prices. Year over year this number has improved from 94%.

What’s ahead? Locally, demand remains steady, and as high prices in the South Bay beach cities continue to price out buyers, Palos Verdes Estates and surrounding areas can expect to see continued buyer interest. What are the potential challenges? Price growth in the short term may face headwinds with rising mortgage interest rates and a limited number of qualified buyers as prices continue to climb while wages and job growth wane. The result – we’ll likely see a leveling off in prices until more qualified buyers enter the market.

Valmonte Market Statistics

	# of Homes	Price Range	Ave $/foot	Average price
Active listings	10	$1.338m – $2.295m	$770/foot	$1,714,200
In Escrow	3	$1.475m – $1.699m	$620/foot	$1,574,333
Sold	45	$799k – $2.625m	$656/foot	$1,546,067
2014 Sales	34	$865k-$2.299m	$656/foot	$1,354,569

2018: Valmonte Real Estate Forecast – Are we in a bubble? What about taxes? And Should I Buy or Sell in 2018?

Mid-Summer Musings on Valmonte Real Estate

Realistic Pricing? At Least for a Couple Months Anyway

Palos Verdes Estates: Valmonte Home Prices Set a New Record in 2016!

In Escrow: 4209 Via Pinzon, Plus 2 Insights to Today’s Buyers

Did the top end of the market peak?

Where did all the sellers go?

SOLD: Second all-time highest sales price in Valmonte

Valmonte Home Sales Keep Pace in October

3rd Quarter Valmonte Real Estate Market Report: Spoiler Alert: Prices Are Reaching New Highs!

About Kyle Daniels

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