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New Construction South Bay Homes: To Buy or Not to Buy

…That is the question.

It is a question I get from my clients repeatedly. The answer? Well, sometimes it is the right call, but oftentimes it is not.

Manhattan Beach Case Study

To demonstrate this age old new construction quandary, let’s look at some properties in Manhattan Beach, as it is the epicenter of new construction in the South Bay. These examples can also be applied to areas like The Avenues in South Redondo, town homes in Hermosa Beach, remodels in Palos Verdes, and more.

Let’s start with East Manhattan Beach.

1467 3rd Street (5-beds, 5-baths, 4,472 sq. ft., 7,466 sq. ft lot)
Sold for $2,631,000
Built in 1999

1540 Curtis Avenue (5-beds, 5-baths, 4,400 sq. ft., 7,499 sq. ft. lot)
Sold for $3,455,640
Built in 2017

What’s the difference? Not much besides the price and year built. That is an $800,000 spread between property sales.

In 1999, that home was all the rage! The new buyers probably never thought the home would be “less desirable,” but sure enough, 18 years later, styles, technology, and floor plans changed.

Much like a brand-new car versus a used car, properties depreciate and revert to the mean while the newest ones command a premium. Neither choice wrong, it just depends on your strategy.

Now let’s use another (better) example in the Manhattan Tree Section.

2504 Pine Avenue (5-beds, 5-baths, 3,600 sq. ft., 4,480 sq. ft. lot)
Asking $2,950,000 (almost six months on market)
Built in 2007

1604 Pine Avenue (5-beds, 5-baths, 3,585 sq. ft., 4,200 sq. ft. lot)
Asking $3,495,000 (went to escrow in five days)
Built in 2018

Again, there is basically no difference here except for the price and year built. Two things seem to be true from these examples:

1) Buyers will pay a significant premium for new construction.
2) A new construction home value will not keep pace with other new construction prices when the house is deemed “old.”

What is Your Home Ownership Strategy?

If you are planning to live in Manhattan Beach for just a few years, then sure, buy the new construction. Enjoy your gorgeous, in-style home at a premium and you can unload in a few years likely at the same price or more. It’s a fairly safe trading position.

If Manhattan Beach is your dream location where you plan to live for 10 to 15 years, then I would encourage you to buy the 1999 build and live in it as-is (if you’re willing). It is still an incredibly nice home worth living in at a reduced price. Just be sure to do a major remodel in 2033 to match the new construction trend of that year. You’ll make a killing!

Now this is from a dollar and cents perspective only. I have clients that get the concept in a snap, plan to stay forever, and opt to enjoy their new construction home regardless of not appreciating as strongly as others.

In the end, make sure you know your strategy and understand the short and long term consequences of your new or existing home investment.