High-End Homes Getting Harder To Sell?

Posted by Mike Michalski on Wednesday, September 12th, 2018.

A funny thing happened this year and last as the housing market in the South Bay soared to higher and higher price levels.  After a roaring 2017, high-end home sales have suddenly stalled.

Take Manhattan Beach, the locus of expensive homes in the South Bay.  The median single family home sale price jumped 12.4% from 2016 to 2017.  Yet, so far this year, the median sale price is actually lower than last year's full-year median - $2,450,000 versus $2,473,250 last year.  That equates to a decline in the median price of 1%, assuming things don't improve dramatically for the last few months of this year (unlikely with the holidays approaching).

We were particularly interested in the state of sales of homes listed in excess of $5 million.  Here, the news is decidedly mixed.

In Manhattan Beach, there are currently 22 single family homes on the market priced above the $5 million mark including the 8-bedroom, 6381 sqft home on a double Strand corner lot, pictured above, priced at $23,995,000 (2722 The Strand). 

The number of $5 million+ homes in escrow is 6.  From a pure absorption rate standpoint, we are looking at a little less than 4 months for the current inventory of high-end homes to be "absorbed" or purchased (22 ÷ 6 = 3.67 months), assuming 6 new escrows are opened every month.  This indicates a market in relative equilibrium between buyers and sellers, if one can derive anything meaningful from such a small sample set.

Furthermore, if those six pending sales close, that will produce a total of 32 sales in Manhattan Beach over $5 million this year, which equals 2017's full-year total of 32.

But something feels different this time.

For example, days on market.  A number of the current crop of available high-end homes have spent all of this year and a good portion of last year on the market. Take, for example, 317 17th Street (pictured in the lead photo atop this article) billed as one of the largest homes ever built in Manhattan Beach (11,917 sqft) on a walkstreet lot the size of 2½ normal-size lots.  This newer (built in 2014) custom home debuted in January, 2017, with an asking price of $19,950,000, since reduced to $16,995,000.  Still no takers (granted the buyers who can afford this home don't grow on trees).

And then there's the recently-closed sale of 3120 The Strand, pictured here, a 5-bedroom, 4200 sqft home on a very desirable ocean-front corner lot, that actually first hit the market back in 2015 for $16 million.  The seller's efforts to sell included a change of agents and a series of substantial price drops, culminating recently in a closed sale at $11,500,000.

And we'd be remiss if we didn't mention 108 The Strand, shown above, a 2015 custom-built, 5-bedroom, 6910 sqft home asking $16,995,000.  This home is on its second agent, a noted participant in the show "Million Dollar Listing LA."  Yet, despite the added publicity of appearing on a hit reality tv show, this home has struggled to find a buyer since 2016 when it debuted on the market for $19,995,000.

Interestingly, one of the beneficiaries of the high Manhattan Beach home prices seems to be Hermosa Beach where the lower median single family sale price has actually increased more this year (6.1%, year to date) compared to last year (4.7%).  This is possibly the result of home buyers shifting their attention from Manhattan Beach to a neighboring beach city that offers more for the money, although the year-to-date percentage increase for this year hasn't yet been impacted by the traditionally slower holiday season that will soon be upon us.

As far as the highest-priced homes over $5 million in Hermosa are concerned, there seems to be a veritable glut with 12 active listings and only 7 closed sales year-to-date. 

Surprisingly, of these 19 high-end Hermosa listings, 9 are on The Strand and they are all active, with not one having sold so far this year.

For pure persistence, the winner in this group has to be 3500 The Strand, shown here, which seems like it's been trying forever to trade on its tv fame as the beach house of Beverly Hills 90210.  Currently being used as a triplex, this 6-bedroom home is asking $16,500,000.

Perhaps upper-end sales activity will pick up again after the first of the year if the economy remains strong and mortgage interest rates don't spike.  Or maybe another tv show will pick up one or more of our struggling luxury homes and give it some fresh appeal.

This entry was posted under Market Conditions, and South Bay Real Estate News.