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I recently wrote an article about the appreciation of single family home average sales prices in the South Bay (“Looking at Single Family Home Appreciation Relative to Inflation”). One reader was curious what impact the number of new homes in Manhattan Beach has had on the appreciation rates for this city in particular. My gut feeling has always been that Manhattan Beach has had an unusually high number of new homes built relative to other local cities over the years and so I thought I would check into this. It seems there is a new home being built up on every street all the time. In an attempt to address this reader’s comment, I took a look at the sale of new homes in several cities in 2000 and in 2008. This has yielded some interesting results.

In calculating the number of new homes sold, I counted all sales of homes built that particular year and added the new homes built the prior year as some homes sit on the market for a while before selling. In other words, for the new home sales numbers for 2000, I included homes built in 1999 and 2000. As anticipated, the number of new homes sold in 2000 in Manhattan Beach was far higher than in any other city as a percentage of both total homes sold and the percentage of homes built relative to the total number of all single family homes. Specifically, about 16 percent of all homes sold in Manhattan Beach were newly built in 2000. The next closest city was Hermosa Beach at eight percent. Redondo Beach was not far behind, but the story shifts quickly when looking at 90274 and 90275. They have far fewer new homes built and then sold as a percentage of total sales.

The story is similar for 2008. It is no surprise that there were fewer new homes built and sold thanks to the credit market crash the prior year. There were about 40 percent fewer homes built in Manhattan Beach, though in Hermosa Beach the decline was only 12 percent. The numbers for Redondo Beach and Palos Verdes are much higher. However, because of the drop in the total number of homes sold in all of these areas, Manhattan Beach still maintains the highest new homes sold rate at 22 percent of all sales, up from 16 percent in 2000. Hermosa Beach also experienced an increase, going from eight to 16 percent. Redondo Beach went from just under eight percent in 2000 to just under seven percent in 2008.

So now circling back to the reader’s curiosity about the new home effect on sales. Would the amount of new building taking place in Manhattan Beach (or other cities) impact the average or effective appreciation rate for single family homes. In reviewing the numbers above, I think it is safe to say that it certainly does. If 15 to 25 percent of all homes sold are newly built and subsequently sold at a much higher price, then there is a measurable impact on the overall effective appreciation rate for this area, especially if the percentage of new homes sold increases each year. This may not always be the case, so the net effect may not be as large as thought. I may pursue this in greater detail, depending on the interest level of you.

Tony Cordi is the owner of Beachtime Realty, serving the South Bay since 2007. He specializes in beach properties across the South Bay and Palos Verdes. Tony has helped several clients identify properties where they can add value by remodeling or developing the property.

Magnificent Custom Beach Home

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