Not Holding Out

Posted by Dave Fratello on Thursday, August 28th, 2008 at 5:32am.

Builders with new homes on offer in this market know that it will take some combination of patience and price-chopping to make a deal. How to balance the two?

When they started their projects 18-24 months ago, they had to plan for the ultimate market value upon completion. But the market, particularly in the Tree Section, has slowed to a crawl, and a yearlong glut is only gradually being reduced. Asking prices, overall, have been adjusting downward.

In this environment, what was supposed to be an elite-level, high-priced home at 560 36th is now heading to the bargain bin. (Click highlighted address for details via Redfin.) The seller here is more focused on the price-chopping approach than on eternal patience.

The original ambitions for this new home were top-tier: It began just $1k shy of $3 million in late March.

It's big – 4br/4ba and 3800 sq. ft., a good 500+ sq. ft. larger than the typical Tree Section newbie. And though it's sharply modern in style, we've always liked the warmth of some of the materials and the overall flow of the house.

Same floorplan with a Cape Cod or Caliterranean look, they might even have a deal by now.

Though the builder thought $3m to start was reasonable, just 2 months later, the price was already down $500k/-17% and the listing was screaming "please submit all reasonable offers!" (Listing price history taken from Redfin.)

Two months? That's nothing for new construction in the Trees these days.

Three more months passed after that, and now, another $300k has come off the price. It's at $2.199m now (-$800k/-27%) after a new cut Wednesday.

At $579/PSF, that's the lowest PPSF for a new home in the Trees that we've seen for a long time. The only PPSF on a new home that came close in the past 6 months was $591/PSF for 2309 Pacific.

That was a true cookie-cutter newbie on a busy street that sold for $1.890m in April. (See 2611 Palm for its twin.) 36th is easily superior.

560 36th is being punished partly because of the location. As the image here shows, the home is distractingly close to the National Guard Armory. And Sand Dune Park – a real local treasure, but one that can get very busy – is also nearby.

And there's the "modern" problem. These high-style homes, by definition, turn off the average person. There goes another segment of potential buyers. More specifically, 560 36th doesn't seem friendly to small children, particularly due to the concrete floors and open staircase between the kitchen and a sunken living area. Whoops, the buyer pool just got smaller, again.

OK, alright, yes, yes, we get it – that seems to be the attitude of the sellers now. They're not holding out.

They are going to find that place at which the clear positives outweigh the negatives and overcome the sluggish market. And once they do, everyone else holding a Tree Section property will have to explain why their prices are magnitudes higher.
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