How Location Matters for Tree Section New Home Values

By Dave Fratello | July 8th, 2020

3509 Pine Avenue Manhattan Beach CAThere was a fairly large ask/close spread for the new construction sale at 3509 Pine (5br/6ba, 3250 sqft.) in the Tree Section.

Asking price, out of the gates in early March, was $3.519M.

The closed price this week: $3.125M.

At first glance, you might wonder if the builder took a huge hit, almost $400K, because of the COVID-19 shutdown.

But place the sale in context, and the number looks OK. What was wrong was the overly ambitious asking price.

The way to see that clearly is to stack up some data.

We packaged a little over 2 years' worth of Tree Section new construction sales data.

A pattern emerges upon a quick glance: Better locations mean higher prices, and OK locations mean OK prices.

Here are some charts to show what we mean.

We've already separated the "OK locations" out for a first look. By studying the addresses, you can see many are on the outer periphery of the Tree Section, or on streets with challenges. 

Most were also smaller than the average homes in the next, higher-priced group, with these in the 3100-3200 sqft. range. Just a few exceptions were larger (3000/3004 Pacific and 717 35th, nearly 3600 sqft. each).

You will see that homes in this "OK" group have tended to sell in the low 3's, with a couple dipping under $3.0M. The lowest sale, 3604 Walnut ($2.815M), enjoys prominent views of the refinery.

The highest price on the chart also corresponds to the best location* on the chart: 1820 Pine (5br/6ba, 3135 sqft.) at $3.375M.

This is where 3509 Pine, this week's sale, belongs. It's a credible number for this group, whatever the start price might have been.

Here's our second group of sales.

As noted, almost all are around 3500-3600 sqft., so a bit bigger than most in the set above.

More importantly, these locations are all notably more desirable.

You'll see 3 sales in a cluster near Pacific school (14th St. and 12th Ct.) that are all very near $3.700M.

The others are mostly $4M and above. They include homes on much-sought-after John St. and Palm Ave.

At $1,000/PSF or so for many of these new homes, the few hundred extra square feet in the homes in this group won't fully explain the $700K-$1.0M price differences.

Location does help explain the difference.

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* 1820 Pine would probably be regarded by most as quite a bit better than an "OK" location; its inclusion on the chart is more tied to its smaller square footage.

NERDY NOTE: There is a whole different, higher tier of Tree Section new construction that we're not tackling here: Homes above 3800 sqft. You can find houses in the high 4000s through the high 5000s in terms of interior square footage, often with basements and/or larger lots. We didn't go there because the focus was on more typically sized homes to help put the 3509 Pine sale in context.

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