Looking for Value in an Expensive South Bay Home Market

This South Bay real estate market just won’t quit.

If you are a prospective buyer home hunting, then you are likely exhausted and discouraged.

If you are a recent home seller, then you enjoyed a painless process collecting multiple offers and selling for a big price.

Thanks to an acute shortage of homes on the market, quite simply, there are just not enough homes to go around in the South Bay Beach Cities & Palos Verdes Peninsula.

To give you an idea in numbers, let me show you how few homes there are for sale.

Between Manhattan, Hermosa, Redondo Beach, and the Palos Verdes Hill, as of February 9^th, there were 148 home listings marked as “active” on the MLS.

If you step back, pre-pandemic, to February 2019 the same areas offered a total of 564 homes actively listed on the MLS.

That is how incredible the supply crunch is for home buyers.

As a result, most homes for sale are receiving multiple offers and selling for new records every single day.

So, where can one find value in an expensive, supply-constrained market?

Sometimes you must go digging through the old inventory.

Pre-Coronavirus, seeing a home on the market for longer than three months could be seen as normal – today, it feels like a lifetime.

While potential deals to be found with listings older than 90 days are few and far between, I want to take the opportunity to highlight some homes to help buyers think through how to approach lingering listings that might offer some value.

Below are a few cherry-picked homes from each city that have been active on the MLS for longer than 90 days.

Affordable Optionality in Manhattan Beach

The third lowest priced listing in Manhattan Beach gives a buyer a multitude of options on the cheap.

• 522 Rosecrans Avenue, Manhattan Beach
  • 3 beds, 2 baths, 1,092 sq. ft., 3,006 sq. ft. lot
  • Asking Price: $1,575,000

Just a stone’s throw from El Porto, North Manhattan Beach eateries, and the beach, this listing offers a 2-bedroom home and 1-bed studio above the garage. Use as a fully private property or rent out one of the spaces to make it more affordable.

Thanks to its use on the assessor records as a single-family home, you can likely do a major addition or ground-up build – and of course, permit the studio legally. There are a lot of improvement options, and you are super close to the beach.

Its closest comps on busy Rosecrans were fixed-up and similarly sized, both selling for $1.575 million and $1.645 million.

The seller has already reduced the price once and surely would consider lower offers after 239 days on market. Consider your rehab costs and make a lower offer based on those numbers.

You might make a deal that pencils with current comps. Quite a feat to pull off in this market!

Once Expensive Valmonte, Not So Much Anymore

A big asking price Valmonte home no longer seems like a huge number after the popular Palos Verdes Estates submarket’s torrid price growth over the last 18 months.

• 3649 Navajo Place, Palos Verdes Estates
  • 4 beds, 4 baths, 3,937 sq. ft., 13,384 sq. ft. lot
  • Asking Price: $4,550,000

Newly built in 2008, this home offers modern conveniences of a house built in this millennium. All that said, the home could use a light refresh to match today’s trends (but not much).

Nonetheless, it is very difficult to find “newer” homes in Valmonte.

With land value for a lot of this magnitude going for well over $2 million dollars thanks to recent comps, this home is starting to pencil.

A home of this size, the pool, and landscaping could easily cost $2.5 million to build and two to three years to complete. If land and construction costs the same $4.5 million, then why deal with all the hassle and stress when you can just buy this one?

What’s more, there was a rare new construction spec on Via Nivel that sold at $1,119 a square foot and a record high sale on Via Colorin that got $1,041 a square foot.

Considering there is limited inventory in Valmonte, this home asking $1,155 a square foot is not unreasonable considering what you get. Maybe 226 days ago it was far too much, however, the market has caught up to this interesting opportunity.

It can be had today at a fair deal.

Covered Land Play in NoRo

No place in the South Bay returns profits over time like a North Redondo R-3 lot.

Year after year, new construction townhomes break the previous year’s price highs. If you can grab yourself a piece of this developer’s paradise, you’ll do incredibly well long term.

• 2618 Graham Avenue, Redondo Beach
  • 4 beds, 3 baths, 1,909 sq. ft., 7,501 sq. ft. lot
  • Asking Price: $1,550,000

This property has a lot of hair on it: old house, tenant-occupied, easement with the neighbor to the west, and subject to the seller’s 1031 exchange. There is a lot going on.

But, new construction three-on-a-lots can command $1.3 to $1.4 million in this location. If you can work out the issues and risks while in escrow, there is a $4 million resale development to be had here.

The current price is not a home run for a developer, and likely neither for you. But, if you can get past due diligence and bank the land, long term, it is tough to miss on redevelopment.

Build today if you have experience or build later if you are conservative. Either way should be profitable.

Hermosa Avenue Opportunity

In the north Hermosa Sand Section, there are some stunning multi-level homes recently built that stand tall above The Strand.

These homes offer towering views of Hermosa and epic rooftop decks that act as an extension of even more living space to its residents. Cue our subject property…

• 2434 Hermosa Avenue, Hermosa Beach
  • 5 beds, 6 baths, 4,237 sq. ft., 2,404 sq. ft. lot
  • Asking Price: $7,999,000

This 2014-built home came to market just about 100 days ago originally asking $8.295 million.

Just this past April, another newer home came to market and closed as a great comp for $8.56 million at 2240 Hermosa Avenue.

In this market, a listing with anything remotely close to it as a comparable sale has been selling for over that comp. For this listing, it has made a price cut and is half a million lower than its closest comp.

If sweeping Hermosa Beach views above the Strand are your thing, then this home might be ripe for the picking.

Conclusion

With so few homes to choose from, it is incredibly difficult to find value anywhere.

The above listings were not just hard to dig up, but in some cases, it is a stretch to say they offer value.

However, I remain optimistic that if you are patient and wait for the right spots, there is value to be found in almost all markets.

Hang in there and pray for more inventory.

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