I had a difficult time coming up with the title for this post. I’ve spent a few hours looking at the appreciation rates of single family homes in the South Bay and wanted to share my findings for a number of reasons. First and foremost, I simply wanted to better understand the trends of home values here by home type, location, and price point. This is a complex market that is not easily classified. Nonetheless, at a high level, there are some common characteristics and a story appears to emerge on what has been happening this decade. With this data in hand, I hope to establish some possible leading indicators that I can track that will provide strong clues for where the market is heading. Finally, this enables me to put homes into a context relative to other investment types. So, have home values kept pace with inflation this decade? The short answer is yes. This post explores these comparisons. I will address the other topics in subsequent posts.
I’ll start with some high level findings. Before I do, I should point out that I have used averages here, though it certainly can be argued that medians might better represent the market reality. It turns out, however, that for the purpose of highlighting trends, they both work out about the same. One of the first surprises that emerged form the data is that the average sales price for a single family home in the South Bay this year through October, is close to $1.3 M. This includes Manhattan Beach, Hermosa Beach, Redondo Beach, and the Palos Verdes peninsula (minus San Pedro). Back in 2000, the average sales price was closer to $760 K. In essence, this equates to having an annual appreciation rate of six percent. Over this same period, the consumer price index effectively averaged growing by 2.9 percent per year. Back in January of 2000, the Dow Jones Industrial Average was over 11,500. This past Friday, it was just over 10,300. I think the readers of this post know that treasure bills and savings rates have been similarly challenged. Clearly, single homes have performed nicely over this time frame. If I throw gold into the mix, it walks away with the crown though. It was priced at $279 per ounce at the beginning of the decade and is currently valued at over $1,100 per ounce.
There are other interesting findings that appear as I separate the beach cities from Palos Verdes. The beach cities as a whole, with an effective annual average appreciation of 7.3 percent, has outpaced Palos Verdes by a fairly substantial amount. Palos Verdes came in with an annual average pace of 4.6 percent. Back in 2000, the 90274 zip code had the highest average selling price of all cities in the South Bay by over 20 percent. By 2007, Manhattan Beach became the area with the highest average and remains so today.
Interestingly, the city with the fastest growth rate this decade was Hermosa Beach with an effective annual 9.5 percent increase every year. Manhattan Beach and Redondo Beach were both just over seven percent. The two top performing sub-areas were the Hermosa Beach Sand and Valley areas. The El Nino area of Redondo Beach was a very close third. The Monte Malaga and Mira Catalina areas were the most challenged areas with effective annual growths of 2.4 percent and 3.2 percent, respectively. Consequently, only one of the 34 sub-areas in the South Bay did not keep pace with inflation this decade. This, in part, might be an artifact of the result that back in 2000, Monte Malaga had the second highest average selling price of all areas behind Rolling Hills, but by 2007, had dropped to fourth while Rolling Hills remained the top location. This year-to-date, it is the Hermosa Beach Sand area leading the pack (using averages).
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Posted by Tony Cordi 
