Just two weeks ago, one of the most stunning homes on the Manhattan Beach Strand closed escrow. In only nine days, the gorgeous 1204 The Strand found a buyer, which closed 30 days later in an all-cash transaction.
You do not see Strand listings selling that quickly in today’s Manhattan Beach market, but this sale makes sense due to the fabulous construction quality and aggressive pricing relative to past sales.
In this past blog post, I have documented softness and supply issues in The Strand marketplace. As a result of the price data, I commend the Sellers on their sale by not being greedy, pricing appropriately, and making a quick sale that seems very fair to both parties. Cheers to everyone involved.
While the 1204 The Strand deal is a positive for both buyer and seller, the opposite effect is happening for the rest of the Strand marketplace as a result of this sale. There are and will be negative repercussions for the remaining Strand listings already struggling with high inventory, high prices, and few buyers.
Looking Back on 2017 Strong Benchmarks
Let’s look at a benchmark sale from early 2017 guiding much of the Manhattan Beach Strand market.
- 104 The Strand (6,100 sq. ft., 3,330 sq. ft. lot, 2017 build) sold for $18,400,000.
This would become the highest new construction sale and set pricing for future south Strand properties, just as the market was topping out.
Six months later in the fall, another benchmark sale occurred in the north Manhattan Beach Strand market which set pricing for those properties.
- 3420 The Strand (5,500 sq. ft., 3,517 sq. ft. lot, 2003 build) sold for $15,400,000.
Originally, this home was asking $17,995,000 to try and capture the momentum of the $18.4 million sale at 104 The Strand; however, the marketplace was not buying that an older, smaller, and less desirable location was worth only $500,000 less than 104 The Strand. So, the Sellers quickly and smartly cut the price by a whopping $1.5 million and made a deal less than two weeks later for an additional $1 million off the top.
The final price of $15.4 million, a $3 million discount to the brand new, larger, and better located 104 The Strand seemed like a fair deal in comparison.
Besides those two benchmark sales, everything else on The Strand was having a tough go. Let’s take a look…
Examining 2017 and 2018 Weak Signs
Around the completion of the two Strand sales above, 104 The Strand and 3420 The Strand, the only Strand listings selling were at significantly lower price points.
- 2400 The Strand (3,969 sq. ft., 3,492 sq. ft. lot, 1936 build) sold for $11,900,000.
- 1912 The Strand (3,482 sq. ft., 3,327 sq. ft. lot, 1957 build) sold for $11,300,000.
Additionally, to start the year in 2017, a property sold for “land value,” which was quite a shock and many thought it might just be an outlier. However, it most definitely had an impact on buyer psychology. See below…
- 716 The Strand (1,648 sq. ft., 3,483 sq. ft. lot, 1909 build) sold for $9,300,000.
If a buyer will pay $18 million or more for a south Strand property, why not buy a south Strand lot for $9 million, build a brand new home for $5 million, and sit on $4 million in equity. Easy, right? Turns out, that sale helped to reset the market downwards.
In 2018, the declining Strand trend was further emphasized with additional low sales prices.
- 3120 The Strand (4,200 sq. ft., 3,488 sq. ft. lot, 1991 build) sold for $11,500,000.
- 1313 Ocean aka 1312 The Strand (Triplex, 2,987 sq. ft. lot, 1948 build) sold for $10,914,000.
Having these low sale prices close in bulk, even if they are not fully comparable to the new or newer home sales, helped to bring the overall market down.
Struggling Listings Now Forced to Cut
The most glaring case study here is a very well-known listing to all agents and most residents.
- 108 The Strand (6,910 sq. ft., 3,333 sq. ft. lot, 2014 build)
This property is the next-door neighbor to the $18.4 million sale and a very very similar offering to that comparable sale. The owner came out asking $19.995 million in 2016 before the neighboring sale, looking to set a high sale for The Strand.
After the $18.4 million neighboring sale was completed, the owner smartly cut the price, but unfortunately not enough. Rather than matching the price of the neighboring sale or under-cutting it, they only dropped to $18.95 million.
About a year later in August 2018, the listing was cut by another $2 million, asking $16.995 million. That is astonishingly $1.4 million lower than the neighboring property. Unfortunately, it had missed the market as it was starting to turn lower.
And of course, if you remember the beginning of the blog and looked at the pictures of the stunning 1204 The Strand, now the market’s most recent sale at $17.4 million, the news only got worse for this listing at 108 The Strand. After that closing became public on September 19th as arguably some of the best construction quality on The Strand, the property at 108 The Strand, only five days later, cut to a staggering $15,999,999!
Not as painful of a story, but certainly watching the market is three month-old listing:
- 3400 The Strand (5,468 sq. ft., 3,500 sq. ft. lot, 2006 build)
At its July start, this home was originally asking $19.3 million. Obviously knowing what was coming with the $17.4 million sale, the Sellers cut a week before public knowledge by $1 million to $18.3 million.
Do you think that they will have to cut more? I certainly do.
Looking Towards the Future Market
This beautiful $17.4 million home sale has now reset the benchmark on The Strand, and as a result, you have seen two high-profile listings cut their pricing as a direct effect.
Others will likely have to cut, as very few homes can match the quality and beauty of this most recent home sale.
Not only that, lower priced properties, even certain “land value” listings, may have to begin reducing their prices as well to allow for buyers to have room to achieve equity with a new build. Furthermore, they need to give buyers incentive to take on risk that Strand properties could continue to fall.
As we begin to head into winter, look out for more properties to start cutting as a result of this 1204 The Strand sale. No question, The Strand market as a whole has declined in value officially and will likely continue to decline as more properties are forced to cut their prices to compete.