Manhattan Beach Homes for Sale | Housing Bubble?


A common question I get is whether we are in a housing bubble in Manhattan Beach and will prices come crashing down again anytime soon.  I don't think we are in a bubble but that depends on how you define bubble. Can there be a price "correction". Sure, anything is possible and the history of Southern California real estate certainly indicates that we can expect periodic ups and downs. But, as in the last downturn, Manhattan Beach did not decline as much as other markets and came back faster. In fact, if anything I would say that consumer confidence is very high as to real estate property values right now (based on my informal non scientific study). Buyers see that after the worst downturn in almost 100 years, we have equaled and in some cases exceeded pre-recession levels. Many of the most prestigious luxury markets are at all time high prices.

I was reading a recent article by Robert Shiller, you know the guy who whose name is on the Case Shiller Housing Price Index. He touches on an interesting point.



In a bubble, investors including the average guy on the street are looking to make a quick buck. In other words buying anything from Tulips, the original bubble to houses or, I'm sorry, stocks in start up companies with no revenues, with the explicit intent of making a profit. Look, I'm not against making a profit. In fact, I'm all for it. There is however, a difference between acquiring assets because we expect their prices to increase quickly without the holder adding any value and long term investing. Housing also has another differentiator. That is, people need someplace to live.

One of the fundamental differences I see in this market is that most buyers are acquiring houses they want to live in and not looking for quick profit. Yes, there are still a fair share of flippers out there but investors are not the market movers they were just a few years ago.

Another difference right now is that more homeowners have "skin in the game" meaning they put money down when they bought. That coupled with the low interest rates will prevent "strategic defaults" and the foreclosure frenzy we previously saw.

A better question than whether we are in a bubble might be "is this market sustainable?". To that I would have to say "not really". As to when it turns, the 800 pound gorilla in the room is interest rates. Rates go up 1% and the appreciation we've seen slows to a crawl.

But until then, it is still a great time to buy or sell a home in Manhattan Beach CA.

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