Hermosa Valley Pocket Lands Exceptional New Home Gains

I am quite excited for the next couple of weeks. Why you say? Well, Friday is the final day of the third quarter and there will be some juicy data to cover beginning next week.

What will inventory levels look like? Will price growth decelerate dramatically thanks to interest rates above 6%? Are sales shifting in a meaningful way? These will be important questions to answer.

I will be sharing insight on my Instagram and podcast in the coming weeks if you’d like to follow along. You can expect to find a deep dive into quarterly numbers, affordability, and happenings throughout the South Bay home market.

Today’s blog is going to cover a small, yet strongly performing pocket of Hermosa Beach.

Hermosa Valley Pocket

Most South Bay real estate professionals know the Hermosa Valley submarket is the section of the city between the Sand Section and East Hermosa Beach. What are the boundaries exactly?

Essentially, the boundaries are Valley Drive to Pacific Coast Highway when south of the Pier Avenue, and when north of Pier Ave, the western boundary is bottom of the Loma Drive sand dune up to PCH.

Today I am going to zero in on the northeast pocket of this Hermosa Valley submarket. This small neighborhood begins at the base of Ardmore Avenue and significantly climbs in altitude up to PCH.

In this area you see a chunk of single-family lots around 5,000 sq ft. As the elevation rises to PCH, owners receive gorgeous views of the valley and some properties hold fabulous views of the Pacific and Palos Verdes with the privacy of a cul-de-sac streets.

As the beach cities have grown in popularity over the past couple of decades, this unique pocket has been the focus of many spec developers and industrious homeowners.

I want to share a triptych, so to speak, of three new builds that were all side-by-side-by-side to demonstrate the pocket’s strong appreciation over the years.

Past Home Sales

Below are past sales to help set the stage for the segment of new home sales this year.

661 25^th Street

• 5,203 sq. ft., 5-beds/5-baths, 5,559 sq. ft. lot
• Sold for $4,400,000 (1/3/2020)

Right before the coronavirus pandemic became a national emergency, this spec home with views of the valley and Pacific Ocean in our northeast Hermosa Valley pocket came to market asking just under $4.7 million. It closed about three months later at $4.4 million to start 2020.

719 24^th Place

• 4,585 sq. ft., 5-beds/5-baths, 4,100 sq. ft. lot
• Sold for $4,725,000 (1/31/2022)

Just 28 days later, this custom contemporary home landed a $4.725 million price tag thanks to its ultra-high-end finishes. That was not without testing the market for the better part of a year and a half starting with an asking price of $5.65 million.

These two home sales kicked off 2020 (pre-pandemic) and solidified large spec home values in the mid $4 million range.

Trifecta of Closings

Fast forward two and a half years and we have a trifecta of neighboring properties sales to examine after the volatile pandemic market the South Bay experienced since February of 2020.

724 24^th Place

• 4,500 sq. ft., 5-beds/5-baths, 4,700 sq. ft. lot
• Sold for $6,000,000 (5/19/2022)

A big-time sale that was sold pre-completion right as the market was beginning its shift thanks to rapidly rising interest rates.

730 24^th Place

• 4,725 sq. ft., 6-beds/6-baths, 4,060 sq. ft. lot
• Sold $5,400,000 (8/2/2022)

Custom-built, this fabulously finished home with outrageous southern views of the Queen’s necklace and Palos Verdes Peninsula got a deal done at $5.4 million after working hard to catch the end of the hot market starting out at $6.1 million asking price in February of 2022. Perhaps if they listed a few months earlier there was a chance they would have gotten that $6 million number.

720 24^th Place

• 4,500 sq. ft., 5-beds/5-baths, 4,700 sq. ft. lot
• Sold for $5,700,000 (9/22/2022)

Finally, the most recent sale of the three neighbors closing last month settled at a $5.7 million price. This was a nice result considering the shifting market in full swing and its unconventional aesthetics for a South Bay beach home.

What do these three sales tell us? The northeast pocket of Hermosa Valley has constant, strong demand throughout this shift in the housing market whether it be pandemic or surging interest rate effects.

At the time of the 2020 sales showcased in the first section, those were record prices for the pocket and now today, we are seeing a $1.5 million increase in some cases.

Land Values & Property Appreciation

As regular readers know, I harp that new construction sales raise prices for all homeowners in a specific marketplace.

We saw land prices in 2016 and 2017 trend in the $1.6 to $1.7 million range in the northeast of the Hermosa Valley. Thanks to 2020 sales, we saw land prices jump to the $2 millions as a result and even an oversized lot at 707 24^th Place (a whopping 7,500 sq ft) sold for $2.9 million.

Additionally, the new homes that closed in January of 2020 had to be nervous about their home values just a few weeks later when the coronavirus led our economy into a recession. That said, with 20/20 hindsight, those owners have seen 20% to 30% appreciation thanks to the latest round of speculators and eager buyers meeting supply.

For now, northeast Hermosa Valley property continues its climb thanks to it offering the desirable combination of large lots, privacy, and big ocean views.

Next Week

Be sure to check out next week’s blog for some of the most important numbers of the year – Q3 home data. I think we will be able to see some of the impacts of rapidly rising interest rates on our local South Bay home market.

Which markets are staying strong? Which markets are now slowing like some national home markets many of you read about? I will be sharing all my research and insights.

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