Mortgage rates lingered below 3.25% for much of 2021 but have been on a steady incline in 2022. According to Freddie Mac, a government-sponsored enterprise that purchases, guarantees, and securitizes home loans, the US weekly average for a 30-year fixed rate mortgage was at 5.78% (as of 6/16/22). Conventional wisdom would suggest that an increase in mortgage rates would also impact affordability and, in turn, slow down a real estate market that has been on a torrid pace since May of 2020. Fundamentally, a borrower taking out a $550,000 loan at 5.5% (30-year FRM) would pay approx. $3,123/month. This same loan at 3% would cost a borrower approx. $2,319/month. That’s an $804/month increase and one that could potentially take some buyers out of the housing market all together.
So what impact, if any, have the above factors had on our local real estate market? Through the first five plus months of this year (Jan -June 16th) in San Pedro, according to local MLS statistics, there were 155 single-family residences (SFRs) sold. This was down -8.28% from the 169 SFR sales during the same period in 2021. However, the average sales price for a SFR in San Pedro increased by 16.4%, up from $859,000 to $1MM. Average Days on Market (DOM) remained mostly unchanged at 9 days.
In neighboring Rancho Palos Verdes, there were 183 SFRs sold, which was down considerably at -12.01% from the 208 homes sold during the same period in 2021. Staying consistent with the overall trend, average sales prices increased by 15.27% from $1,683MM to $1,940MM. Average DOM stayed consistent at 9 days versus the year prior.
The Greater South Bay saw the number of SFR sales decrease by -16.59% during the first five plus months of the year from 2,103 in 2021 to 1,754 in 2022. The average sales price for a SFR jumped up by 15.84% from $1,060MM to $1,228MM. Average DOM also stayed at 9 days, which was similar to the same period the year prior.
So the trend remains consistent across the board with sales volume consistently down and home prices up throughout the Greater South Bay. In fact, we have never experienced a time in our past where the average sales price in San Pedro reached $1MM for close to a six-month period. Looking ahead the big question remains: what can we expect in our local real estate market for the remainder of 2022 and into 2023? Based on what we’ve seen, supply and demand remain a key component to how the market will perform going forward. A continued limited inventory climate suggests that home prices should remain stable without a significant change.