Cut it, cut it, cut it, cut it…
As the South Bay begins to transition to a seasonally slower time in the market, we have documented areas receiving price cuts by owners looking to seriously sell before the holidays. Our main focus tends to be new construction because it is easier to compare property in larger quantity throughout South Bay sub-markets to see if it can shed some light on where the real estate market is trending as a whole. New construction can drive a market to new highs; if newly built homes are breaking records, then old tear down homes go up in value as well as existing homes. If developers can pay more for the cheapest lots, then all homes rise. On the flip side, new construction can be a drag on the market…
New construction dragging the market in the South Bay you might ask? Seems like a distant memory to way back during the Great Recession. But yes, new construction is starting to drag some areas that may have over-heated due to speculation, over-supply, or other reasons.
In this blog post, the focus firmly lies within the Tree Section of Manhattan Beach which has had a meteoric run over the past few years. Today it looks like buyers are beginning to pull back from new construction. An area that used to be synonymous with sayings like “red hot,” “multiple offers,” “over-asking,” and “new record” seems to have plateaued. And quite possibly even a small decline as buyers catch their breath and developers come back down to earth.
To illustrate the softness of homes built in 2105 or newer over the last six months, I think a picture from the MLS is worth 1000 words…
Look at all those red arrows! As you can see, there a lot of price cuts on Tree Section new construction homes.
Take for instance the new construction offerings on Pacific, both 3401 Pacific and 2602 Pacific listed at $2.799 and $2.899 million respectively. Both similar sized homes have been on the market between four and five months, and both have cut their price by $200,000 to try and get some sort of traction. It looks like they may be competing with one another, and buyers could go after the home that reduces price again. Which owner will crack first?
A newly pending property at 2001 John Street came out asking $5.475 million which heard crickets for two months. They decided to drop the price to $4.749 million (that is 13 percent!), and just like that they made a deal five days later.
A property at the ends of the Tree Section adjacent to Sand Section territory came out boldly at $4.799 million located at 505 14th Street. The 14th Street property address is deceiving as it sits on busy Ardmore. Buyers were not feeling it so they dropped the price by over $800,000, close to 20%, and they are still waiting to sign and accept an offer.
Another interesting case study is on Poinsettia; a former income property sitting atop a double lot that was razed and replaced by two new spec homes. Essentially, they are the same floor plans mirrored and in different styles. The first property on 3312 Poinsettia came out at $3.649 million seven months ago, and then a short seven days later 3308 Poinsettia came out asking the same price. After waiting quite some time they dropped both to $3.299 million. One of those properties has opened escrow while the other one sits. I am sure prospective buyers are waiting to see the closing price on the one under contract, and smelling blood in the water thinking they might get a deal and snag the other one below what their neighbor paid.
All in all, these are just a few of the price cuts. There are many new construction properties that took cuts, but in much less drastic manner. Nonetheless, as you can see from our MLS photo, it is hard to ignore that the Tree Section is not what it was a couple years ago. These new construction struggles are slowly trickling down to scraper properties and if it keeps going, current existing housing. It all takes time.
This is something we will watch closely through the holidays and into the spring selling season. Will buyers be able to grab a Tree Section house at a discount? Or, if this is just a brief blip on the radar as the market catches its breath and works out the inventory? It is my belief that the sky is not falling… just a healthy adjustment and much needed relief to the Tree Section pricing.
It’s Your South Bay. Own It.
Richard Haynes
DRE: 01779425
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The Richard Haynes Real Estate ShowA leader in South Bay real estate for the better part of a decade, Richard thrives as an advisor to his clients with over $248 million in sales as a broker or investment principal at his boutique agency, Haynes. Richard is known for his keen local market insights which have been featured in the L.A. Times, The Street, and Forbes, along with his weekly South Bay real estate blog. [read more]