lot values

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It was about 6 years ago. The last real estate upcycle had begun to stall out. New construction sales slowed. A local builder took it upon himself to convince wary buyers that it was an excellent time to buy.

In our January 2008 post here at MBC (see "A Builder's Take"), we copied this extraordinary half-page print ad placed by the builder and discussed the ad's message. (Click to enlarge.)

Memorably titled, "The Crystal Ball Story," the ad said that new home prices could not go lower, and that buying in early 2008, you'd find your investment up 20% in 5 years.

As time has passed, the message of the half-page ad has proved to be about half right and about half wrong.

The wrong parts are easy to spot. The ad noted that many (then) new homes were built…

Earlier this year, we were already amazed at the runup in land values in the Tree Section. (See "Tree Section Lot Values Spike Again.")

The newest closed sale exceeds the points of reference we had before.

That's at 738 29th St., a standard-size 4800 sq. ft. corner lot in a very quiet, favorable location along Agnes.

They listed it publicly at $1.495M, conscious that a larger, nearby lot with a nice location at 750 30th had recently settled for $1.515M.

But that $1.5-ish price turned out to be just the starting point.

A rush of early offers came in, and the victor paid $1.750M.

Our information is that the buyers are, as they say, "owner/users" intending a custom new build for themselves. Spec builders were in the mix at this price level as well.

People love to love the flat walkstreets in Manhattan Beach's South End.

Spec builders and folks who want to build for themselves keep paying more for the land.

The latest eye-opening land trade is a lot that went to a spec builder at 504 8th St. for $2.000M. The sale posted recently in the tax records.

The buyer is the development LLC that recently built and sold 340 6th St. (5br/5ba, 3600 sq. ft.), a modern Plantation style home.

The builder paid $1.825M for the dirt there on 6th back in July 2012. The completed home sold for $4.235M in December 2013, hitting a new high on a PPSF basis for the flat family walkstreets.

However, that sale fell slightly short of the off-market sale price on a new home at 337 7th (4br/4200 sq. ft.) at $4.500M. (See "

When spec builders were running wild in the prior cycle, 2000-2007, Tree Section lot values rose to meet the demand from builders.

Generally speaking, lots gradually began to trade at an average of $1.3M, occasionally climbing higher, to the mid-1.4s. (For instance, 2310 Palm, a standard 4480 at $1.450M, and 2807 Elm, bigger at 5600 sq. ft., at $1.475M.)

When the market took a dump, and spec builders disappeared, a standard lot in an average location in the Trees could be had at or near $800K. It was quite a comedown, but demand is funny that way.

The market for lots has begun to boom after bottoming out like that. Owner/user types came back first, wanting lots for custom builds. Then a high-end spec building frenzy began anew. 

It's almost funny to…