Solid economic growth in El Segundo fuels housing demand
Shake Shack in El Segundo opened up to very long lines a couple of weeks ago. This auspicious start for the new Apollo Landing development is yet another example of the increasing diversification of the business base in El Segundo.There have been substantial investments made in development projects over the past few years that have solidly propelled the city into a new era that some businessmen and even professional writers are classifying as “trendy” and “cool.” Both The Point and the new Lakers executive offices with a world-class training facility were $80 million investments. Elevon, which is adjacent to the Lakers compound, came in closer to $100 million. Many investors and residents may be wondering what, if any, impact all of this growth might have on the residential real estate prices here, as reported by The Easy Reader News.
The housing market has been turbo-charged for a while now, with average annual appreciation rates of over 7 percent for the past six years. The 2016 Forbes annual study of the most expensive zip codes in the country places El Segundo in the top 1.6 percent of all zip codes nationwide. In El Segundo, what makes this growth particularly interesting is that median sales prices are not skewed by newly-built homes. Only a couple of homes that have been sold this year were new buildouts. In parts of Manhattan Beach, we are seeing as many as 20 percent of home sales coming from recently built homes, which can skew the median sales prices up.
The S&P Corelogic Case-Shiller national home price index shows a year-over-year gain of close to 6 percent for their 20-city composite annual increase. For the other areas of the beach cities, the increases have been between 5 percent to 10 percent. El Segundo is consistent with both the national and local numbers, suggesting that the commercial investments in the city have probably not had much impact yet.
While there have been a few noticeable changes to the downtown area, they have been limited. Most of the commercial investment has been on Sepulveda Blvd., Rosecrans Blvd., and what is often loosely referred to as east El Segundo. In the downtown areas of Manhattan Beach and Hermosa Beach, we have seen more activity with respect to new retail and restaurant offerings. Residential appreciation rates in the sand sections of these cities have been much higher than the average for the area and there continues to be substantial new buildout activity.
There are currently 14 homes for sale in El Segundo at a median listing price of over $1.3 million. This is a very low level of inventory for El Segundo and highlights a surprising finding about the housing market here. It turns out that the turnover rate of homes is exceptionally low, about half the national average rate.
We may or may not see much impact on appreciation rates in El Segundo from the tremendous development success in the city outside the residential areas. Bill Simone, the President of Custom Design & Construction, which has been based in El Segundo for 31 years, “Our South Bay area has enjoyed solid economic growth, ongoing quarterly job gains, and rising household formations, which fuel local housing demand. Tight inventories and the looming threat of mortgage interest rate increases through 2018 will keep home prices on a steady inclining path.”
A leading indicator to watch would be permits pulled for new buildouts of custom homes, something we have been seeing in Manhattan and Hermosa for a while now.
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