Dirt Cheaper?

Posted by Dave Fratello on Thursday, June 4th, 2009 at 6:00am.

Among the cottages and land sales around town that seem to keep pushing values down, 1733 Elm may be the biggest eye-opener.

How big?

Let's first revisit the rant-against-the-wind published by way of paid advertising by a local spec builder back in January 2008 (see "A Builder's Take").

Those ads included this memorable prophesy:
In order to sell new homes under $2 million, the price of building sites needs to drop 40%, down to $700,000-$800,000. This will not happen in Manhattan Beach because there are too many investors and home buyers willing to pay much closer to $1 million for a site to build their dream house and still manage to accumulate equity.
Not even 18 months have elapsed, and that "will not happen" has just happened.

1733 Elm (3br/2ba, 1325 sq. ft.) closed last week for $801k as a short sale.

Say what you may about Elm, but the location is not subpar like some of the other lot sales and lower-end sales recently. This is a nice lot in a decent location.

The home needs work. In fact, work was under way, and that appears to have precipitated the short sale. (Not a fun story.) The home lacks basic services in the kitchen and bath areas. You can flatten the pre-remodeled home or pick up where the former owners left off. (We don't know the new owners' plans.)

Bottom line: The dirt just went for less than anyone would like to say.

And there's something to measure against, here, too: The same home changed hands in Oct. 2004 for $1.050m, needing work.

So what does $800k dial us back to, time-wise? Maybe 2002?

Here is yet another case in the quickly evolving pantheon of short sales and REOs decimating comps. You hear about it in every market, now we see it here.

Some other recent sales that are, or could be, lot sales to private parties:
  • 1900 Laurel – a 6000-sq.-ft. (125% size) corner lot in a terrific location sold for $1.25m in January 2009.
  • 1205 Walnut, a 6700-sq.-ft. lot (150% size), too close to MBB, closed for $985k in late March.
  • 2111 Valley, a standard 4400-sq.-ft. lot, went for $725k in mid-April.
Against those comps, $800k for 1733 Elm is still a significant deal.

Also these days, we're waiting for a closed price on 2300 Laurel. Like 1900 Laurel, it's also a corner lot, but just 4800 sq. ft., smaller and inferior to 1900. It was last at $1.279m, which, you'll note, is above the closed price 1900 Laurel; we'll see on that one.

So is dirt getting cheaper in the Trees? Signs point to "yes."
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