Homer's Shocking Fall

Posted by Dave Fratello on Monday, August 25th, 2008 at 5:04am.

Here's an update to last month's story on the travails of 225 Homer. We have described the property as a:
decent-sized 3br/3ba, 2300 sq. ft. home with substantial ocean views. Contemporary, clean, and nice, nestled in a very quiet part of the South End...
When MBC took note of this one finally making a deal in mid-July, after 100+ DOM, we only thought we were astonished by its drop from a start price of $2.3m. (See "Poor Homer.")

Now that the closed sale price has posted, we're even more amazed. It went for $1.700m, a shocking cut of $600k/-26% from the initial offering price.

The shock is magnified because a significantly smaller, older and crustier home just a few doors down recently went for more money, making a deal quickly in March – just 7 DOM. The neighbor was 207 Homer (3br/3ba, 1800 sq. ft.), which closed at $1.715m and $953/PSF.

207 Homer needed almost everything and its principal asset – ocean view from a window and a balcony – would be at risk if the next home to the west ever builds up. (This is MB; it's only a matter of time.) By contrast, 225 Homer has an alley to the west and is taller, preserving those views.

Look at the closed price on 225 Homer and the PPSF difference is also startling – $739/PSF for the newer, larger home versus $953/PSF at 207 Homer. That's 22% lower that the older neighbor. (Lot sizes are equivalent.)

Finally, let's compare the newest sale with the seller's acquisition price. In August 2002, according to PropertyShark.com, 225 Homer was purchased for $1.342m. Fully 6 years later, it was up just $358k.

Sure, that's a 26% bump, nothing insubstantial, but how many properties in quiet locations, near the beach, with big views, rose in value by such a modest amount during our local boom years?

Two problems hit 225 Homer simultaneously. The local market remained slow into the Spring and Summer and may well have shifted down from March to July, the months in which each property made their deals. Meanwhile, the seller, while not desperate, per se, had abandoned the house and watched it cross 100 DOM, and finally had to get into a deal-making mode – whatever it takes to unload the place.

The change of circumstances over those 100+ days was significant. An early offer at $1.725m was rejected out of hand. At the time, it must have looked like a non-serious lowball. And it was almost crazy – then – to think that 225 Homer should sell for only a trifle more than 207 Homer.

In the end, it sold for less than the neighbor, adding weight to that adage: the first offer is often the best offer.
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