Atypical Deal on the Hill

Posted by Dave Fratello on Tuesday, August 25th, 2009 at 4:48am.

Next time you find yourself tooling up or down 2nd St. in the Hill Section, ponder this: someone just got some kind of a deal on one of the unlikeliest homes on the block.

1042 2nd is the first home you will see on the south side of 2nd if you're turning down the hill from Sepulveda. It's the last home you'll see if you're coming uphill to the light or – more often – waiting at it.

We're calling the home "unlikely" because it's some kind of amazing that someone deigned to build a big new home right next to the imposing office building at 2nd/PCH in the first place. (It's got a twin next door at 1038 2nd; they appear to be detached townhomes, technically, though 1042 2nd was always marketed as an SFR.)

With no views to speak of, the backed-up traffic factor and the office building as neighbor, this home was not your typical Hillie at all.

One thing 1042 2nd has going for it is that it is quite large (5br/4ba, 4425 sq. ft.). It was built in 2003 and picked up for $1.460m in March 2004.

Now, about 5 and a half years later, new owners take possession for $1.810m, a markup of $350k/+24%.

At a time when 2005 prices on resales are common, and some sale prices seem to slip back further in time, a 24% markup over early 2004 is an interesting data point to ponder.

Also worth a note: The PPSF on 2nd is dramatically lower than is common in the Hills, reflecting the tradeoffs involved here. The sale closed at $409/PSF. You know that's low, but here's some perspective:
  • 620 9th (4br/4ba, 3700 sq. ft.), similarly sized in a better location, needing lots of work, closed for $577/PSF in May (see "Low on the Hill");
  • Flawed, crusty 402 Larsson (3br/3ba, 1800 sq. ft.) sold for $453/PSF in June; and
  • 918 10th (5br/5ba, 4475 sq. ft.) (pictured), nearly the same size as 1042 2nd, closed at $592/PSF in July.
Suffice it to say that 1042 2nd has set a new low for value by the square foot.

That same $409/PSF level was hit recently on a fire sale (not literally) of new construction in the Trees, at 560 36th (4br/4ba, 3800 sq. ft.), which sold for $1.555m. (See "New for $1.5m.")

Finally, though we're actually impressed with the sale price and the markup over 2004, it's worth a mention that the sellers tried for a much grander markup at the outset. The listing began at $2.395m (+$935k/+64% over acquisition) in July 2008, dragging on for 11 months as the sellers only gradually dropped the price. It was last at $1.999m, so the buyers took an extra 10% off in the negotiations.

When the deal was made in June at that price (see "Some Pickup"), MBC pledged to call it a "surprise" if the deal closed above $1.65m. It did, and it's official – we're surprised.
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