Valmonte: Low Home Inventory But Crowded at the Top

One of the most talked about sub-markets in the South Bay is Palos Verdes Estates’ Valmonte.

It is not only discussed frequently by Palos Verdes real estate agents, but also the neighborhood is a hot topic of conversation among high-end agents in Manhattan Beach as a more affordable alternative to the Tree Section.

Valmonte’s location is truly accessible to areas on and off the Palos Verdes Hill. It is less than ten minutes to “the top of the Hill” for local shopping as well as Redondo’s Riviera Village, Torrance, and other areas of the beach cities.

This neighborhood not only offers bang for your buck compared to the beach but also value compared to other areas in Palos Verdes Estates that sell at higher prices. Not to mention, it has one of the most desirable school districts as well.

With all the chatter and positive aspects regarding Valmonte, out of the four sub-markets in Palos Verdes Estates, Valmonte was the only market that saw prices down year-over-year in 2019. Conversely, the other Palos Verdes Estates neighborhoods, Lunada Bay, Montemalaga, and Malaga Cove, were all up on the year.

But generally speaking, it is not that simple.

There are certain asset types in Valmonte that are moving in different directions, varying inventory at different price levels, and like any market, pockets of value that can present opportunities.

Valmonte Inventory

Inventory is low in Valmonte.

In fact, active and new listings throughout the sub-market are below the data trends over the past five years. The lower trends are not incredibly lower, but low enough where they are having an impact on certain price levels.

More specifically, and from an anecdotal standpoint, I am seeing the most challenged inventory at the turnkey entry-level and move-up buyer price points that are not on the Drive. In the case of Valmonte, in my made-up opinion, entry-level pricing is between $1.2 to $1.7 million and move-up buyers trading higher into the $1.7 to $2.3 million range.

To use the entry-level example, this is what retail buyers are facing…

Take on smaller, older homes at a discount that are livable now and can be updated over time like the following examples:

• 4041 Via Solano
  • 3 bed, 2 bath, 1,491 sq. ft., 7,796 sq. ft. lot
  • Sold Price: $1,428,000
• 3932 Via Nivel
  • 3 bed, 2 bath, 1,712 sq. ft., 6,098 sq. ft. lot
  • Sold Price: $1,430,000
• 3901 Via Pavion
  • 3 bed, 3 bath, 1,847 sq. ft., 7,263 sq. ft. lot
  • Sold Price: $1,335,000

Or, take on slightly larger, turnkey homes at a premium price to avoid updating over time like the following:

• 4032 Via Picaposte
  • 4 bed, 3 bath, 2,000 sq. ft., 7,669 sq. ft. lot
  • Sold Price: $1,755,000
• 36 Valmonte Plaza
  • 4 bed, 3 bath, 1,967 sq. ft., 5,645 sq. ft. lot
  • Sold Price: $1,780,000
• 3616 Navajo Place
  • 3 bed, 3 bath, 2,081 sq. ft., 8,083 sq. ft. lot
  • Sold Price: $1,960,000

These options are all great but there is a massive void of “in between” options for the entry-level.

The entry-level examples are the main source of where tight inventory exists, along with other examples in the move-up market.

That all said, other sectors like heavy fixers and higher-end homes are still available or present opportunities.

Valmonte is Crowded at the Top

To start this year, much of the new Valmonte inventory has come on the higher-end of the market. In essence, at this current moment, “it is crowded at the top.”

This has likely been caused by the strength of the high-end market last year with some record sales in the neighborhood.

Large homes on rare oversized lots, along with new construction, made some bullish sales in 2019. For some background, new construction is scarce in Palos Verdes Estates due to building codes making it a tough market for spec building.

• 3116 Via La Selva
  • 5 bed, 6 bath, 5,273 sq. ft., 12,495 sq. ft. lot
  • Sold Price: $3,720,000
• 3649 Navajo Place
  • 4 bed, 4 bath, 3,908 sq. ft., 13,384 sq. ft. lot
  • Sold Price: $3,600,000
• 4005 Via Campesina
  • 5 bed, 6 bath, 4,000 sq. ft., 9,203 sq. ft. lot
  • Sold Price: $3,500,000

These three 2019 sales represented the highest sales in Valmonte, ever.

And, two of them were bold enough to come to market asking $4 million or more before taking sizable price reductions to get their deals done.

Also, throw in another new construction…

• 3732 Via La Selva
  • 4 bed, 5 bath, 3,552 sq. ft., 8,409 sq. ft. lot
  • Sold Price: $3,050,000

3732 Via La Selva sold as a spec like Via Campesina and was the sixth highest MLS sale ever in the neighborhood.

This all leads me back to 2020’s start of “it is crowded at the top.” Of the four Valmonte listings currently, three are on the high-end along with another one that made a surprising deal rather quickly.

• 4032 Via Largavista
  • 4 bed, 4 bath, 3,423 sq. ft., 8,766 sq. ft. lot
  • Asking Price: $3,125,000
• 3216 Via La Selva
  • 4 bed, 4 bath, 3,828 sq. ft., 7,970 sq. ft. lot
  • Asking Price: $3,089,000
• 3401 Via La Selva
  • 5 bed, 5 bath, 3,810 sq. ft., 9,667 sq. ft. lot
  • Asking Price: $2,795,000

And, the surprise quick escrow goes to a beautiful Spanish home in an unfortunate location.

• 3613 P.V. Drive North
  • 5 bed, 5 bath, 4,200 sq. ft., 8,773 sq. ft. lot
  • Under Contract Asking: $2,995,000

Now, none of these properties compare to the record sales last year on Via La Selva, Via Campesina, or Navajo Place, but they are still high-end properties where their asking prices are influenced by those bullish record sales of last year.

To have a rush of four higher-priced options come to market so early in the season will be a test to see if the higher end of the market can sustain the momentum.

The immediate escrow of the well-executed Spanish on P.V. Drive is an indicator of strength, however, if the Via La Selva and Via Largavista offerings linger, that could be a sign that more expensive properties may have gotten ahead of themselves.

Time will tell but it will be interesting to track these listings to see how things develop in this price point of Valmonte.

Where to Find Value?

With record highs on the high-end and lack of inventory on entry-level and move-up options, where is the value? And, where are the opportunities?

In my opinion, there are some glaring opportunities in Valmonte. And, professional investors are currently the only ones taking advantage of those deals.

The median and average price per square foot is about at its all-time record high for Valmonte.

That number is about $800 per square foot.

As we have seen in other markets like Manhattan Beach, turnkey and new construction homes are in very high demand.

At the same time, livable homes where improvements can be made down the road and are more affordable are also desired by your standard retail buyers.

The homes that buyers seem to hate: Heavy Fixers.

The avoidance of heavy fixers is true for today’s Valmonte retail buyers. And therein lies the opportunity.

Heavy fixers with good square footage are selling at significant discounts relative to the market.

Look at the recent heavy fixer sales at ridiculously discounted price per square foot rates…

• 4024 Via Pavion
  • 3 bed, 3 bath, 2,001 sq. ft., 6,973 sq. ft. lot
  • Price Per Square Foot: $594
  • Sold Price: $1,190,000
• 3621 P.V. Drive North
  • 4 bed, 5 bath, 4,159 sq. ft., 8,840 sq. ft. lot
  • Price Per Square Foot: $380
  • Sold Price: $1,580,682
• 112 Via Las Vegas
  • 5 bed, 4 bath, 3,478 sq. ft., 10,940 sq. ft. lot
  • Price Per Square Foot: $488
  • Sold Price: $1,700,000

These are incredible discounts relative to the market showing buyers’ unwillingness to take on big projects. All of these sales were purchased by investors and were had at steep discounts due to the lack of demand for these options.

But, when you look at the numbers, the spreads look to be fat with some potentially nice-sized profit margins.

P.V. Drive North closed at $380 a square foot and its same block neighbor at 3613 P.V. Drive North (discussed above) is in escrow asking $713 a square foot. That is a massive spread and room to spend at least $400,000 to $600,000 in rehab. To have a potential comp that is $1 million higher than the full investment of purchase and rehab costs together, this altogether could be a huge profit.

Via Pavion at $594 a square foot has two closed comps on the same street between $677 and $795 a square foot. There will be money made here.

And, Via Las Vegas closing at $488 a square foot has two comparable listings at similar square feet asking between $700 and $900 a square foot. That again is a significant discount where money can be made with a rehab project.

I would share the comps, but this post would eat up your whole day. That said, I am more than happy to send comps and/or potential profit margins upon request.

Heavy fixers are selling at a disproportionate discount to other home offerings in Valmonte, as most buyers do not want to do the work. The huge spread in price per square foot is providing a margin of safety that is pretty hard to ignore. I expect these investors to reap big profits.

If you are open to doing work, you can use these ultra-cheap heavy fixer comps to snag a deal on the next one. If you can convert the home to a more comparable turnkey property, then you are looking at resale of between $700 and $900 a square foot or higher.

If everything stays the same in Valmonte, then it is going to be very hard to lose on a heavy fixer purchased at the right price.

2020 Will Be a Great Test

In summary, you can look at Valmonte like this…

1. The high-end side of the market had a banner year in 2019, but there is a lot of new inventory that could end up being a drag into 2020 or prove that this part of the market will continue higher.
2. Entry-level and move-up turnkey inventory is challenged and will likely remain a very tough find for buyers. This is the biggest squeeze in the market.
3. If you are looking for opportunity in Valmonte, go towards heavy fixers as their price per square foot comps are completely oversold. There is a ton of value and potential for big short-term profits.

The market can change in a moment’s notice both with on and off-market sales.

We’ll continue to watch and report on Valmonte as one of the most talked about sub-markets in all of the South Bay.

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