Just Leased: 2411 Carnegie Ln Unit B, Redondo Beach

I just leased 2411 Carnegie Ln Unit B for one of my landlord clients. This is a great case study of why the sales market is currently sluggish at best and illustrates how the coin has flipped and how it is now more attractive for many people to lease than to buy. But before I get into that analysis, let’s take a look at this particular property.

This is a middle unit townhome of a 3 on a lot project. It was built by Craig Casner in 2000 and has high end finish work. Also unlike most 3 on a lot homes from that era, it has 4 bedrooms. There are 2 bedrooms downstairs and 2 upstairs in a typical reverse floor plan format. The kitchen opens to the living room and there is an attached exterior 2nd floor patio. Here’s some pics:

Let’s take a look at why leasing is out performing purchase activity right now. This unit leased for $4850 per month with a one year term.

For the purpose of this exercise, let’s assume it would have sold for $1,250,000. If a buyer did the traditional 20% down and mortgaged $1M even, the monthly principe and interest payment would be $5,368 at a 5% rate which is very attainable right now either by paying points, getting an ARM or having a bank relationship. Some buyers are even getting lower rates. At 4.5%, the payment would be $5,067.

The property tax would be approximately $15,000 per year which adds $1,250 per month to the payment. Throw in another $100 per month for HOA dues and you are at a monthly payment of $6,417 or higher creating a delta of over $1,500 per month in the best case scenario.

Six months ago when rates were at 3% or lower, the delta between renting vs owning would have been closer to $700 prior to any potential tax saving. And the climate was more attractive in that home prices were increasing.

There’s more at play here than just the higher rates. Buyers are expressing concern over the broader economy and are concerned about their stock portfolios, crypto investments, and jobs. Markets do not like uncertainty. It’s that simple.