Knocking Down 524 15th

By Dave Fratello | October 11th, 2013

You could almost call 524 15th the last bidding war of the last cycle.

It sold way-back-then, 6 years ago, and it has just sold again. Now the site is getting a major reboot. (A rebuild.)

The 2007 public-market price and the 2013 off-market price turned out to be essentially equal. But whereas builders didn't want it way-back-when, they sure did this time.

Let's first look back at the prior sale.

Back in 2007, while MBC was watching day by day and reporting on what looked like a softening market (yes it was), we were savvy to something happening then that did not look like a sign of decline. They were about to have multiple offers for 524 15th.

In our post then, we noted that the start price of $2.200M on the 2200 sq. ft. 1960s home, which we called "[d]ated, forlorn and a bit musty," was just the beginning for what someone would have to put into it. We thought it'd be very pricey to improve it:

To capture the potential here, you're going to take out the fireplace, raise the roof, build a deck – generally treat the existing layout like a bad first draft.

Modernizing the house seemed like such a huge task, we just bet on builders to take it. That was our call, even though we conceded that builders were losing confidence in downstream resale prices. Was it really the time to start a new project?

We bet wrong. An "owner-user" bought 524 14th, spiffed it up and held it for 6 years – no doubt happy ones. They went way over asking price to get it: $2.487M.

This Summer, 524 15th traded again – this time to a builder, for the 2007 number: $2.500M (off market).

And the lot scrape has now begun.

So, yes, in 2007, this was seen as a great location (as it is now), and there were plenty of buyers. But the ones willing to pay most cared more about living there than about building.

Back in 2007, it didn't look like a new house on this lot could be reliably sold for $4.2-$4.5M.

But now, even with the higher lot acquisition cost, the sale of a new home pencils out as profitable. In today's market, it makes sense to a builder to make a run, because they can sell much higher.

How much higher? Right now, they're thinking a lot higher. But let's give them about 18 months to figure that out. We're not going to bet one way or the other on this one again.

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