It is not often you get a large publicly traded home builder doing business on The Hill. Quite frankly, the scale and economics rarely pencil for large builder operations. In addition, the Palos Verdes Peninsula poses many challenges like countless environmental issues, wealthy neighbors opposing new development, and not much land left (other than parkland) to develop.
D.R. Horton “America’s Builder” on The Hill
A new subdivision in Rolling Hills Estates on the corner of Palos Verdes Drive North and Palos Verdes Drive East includes 12 new lots that can be sold as single-family residences. The newly created street called Casaba Road can be accessed off Montecillo Drive which is the street that takes you to Jack Kramer Club, known by locals simply as “The Kramer Club.”
Let me be clear, D.R. Horton did not subdivide this lot. Per title records it looks to have been subdivided by another party that began selling lots between 2014 and 2015. As a result, there have been home builders, speculators, and retail home buyers throwing their hat into ring on this brand new street.
Of the 12 lots, it appears D.R. Horton owns five of the lots while currently listing two new construction homes for sale on the MLS.
The remaining seven lots are owned by what look to be a mix of two retail home owners, one individual speculator, three entities (that we are simply guessing were part of the previous party to subdivide), and one last lot owned by the good ole’ Kramer Club.
Casaba Road Lots
Starting with the two retail buyers, 2 Casaba Road and 3 Casaba Road were newly completed homes back in 2014 that are 4,200 square feet. Those found the street’s only current home owners and were purchased off-market for $2.4 million and $2.6 million respectively. Since then there have been only a few pre-construction canceled and expired listings, but no other sales to be had. So for all intents and purposes, those are the comparable sales.
That leaves us with the five lots owned by D.R. Horton and one lot owned by the speculator. According to our not always reliable title software, it looks like D.R. purchased their lots for about $900,000 each while the speculator only paid $790,000. The lots are completed or being built, and a battle for buyers is beginning to ensue.
D.R. Horton fired the first shot on the coming new construction supply in November and listed their beautifully staged flagship lot at $2.499 million at 11 Casaba Road. At 4,112 square feet, this one is right in line with the 2014 comparable sales both in price and in livable square footage. “America’s #1 Homebuilder by Builder Magazine since 2002,” according to their website, seems pretty gosh darn reasonable with their pricing.
The speculator decided it was time to compete with D.R. Horton and listed his gorgeous new property at 12 Casaba Road this past December at $2.999 million to set the tone on what can be expected of new 2016 construction at a whopping 4,600 square feet.
And the last move made was this month by D.R. Horton listing 9 Casaba Road at 4,700 square feet, but undercutting the speculator asking only $2.805 million.
The chess match has begun and guess what? Not one of those three homes has found a buyer.
To be fair, none of the listings have been on the market for longer than two months and the new mega-home by D.R. Horton has only been on the public market for six days. Certainly no one is panicked, but it cannot be comfortable for the sellers with the looming supply D.R. Horton will be bringing to market.
Conclusion
In the end, it is great to see a big home builder like D.R. Horton express confidence in the Palos Verdes real estate by making such a large investment in Rolling Hills Estates. It does show the massive risk, however, that they do take on in their business.
Putting this all in perspective, Rolling Hills Estates had 135 sales in 2016 and only four homes sold above $2.7 million. Yikes! And for all those familiar with this area, Casaba Road does not lend itself to what most locals consider a sterling location as P.V. Drive North is an ominous presence with traffic and noise.
I am sure the two current home owners are watching with great interest to see how this shakes out to see if they can score some equity after 2+ years of taking the chance of being the first buyers of the subdivision. If you are an interested buying party in this subdivision, we would highly recommend sitting on the sidelines until these first couple of properties find their pricing. Be patient! There are more of these homes to come.
Richard Haynes
DRE: 01779425
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The Richard Haynes Real Estate ShowA leader in South Bay real estate for the better part of a decade, Richard thrives as an advisor to his clients with over $248 million in sales as a broker or investment principal at his boutique agency, Haynes. Richard is known for his keen local market insights which have been featured in the L.A. Times, The Street, and Forbes, along with his weekly South Bay real estate blog. [read more]