Thanks to the wild real estate market over the past 18 months, some of my normal posts on certain sectors of the market have lagged.
This week we get back into the flow. It is time to check in on new construction town homes in North Redondo.
In the past I would post an update every six to 12 months. Unfortunately, I just realized that the last update was in November of 2019, so a new post is long overdue.
For reference, here is the previous post: “North Redondo Beach New Construction Town Home Update”
Like most real estate throughout the country, new construction in North Redondo has performed extremely well during the pandemic. What sets it apart is that this specific asset/area has delivered fabulous growth each year for almost a decade.
If past performance is any indication, North Redondo new construction is a steady grower that offers solid risk-adjusted returns.
In my last post, I separated three-on-a-lot sales between into two categories: 1,900 – 2,150 square feet and 2,150+ square feet.
Just a couple of years ago, North Redondo town home developers kept their unit sizes smaller because they would not land the prices needed to justify going bigger. That started to change in 2019 as price per square foot rose in North Redondo and buyers were willing to pay (and could afford) prices for larger spec sales.
The smaller units were essentially commonplace a few years ago. Now, it seems they have all disappeared.
Today, developers are going big because it pays handsomely compared to old sales.
Larger Units (2,150+ sq. ft.) Median Prices:
As you can see, we are seeing a jump in larger scale three-on-a-lot developments.
All of the eleven 2021 sales seen in the first half of the year have been five bedroom units, showing buyer appetite for larger units and developers delivering on that demand.
To start 2021, prices are up 10% in the first six months and over 21% since 2019. That’s amazing.
Smaller Units (1,900 – 2,150 sq. ft.) Median Prices:
Even more interesting, developers have chosen to not even develop (or at least sell on the MLS) smaller three-on-a-lot units.
There have been zero sales in 2021 and only one in 2020, which was a very poorly located unit on Inglewood Avenue.
Surely, prices would be higher in the $1.2 millions or more if not on Inglewood Avenue, but why build smaller units when you can build larger for another $100,000 per unit and earn another $200,000 to $300,000 in revenue?
I doubt we will see the end of smaller units, but they will be few and far between when the larger units simply pay developers a much greater profit. Currently on market, there are three pending sales with two at record breaking asks and a current listing asking over $1.5 million.
The large two-on-a-lot new construction offerings were on fire before the pandemic…
The Coronavirus only fueled their surge higher because of the additional space, privacy, and yards that two-on-a-lot can deliver on top of a single-family home-like feel.
I will re-list the high two-on-a-lot sales since 2013 with updated info on 2020 and the first half of 2021.
- 2021 High Closing – $1,730,000 (1st half)
- 2020 High Closing – $1,632,000
- 2019 High Closing – $1,550,000
- Excluding 1919 Gates Avenue at 2,800 square feet
- 2018 High Closing – $1,500,000
- 2017 High Closing – $1,400,000
- Excluding the oversized lot sales at 3307 Green Lane and 1981 Dufour Avenue
- 2016 High Closing – $1,328,000
- 2015 High Closing – $1,250,000
- 2014 High Closing – $1,019,000
- 2013 High Closing – $992,000
I excluded some large square footage outliers which will be discussed in the next section, but man, what a run since 2013. That is close to a double in new construction prices.
Of course, a 2013-built home would not get nearly the price, but if you own a two-on-a-lot zoned property, then you have made big, big money as a covered land play.
The high sale of 2020 was 1919 Gates Avenue #B.
And, the high sale of the first half of this year is 2013 Voorhees Avenue #B.
You would be crazy to bet against new construction two-on-a-lots, and the demand continues to be insatiable not just because of the pandemic, but because there are many demographic trends in its favor.
To add to it, there is a 2,556 square foot offering at 2421 Voorhees Avenue #B asking $1.85 million. While it might not land the full price, you have to believe prices might eventually get there by the end of 2021 or sometime in 2022.
Over-Sized Two-on-a-Lot Outliers
Lastly, to highlight larger outlier properties which are 3,000 square feet or more town home units, you come to the two sales below:
These are well-above the standard sales in the $1.7 million range and will help drive the market higher for all town home units. If there are more sales like these, and if the trend remains higher, then we could realistically see $2 million town home sales in Villas South and Villas North in the next couple of years.
If you had asked anyone if that was possible eight years ago, they would have called you crazy.
Brand new construction town homes in North Redondo (Villas North and Villas South) continue to be in high demand, as well as breaking record prices.
My last post in 2019 showed that the smaller three-on-a-lot town homes were more highly desired and profitable to developers. Today, that narrative has completely flipped.
The larger the unit, the more in demand, and the higher the price.
Two-on-a-lot units were all the rage in 2019, and they continue to be some of the most coveted “affordable” new construction throughout the Beach Cities. Prices seem to jump by $100,000 each year, and that rate has sustained itself for almost eight years.
As always, there is no slow down currently for North Redondo new construction, and there continues to be no end in sight.
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