Manhattan Beach New Construction at a Deal…Potentially

The Manhattan Beach Sand Section has been the poster child of the incredible price appreciation in Southern California real estate since the Great Recession.

New construction and spec building have been one of the main drivers in the Sand Section’s price growth and the new builds just keep on coming.

Just about four years ago it seemed that anything brand new received multiple offers no matter how crazy the price.

Today, that has changed a bit. Manhattan Beach buyers still crave new construction, but are now demanding more reasonable pricing in-line with comparable sales.

As a result of this change, some spec offerings have been forced to cut prices and have been racking up months, if not years on the market, waiting for the right buyer to come around.

For this week’s post, I am going to look at three new construction specs that have reduced prices enough where they are starting to look like deals relative to sales as far back as four years ago.

How much more do they need to drop? Are they a deal now? I’ll let you determine that for yourself, so let’s get to it…

Manhattan Walkstreet Opportunity?

The South Manhattan Beach walkstreets are a favorite of many and 235 4^th Street is one of its latest specs in a tricky location on the corner of 4^th Street and busy Highland Avenue.

• 235 4^th Street
  • 4 bed, 6 bath, 4,135 sq. ft.
  • Asking Price: $7,399,000

This is a stunning build with high-end finishes. 4^th Street came to market back in February asking $8.3 million. After $900,000 in price cuts, this property went under contract yesterday asking $7.399 million (I wrote this two days ago while it was on the market).

The listing claims, “BEST VALUE (below replacement cost)…” That would indicate that they spent an insane $850 per square foot on the building based on their land acquisition. So, replacement cost is a stretch.

So, how do we value this? With another spec on the corner of Highland Avenue, of course! Let’s take a look at this home on 6^th Street.

• 232 6^th Street
  • 5 bed, 6 bath, 4,319 sq. ft.
  • Sold Price: $7,385,000

This property had a similar story as it was listed in February of 2016 asking $9 million. It reduced over an eight month period and finally closed at $7.385 million.

I will let you be the judge of which building, location, and views are better.

The fact of the matter is that 4^th Street is essentially asking the same price today of a very similar comparable that sold three years ago.

If you believe Manhattan Beach has appreciated in the last three years (the data says it has), then would this home be a solid deal if it can be acquired below $7.3 million.

South Manhattan Town Home Intrigue?

This daring modern four-unit town home development in South Manhattan Beach debuted on the MLS back in May of 2018 asking over $2,000 per square foot for units with a view.

These view homes took time to find buyers and were finally sold in May and August of this year. Take a look…

• 217 1^st Street
  • 3 bed, 4 bath, 2,016 sq. ft.
  • Sold Price: $3,912,000

• 221 1^st Street
  • 3 bed, 4 bath, 2,008 sq. ft.
  • Sold Price: $3,600,000

These two sales above were the better units of the development as a result of their protected ocean views running down 1^st Street.

Their counterparts located on the other side of the building on 1^st Place had no such views and still sit on the market today. Take a look at the current listings:

• 218 1^st Place
  • 3 bed, 4 bath, 2,016 sq. ft.
  • Asking Price: $3,399,000

• 222 1^st Place
  • 3 bed, 4 bath, 2,008 sq. ft.
  • Asking Price: $3,399,000

Essentially, all of these town homes are the same with the exception of their views.

The best view was sold for $3.9 million and the next view was sold for $3.6 million. Your current non-view options are asking $3.4 million.

Have you ever heard the expression, “That’s a million-dollar view?”

The hypothetical question remains: “Can they be negotiated to a million-dollar discount?”

Or, whatever the next buyer feels like is a proper deal below the comparable view sales on the other side of the building.

Marine Avenue View for a Fair Price?

Great views, fabulous finishes, chic look…there are a lot of positive points that can describe the new listings at 216 Marine Avenue and 217 21^st Place.

• 216 Marine Avenue
  • 3 bed, 4 bath, 1,951 sq. ft.
  • Asking Price: $3,975,000

• 217 21^st Place
  • 3 bed, 4 bath, 1,964 sq. ft.
  • Asking Price: $3,850,000

But, others could argue to the negative side with concerns like street noise, unprotected views, etc. So, how do you price it?

Well, there happens to be two Marine specs that sold back in 2015 (sorry we cannot link that far back but Google the pictures).

• 315 Marine Avenue
  • 3 bed, 4 bath, 2,067 sq. ft.
  • Sold Price: $3,520,000

• 316 Marine Place
  • 3 bed, 4 bath, 2,170 sq. ft.
  • Sold Price: $3,499,000

These 2015 sale were major “wow” moments for the market during what seemed to be the peak pricing time for new construction sellers.

These 2015 spec homes offer the benefit of protected views being higher up the hill and sitting above a maxed out commercial building. But, the finish quality of these units leaves a lot left to be desired.

Yesteryear’s Marine spec and today’s Marine spec offer essentially the same town home. The differences are finish quality, protected views…and sales with almost a five year gap!

If the Marine specs sold for $3.5 million in 2015, would you take a similar property five years later for a price a tad higher than $3.5 million?

Or, would it have to be the same price or even lower?

The fact of the matter is that five years later, the current pricing could be fair or more than fair if you can get it at the right price.

Conclusion

When you are buying new construction in a normal market, you can expect to pay more than almost every existing home. New commands a premium juts like anything in this world.

But today, even if you are paying more than the typical existing home, you can still negotiate a solid deal relative to other new construction sales from the past.

In the case of the above three examples, there are previous sales which are the benchmark for new construction values. If you can snag something below a recent comp, and better yet, an old comp, then you just might find yourself a fabulous deal.

Whenever a motivation comes from one these Sellers, you may have a great opportunity on your hands. And as I advise my clients, be patient, don’t be afraid to put in a lower offer if the property is sitting on the market, and you never know what you may be able to pull off.

And if that is at a discount to comps many years ago, then it is hard not to like the deal.

---