2 0 1 7 R E A L E S T A T E R O U N D T A B L E <strong>Peninsula</strong> Realtors Chris Adlam, Lily Liang and Steve Watts. Photo by Brad Jacobson High on hill the Terranea Resort, Trump National and the new Rolling Hills golf course have helped drive <strong>Peninsula</strong> real estate to all time highs, according to three top <strong>Peninsula</strong> Realtors 58 <strong>Peninsula</strong> • <strong>Feb</strong>ruary <strong>2017</strong>
y Stuart Chaussee Chris Adlam, Lily Liang and Steve Watts recently shared their thoughts for <strong>Peninsula</strong> magazine’s annual Real Estate Roundtable. Each has over three decades of experience selling <strong>Peninsula</strong> homes. Adlam was recently named the number 72 Top Producing Agent in the nation by the Wall Street Journal and REAL Trends. He works for Vista Sotheby’s International Realty. Liang has completed over $1 billion in residential real estate transactions and is Executive Vice President of Strand Hill Properties – Christie’s International Real Estate. Watts and partner Ceci Watts are top producers at Re/Max Estate Properties. CHAUSSEE: Steve, take us back, perhaps 10 years, to the prior peak in real estate on the <strong>Peninsula</strong>. WATTS: In 2007 we hit a peak. Then prices fell 30 percent to 40 percent to the trough in Q4 2010. Manhattan Beach fell less, but we declined at least 30 percent on the Hill. The peak price in 2007 was around $1.7 million. We declined to a low of close to $1.2 million in 2010. Since then we have recovered nicely and we are now at all-time highs on the Hill, with an average sales price close to $1.8 million. The market has fully recovered. CHAUSSEE: At the 2013 Roundtable, which Steve and Chris participated in, I asked you both about the potential for price appreciation at that time. You both gave a relatively muted outlook, stating you thought average annual gains would be 5 percent or so. Are you shocked that we have had such robust price recovery? ADLAM: Yes, I am shocked. In 2008 there were only 86 sales in Palos Verdes Estates. The total sales were $165 million, with an average sales price of $1.925 million. In 2016, we were almost double those levels. We had 165 sales representing $366 million in sales volume. Although the average sales price was only $2.2 million. WATTS: From 2012 through 2016 we have been very consistent, with around 600 total sales on the <strong>Peninsula</strong> every year. We had 628 sales in 2016. In 2005 we had 617 sales and then declined to a low of 347 in 2008. It’s also interesting to note that in 2015 the highest priced sale on the Hill was $15.5 million. Chris had the highest priced sale this past year of $11.9 million. What is interesting about the average sales price is that it really hasn’t increased that much. I found another interesting statistic looking at how many homes sold above $5 million in 2016 on the Hill versus Manhattan Beach. I would have bet my life that what I found would have been quite different. I thought Manhattan Beach would have greatly exceeded the <strong>Peninsula</strong>. However, Manhattan Beach had 17 and Palos Verdes had 15. And, Manhattan Beach did not have one sale above $10 million. We had two sales above $10 million on the Hill and, again, zero in Manhattan Beach. CHAUSSEE: What does that tell you? WATTS: That the high-end market of Palos Verdes has greatly improved over the years relative to Manhattan Beach. Manhattan Beach currently has a greater number of homes on the market above $5 million, at 25 homes and we only have 14. ADLAM: It’s important to note that the price per square foot in Manhattan Beach is significantly higher than on the <strong>Peninsula</strong>. Manhattan Beach is priced at over $1,200 per square foot. Our average price per square foot on the Hill last year was $622. CHAUSSEE: What can a new buyer expect going forward, as far as price appreciation per year? Say 5 to 10 years out? LIANG: I think real estate is the best way to accumulate wealth and I believe that will continue. What is important is that you must have “holding power.” We may go down temporarily, but prices will always recover. So, holding power is the key. Looking out seven years or so I think you could see a total return of 20 percent or more. CHAUSSEE: So, we’re only talking about 3 percent or so in average annual price appreciation from current levels? LIANG: Right, and we may have a decline somewhere in that period of 10 percent or so, but the recovery afterwards should make up for the drop. Again, that’s why you need to have holding power. WATTS: The unknown is what is going to happen under the new administration and with interest rates. There is a projection of perhaps two interest rate hikes this year, but in the wealthier areas of the country, like the <strong>Peninsula</strong>, buyers are less affected by interest rate hikes. They can afford the higher adjustment on the mortgage. And, I agree with Lily, real estate has historically been a marvelous investment, but you have to be in a situation where you are not forced to move and sell your home in a bad or declining market. We will have a slowdown again – it will happen. CHAUSSEE: How much do you think we will decline during the next correction? WATTS: I believe the market here on the Hill will sustain itself even in a slowdown in the economy. I don’t think our market will even decline by 15 percent or 20 percent. If it did decline by that much we would have demand come back in and support prices quickly. ADLAM: I agree. WATTS: I do want to quantify this - some properties will be hit harder than others. Distressed homes in a poor location or condition will be hit. When we have a correction, certainly poorly located or “dysfunctional” properties with a gas station in the backyard or lots of road noise will get hit more significantly. ADLAM: Back 10 years ago or whenever the exact period was when we had a big correction, remember, buyers were putting so little down to make a purchase that they didn’t have much “skin in the game.” It was easy to walk away from a property that had declined in value. We have financially healthier buyers and owners now. WATTS: I would think in recent years we often saw down payments, on average, of 40 percent to 50 percent and even some all cash purchases. LIANG: I recently went to Hong Kong to promote the South Bay area. I have lived in many different countries of the world and where we live is one of the nicest. However, the ultra-rich foreigner has not really heard of the South Bay. They know Beverly Hills and Malibu, but not Palos Verdes. I think that we have the resources and environment here to create a Nice or Monte Carlo and that was my goal in promoting the South Bay. I think it should be a place that attracts international buyers. ADLAM: When you compare some of the other great cities around the world, London, Paris and San Francisco – we are a bargain. LIANG: Yes. Even locally, relative to Marina del Rey and the West Side, homes here are a bargain. CHAUSSEE: Where are you seeing your buyers come from? LIANG: I have been working with many different international buyers. Last year I was much more active as a buyer’s agent than a listing agent, which was different for me. My buyers are not only from Taiwan, Hong Kong or China – they are from all over. WATTS: Technology has changed our business tremendously. Drones and 3D virtual tours allow buyers to work directly with the listing agent. In 2016 we had a higher number of dual-listing agents than ever before. This is when the potential buyer goes directly to the listing agent and says he wants that agent to represent him, possibly because they think they can get a better deal on the purchase. CHAUSSEE: So, does the listing agent then get both sides of the sale? WATTS: Yes, there is some negotiation and there is possibly a reduction. Similar to what Lily said, we are seeing a lot of international buyers who will contact the listing agent directly because they can gather all sorts of information online now and see the property through virtual tours. They Terranea Resort’s guests have helped increase international awareness of the Palos Verdes <strong>Peninsula</strong> <strong>Peninsula</strong>. Photo courtesy of Terranea Resports <strong>Feb</strong>ruary <strong>2017</strong> • <strong>Peninsula</strong> 59
Change language