Same Pricing Tactic, Similar Result

By Dave Fratello | May 10th, 2018

Let's stipulate that oversized new construction in prime Tree Section locations represents a rarefied sub-market.

And if you're only going to look on two streets, Palm and John, near Pacific elementary and Martyrs, we're down to a micromarket.

It's within that small universe that we've recently seen 2 similar homes come out with similar prices and close at similar final numbers.

As the sage once put it, it's like deja vu all over again.

1901 Palm Avenue Manhattan Beach CAThe newest sale is at 1901 Palm (5br/7ba, 4750 sqft.).

This large Cape Cod is built along a corner lot that has something of a natural rise to it. This is perhaps the most favorable topography you'll find for a new home, because it allows the garage to be tucked under the main living spaces without a lot of extra shoring or too steep of a driveway.

We've kind of sung the song already about how John and Palm are among the best, quietest streets in the Tree Section, so we'll just say again: Those are great blocks, and this is a great location among those blocks.

Location's the first and most important factor. Then we come to the home design. We said in our mid-January open house post:

1901 Palm Avenue Manhattan Beach CA"The floorplan is familiar, rhyming closely with other new construction from around the Tree Section in these past couple of years. A sparkling bright and open kitchen in back features a dining nook and spacious great room, opening to a covered patio and the backyard via foldaway doors. Also on the main level, at the front of the house, a small formal living room or spacious office is nicely separated from the flow. The very large basement includes a spare bedroom and wet bar, in addition to plenty of space to entertain, play or enjoy a movie."

(To see a quick video of 1901 Palm, click this link to our weekly open-house video - it's queued up to begin right at 1901 Palm.)

So, with something very special to sell, how did they price 1901 John?

Out of the blocks in January, it was $5.500M.

After 3 weeks, a cut of $201K to $5.299M.

After 6 more weeks, a cut of $200K to $5.099M.

And now, the closed sale comes in another $224K lower at $4.875M.

Now, where have we seen that sequence before?

2001 John Street Manhattan Beach CARight. It was at 2001 John (5br/7ba, 4865 sqft.).

That one emerged in July 2016 at $5.475M.

A big, fast correction of $476K came just 10 days in, to $4.999M.

That's where it held for more than 2 months.

Then they cut $250K to $4.749M, trying to show it was time to do business.

And that's when Dave's buyers jumped in, chopping another $99K from the asking price down to $4.650M, where we closed in November 2016.

2001 John Street Manhattan Beach CASo both homes dropped more than 10% from their ambitious start prices. 2001 John went 15% under start, 1901 Palm 11% under start.

Both closed at comparable levels.

1901 Palm sold 5% higher than 2001 John about 16 months later, after the Manhattan Beach median price had risen more than 13%.

If you ignore citywide data and just focus on those 2 homes, the corner-lot location alone could explain the 5% difference.

The homes themselves are extremely similar. The floorplans are nearly identical, by the same architect. Different builders constructed the homes, but used the same designer for the fine points.

And both homes had one listing agent in common, familiar with the drill from the 2001 John sale, and importing the tactic to 1901 Palm.

That tactic might be summarized as "shoot the moon, be confident, cut gradually, and only negotiate when you've got a real buyer."

It's a sales approach that often holds great risks for sellers. Overprice, and you usually take less in the end than you "should have."

But new construction in prime locations seems to be a different category. A rarefied submarket, if you will.

Here, the tactic has done very well twice over.

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