Long Beach Real Estate Market Shows Steady Recovery

All signs indicate a slow but steady recovery in the Long Beach real estate market, with the biggest problem now being not enough homes available for sale.

Phil Jones, a board member with the national and state Associations of Realtors and an executive committee member of the Pacific West Association of Realtors, said 2013 has started stronger than anticipated, and 2012 was better than expected. Perhaps more important, the owner/broker at Coldwell Banker Coastal Alliance said, is the new interest of buyers to move up to bigger, more expensive homes.

“We (Realtors) were aware as early as 2011 that the market had stabilized,” Jones said. “Properties that were properly priced were beginning to sell, and sell for close to the price asked… Long Beach was always a rather stable market, and is the most affordable beach city in Southern California.”

Housing values are inching their way back up after the collapse of 2008, with prices increasing 5% to 7% over the previous year. In some neighborhoods, Jones said, values are back to 2002-03 levels.

“The highest levels were actually in 2005 and 2006,” Jones said. “We don’t expect to see those again any time soon, and actually hope we don’t. We’d just be back to the bubble we were in. We hope to see a consistent 5% to 7% increase, which is sustainable in this economy.”

Currently, the most active segment of the market is those homes valued between $400,000 and $600,000, Jones said. That’s a good sign, he said, because that means sellers are looking to move up.

“Million-dollar sales came back strong last year,” Jones said. “There’s a tremendous amount of liquidity out there right now, too.”

The flip side of the increasing property values is that people may be reluctant to sell, waiting for values to go up enough so they no longer owe more than the property is worth. But that logic may cost more money in the long run, Jones said.

“If you wait for a 5% increase on a $400,000 house, you get $20,000,” he said. “But at the same time, that $700,000 gets a 5% increase, or $35,000. So you actually lose $15,000.”

While the law of supply and demand drives prices up, the lack of houses to sell could present a problem. For example, Jones said that there were 103 homes for sale at this time last year in the 90808 zip code — there are only 27 for sale there today. “In some areas, were down to a one-month inventory,” he said. “To be comfortable, we’d like a six-month inventory.”

Mortgage rates continue to be at near-historic lows, but until recently, it has been very difficult to qualify for those loans. New loan guidelines have been released, though, and the money market is beginning to get better, Jones said.

“There’s still some tightness, but where they are backed by Fannie Mae or Freddie Mac, we’ve seen the market loosen somewhat,” he said. “In Long Beach, our limit (for mortgages backed by the federal agencies) is $729,000. We’re starting to see the pendulum swing back toward center.”

Foreclosures — and properties that have been foreclosed flooding the market — have slowed considerably, too. Bank officials have changed philosophy, working to lose less money, Jones said.

According to Jones, banks lose up to 70% of a property’s value if they foreclose. They can lose about 40% on short sales, and at least recently are losing about 23% on modified loans. That, in turn, has allowed property values to stabilize and start to rise. While the real estate market still remains vulnerable to federal policy decisions — continued discussion about eliminating or capping the mortgage interest tax deduction is mobilizing his Realtor associations — Jones said he is optimistic about 2013. “Right now, we’re seeing pretty much a mirror of 2012, maybe a bit better,” he said. “The supply could limit sales if we’re not able to increase inventory. I think it will be a good year, but not a great year.”

Considering the bad years of recent memory, a good year will be just fine, he said.

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