Sand Happ'nin's

Posted by Dave Fratello on Wednesday, April 30th, 2008 at 4:09am.

There's action in a few parts of the Sand Section. Not sales – no new ones since April 15 – but action worth a look.

First, as we go to press (?), SFR inventory in the Sand Section is at 40, the highest we've seen in a year-plus of public market tracking. That's already +5 over the figure at mid-month. (See this story for a graph.)

There's one less listing in that mix, though. The toe-dipping, market-testing, ultra-modern walkstreet home at 528 6th (pictured) has now called it quits. The listing was withdrawn and the signs are down.

This home hit the market in mid-November 2007 at $3.449m, fully $450k higher (+15%) than its Feb. 2006 purchase price ($2.995m). That was ambitious.

Though we know some people liked it, the market snubbed 528 6th. Its stark, angular modern design just isn't what the typical family is looking for. (The apparently bogus square footage reported in the listing also drew MBC's ire in "Buyer, You'd Better Verify.")

More importantly, the sellers' attempt to play to scarcity in the market simply didn't work. True, when the listing emerged there were few South End walkstreet options, and there's always talk about how "pent-up" demand is for such homes. But 528 6th is just one door in off of Valley, not a classic walkstreet feel, and, well, maybe demand is not so pent-up after all. (See "Options Grow on South End Walkstreets.") The sellers never cut their price in an effort to move it, and appear to have decided to keep it.

Much further north – up at the Gateway to Manhattan Beach – there's a long-running case of involuntary keeping of a property: 4419 Highland (click for details via Redfin). You all know the story here, so we won't rehash it.

It was most recently offered for rent, but the news is that you can now buy 4419 Highland on a lease-option basis.

A lease-option. When another El Porto (El Norte!) listing sang this siren song last Summer, we presented the sellers' pitch and described the pitfalls. (See "The Lease-Option Gambit.") The home did sell pretty quickly, though, so we gave credit for creativity to the sellers then.

To compress the essence of our story from last year, the catch to a lease-option can be that you put up a high security deposit thinking it'll be part of your down payment. Then, 12-24 months after agreeing to purchase the home at today's price, you either do so, or you walk and the landlord/seller keeps your cash. The worst part, in a declining market, is being frozen into an agreement to pay today's price ($1.299m for 4419 Highland).

There are a hundred ways to offer a lease-option, however, and we won't assume this is a bad deal on the Gateway till we get more detail.

Finally, back down South, we have a case of a neighbor perhaps undercutting another. 401 3rd St. (click for pics & details via Redfin) just hit the market at $2.685m – a decent price for a sizable (4br/4ba, 3450 sq. ft.), newer home (an older home radically remodeled in 2006).

Across the street, 400 3rd (click for details) is a lovely corner-lot Nantucket (Cape Cod?) with 4br/4ba and 4050 sq. ft., priced at $3.499m. That's a difference of $814k for two comparable homes with almost the same location.

Because 401 has a narrow street frontage and 400 has that coveted corner, location advantage definitely goes to 400. And 400 offers 600 extra square feet. But is it an $800k advantage?

By PPSF, 401 is undercutting 400 by 10% ($778/PSF vs. $864/PSF). If it sold tomorrow morning at full price, 401 3rd might ultimately cost the sellers of 400 3rd $200k or more. Both sellers would walk away happy, but there could be grounds for a grudge.
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