Although real estate experts commended Long Beach for being one of the most affordable beach communities in the state, they told the Business Journal the city is not an exception to California’s overall affordability problem. Despite lower interest rates, experts said the story remains the same: prices are going up and sales are going down.
Jordan Levine, the California Association of Realtors’ (CAR) deputy chief economist, said that affordability and limited supply remains an issue for buyers statewide. In its 2019 housing forecast released in October 2018, CAR had predicted a decrease in demand for single-family homes. However, the association has slightly amended its forecast. “The reason why we have made our forecast slightly less pessimistic is because [interest] rates have come down pretty significantly since the end of last year, and that does help to offset the cost of rising prices a bit,” Levine said.
Christopher Thornberg, founding partner and real estate expert with Beacon Economics, said the nationwide interest rate for single-family home loans is below 4%. While sellers may find a good return on their properties, buyers shouldn’t expect home prices to level off anytime soon, he noted. “If you’re a buyer, and you’ve been waiting on the sidelines for prices to fall, you’re going to be sadly disappointed,” Thornberg said.
Phil Jones, president and CEO of Long Beach-based Coldwell Banker Coastal Alliance, said the median sales price of a Long Beach single-family home in June was $692,500, based on data he provided from the Pacific West Association of Realtors (PWR). That figure represents a 3.4% increase in the median sales price compared to June 2018, when the median was $670,000.
Jones said the median sales price for condos has increased even more dramatically. Compared to June last year, the price has gone up by 11%, per PWR. The June median sales price for condos was $420,000, an increase of 6.2% compared to June 2018.
As a result, overall activity in the market has dropped off since the latter part of last year, Jones said. PWR statistics show that pending sales of single-family detached homes decreased 7.9% from June 2018 compared to the same month this year, while condo sales were down by 17.5%.
According to PWR, pending sales from the one-year period between June 2017 to June 2018 totaled 194. Between June 2018-2019, there were 98 pending sales, a 49.5% drop-off. For condos, pending sales decreased by 45.5%, dropping from 99 to 54. “It’s taking longer for properties to sell,” Jones said. “It’s ironic, because interest rates are at historic lows, yet we see pending sales have dropped significantly.”
Citing the latest CAR data, Levine said June 2019 numbers indicate that there were 136 single-family home sales in Long Beach, a decrease of 13.4% from the same time last year.
Despite low demand, Jones said the most active single-family area is the 90808 zip code. “It’s a moderate price range,” Jones said. Closed sales increased in 90808 neighborhoods in June compared to the same month last year; there were 40 closed sales, a 25% increase.
Although there may be a limited supply of homes statewide, Jones said it has actually grown in Long Beach’s single-family market. Comparing June 2019 numbers to the same time last year, Jones said inventory increased by 7.7%, with a total of 478 single-family detached units available. The condo market experienced a more sizable inventory increase of 16.4%, increasing from 226 to 263 over the same time period. There is 2.9 months-worth of inventory for single-family detached units, and 3.1-months inventory for condos as of June, according to Jones.
Phillip Mazzocco, co-owner and operating principal of First Team Real Estate in Bixby Knolls, attributes the increased inventory to homes selling at a slower rate. Mazzocco told the Business Journal that pricing homes correctly in each neighborhood is the key to making them “fly off the shelves.”
“If someone is really pushing the market, [the houses are] going to sit for a long time,” Mazzocco said. “It just depends on the motivation of the seller. . . . If you make that aggressive adjustment, you can get ahead of the market again.”
As an example, Mazzocco said homes in one neighborhood might not last 10 days, while another area may struggle to have a home sell within a month. “Long Beach is so different than any other area, because there are so many different pockets,” he said. The median days on market for Long Beach single-family homes is 15, according to CAR. The percentage of active listings that are now listed at reduced prices is 40.3%.
New listings in June were down by 6.9% compared to last year, according to PWR. Jones said that nationwide tax reform may be playing a part in the decrease. “[It] has had an impact, particularly on properties over $900,000, because they’re the ones that were impacted by that drop in the mortgage interest deductibility from $1 million to $750,000,” Jones said. He added that the state and local tax deduction being limited to $10,000 has devalued the incentive to become a homeowner.
The difficulty in amassing a down payment in the face of rising prices is also preventing the market from rebounding, Levine said. “This has been a longstanding trend that just continues,” he observed. “Folks still aspire to and want to become homeowners. It’s a question of having the wherewithal to do that, whether it be making those monthly payments [and] finding the down payments.”