Short in the Sand

By Dave Fratello | July 13th, 2009
Each of the regions west of Sepulveda has a brewing issue or two with new construction.

In the Trees, spec construction is almost gone, but there's been discounting, losses and a couple of REOs on the slide down.

In the Hill Section, for the whole of this year, just one closed sale of new construction (930 John at $3.7m) and just a few pending escrows. This, despite 10 or more new homes sitting on the market.

In the Sand Section, we're starting to see some distress also among new homes.

A fairly good outcome appears to be on the way for 425 26th (5br/5ba, 4400 sq. ft.), a new contemporary with big views over Grandview Elementary that began in March 2008 at $3.75m.

They've got a buyer now, after the most recent cut to $2.475m (listing can be viewed while in "backup offer" status), official designation of the offering as a short sale, and the addition of this language to the listing:
Major price reduction again. If you can show me a better Ocean view SFR new construction value on a full lot at the beach please show me.
425 26th was "DOM Champ" for the Sand Section, by MBC's count, as of early June.

The lot was acquired at or around the market peak in April 2007 for $1.725m; the last public price for the completed home was just $750k higher. As the move to a short sale indicates, the home cost somewhat more than that to build.

Not officially short, but priced to deliver the builder a loss, is 502 24th (4br/4ba, 3875 sq. ft.), also near Grandview – right across from the parking lot – but lacking any views.

The location has been utterly punishing to this listing. The inspired (and "green") contemporary was apparently built on the premise that you could get $5m for this kind of house.

Then they dropped the price to $4m.

Now, after a long series of cuts, including a few last week and one Monday, it's at $3.195m. The listing says it's: "Now priced at least $750,000 under the cost of construction."

The home is very cool (MBC has also called it "fun"), but it's bad news that the larger view home on 26th went for something near $2.4m.

The lot at 24th appears to have been acquired for $1.375m in April 2005.

217 32nd Place (4br/4ba, 3050 sq. ft.) hit the market almost a year ago at $2.799m, which did seem excessive for a pretty straightforward build boasting an unusual alley/alley corner location. (Unusual in the "not so great" sense, that is.)

Nothing much happened with the first listing, but it began fresh with a new agent this March at $2.399m before chopping this week to $1.999m along with the official designation as a short sale. Specifically:
Less than full price offer will be a short sale/price & commission subject to lender approval.
Under $2m must be some kind of deal, because, as the listing notes, the home was: "Appraised at 3.2 mil end of 2008!!!"

The land here was acquired for $1.2m in July 2006.

Three listings, two with major location issues, won't define the market, but, as we have seen elsewhere, the weakest links do start pulling down prices no matter what their specific issues.

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