There is a famous old saying in the commodities market that goes along the lines of: “The cure for high prices is – high prices.”
It is a simple statement on supply and demand that anyone would learn in Economics 101.
In today’s South Bay home market, the supply squeeze on homes for sale has been unrelenting. As the strong demand continues along with record low homes for sale, home prices can keep climbing.
So, when does it stop?
Essentially, when prices get too high, and buyers throw in the towel. (High enough prices drive away the demand.)
Right now, we are not there yet.
There are, however, new listings with aggressive asking prices that can shift the market into a continued fervor if the sellers can pull it off. And, they just might.
This week, I am going to explore some record asking prices that could prove to be catalysts for a tectonic shift in the South Bay marketplace.
Pristine Manhattan Beach Strand
A newly minted listing debuted on The Strand last week and accurately tagged as “one of the finest homes ever built in Manhattan Beach.”
- 3216 The Strand, Manhattan Beach
- 5 beds, 6 baths, 7,454 sq. ft., 3,494 sq. ft. lot
- Asking Price: $30,000,000
Without question this can be considered a “masterpiece” as the attention to detail is apparent in every room of this beautiful home.
When you look at the comparable sales, you’ll notice the highest MLS Strand sale in Manhattan Beach occurred in 2017 for an oversized corner lot at $21 million for 1000 The Strand.
More recently, the second highest sale closed in October of 2021 for a newly built south Manhattan location. See below:
- 508 The Strand, Manhattan Beach
- 5 beds, 6 baths, 4,325 sq. ft., 3,337 sq. ft. lot
- Sold Price: $19,200,000
If you were to ask my opinion, I’d much prefer the South Manhattan location at 508 The Strand, but the finished product at 3216 The Strand is on another level.
The $19.2 million comp closed for $4,439 a square foot.
The $30 million dollar subject is asking $4,024 a square foot thanks to its massive footprint.
It certainly makes the asking price more palatable, but $30 million is still $30 million. That is $10 million more than the highest sale and a big sacrifice on location.
The market will bear what it is worth based on what a buyer is willing to pay for the home.
If the $30 million listing gets its price, or anywhere near it, then that will represent a tectonic shift for valuing Manhattan Beach Strand values from land to turnkey residences. The tremors would be felt on valuing 100 and 200-block walkstreet properties and feed into the rest of the market over time.
As the Manhattan Beach market goes, so can the rest of the South Bay.
If you are a South Bay real estate bull, you want this one to sell high. If you are hoping for lower prices, you pray this listing sits and/or sells for a significantly lower price.
This $30 million Strand listing can have huge implications for the market and is one to follow closely.
Behemoth on Via Cerritos
Next up is the two-week-old listing in Palos Verdes Estates’ prestigious Monte Malaga.
- 2022 Via Cerritos, Palos Verdes Estates
- 8 beds, 12 baths, 11,600 sq. ft., 51,158 sq. ft. lot
- Asking Price: $17,900,000
If nearly two acres, 11,000 square feet, and Pacific Ocean views are your jam, then a property of this size and scale is tough to find outside of Rolling Hills.
Unless of course, you missed the Roessler Estate…
- 909 Via Coronel, Palos Verdes Estates
- 7 beds, 15 baths, 13,032 sq. ft., 137,923 sq. ft. lot
- Under Contract Asking Price: $18,950,000
This listing was a two-year process to make a deal, originally asking $27.5 million, and ultimately going to escrow at the end of the 2021 (and is still pending). Over 13,000 square feet and three acres of Palos Verdes Estate history, this will likely serve as Via Cerritos’ comp.
Which one is more appealing? I’ll let you be the judge.
If Via Coronel gets near its asking price, and in the future, Via Cerritos lands a similar price or more – then I expect this is have a huge impact on the Palos Verdes marketplace and beyond.
It is a tall order and perhaps fanciful, but this market has delivered higher prices after higher prices for the last 18 months.
Hollywood Riviera / Redondo In-Line
To share an example of an aggressive price that eventually came back down to earth, there is an excellent case study in Hollywood Riviera.
Note: The addresses here say Redondo Beach, but it is within the city of Torrance’s boundaries.
- 425 Paseo De La Playa, Redondo Beach
- 3 beds, 4 baths, 2,776 sq. ft., 28,163 sq. ft. lot
- Asking Price: $12,000,000
This property came out aggressively in 2020 asking $12 million. Another potential “aggressive” sale much like The Strand and Via Cerritos mentioned above.
Its two Paseo De La Playa comps existed as heavier fixers and sold in 2020 and 2021 for $5.175 million (505 Paseo De La Playa) and $5.65 million (529 Paseo De La Playa).
How could a property sell for more than double its comps? Are we in that crazy of a market?
The property went to escrow asking $12 million and eventually sold for whopping discount with an official close of $6.9 million. MUCH more in-line with the comparable sales.
This listing could have represented a major shift for the marketplace, but alas, buyers (and eventually the seller) were only willing to pay a small premium above the comps for a move-in ready home.
These aggressive asking prices are not without merit in a crazy housing market.
It remains to be seen if these sellers can continue the hot streak, or if high prices will be the cure for high prices.
I’ll continue to watch and report on it week-in and week-out.