The South Bay luxury home market is a game of high stakes.
Unlike the typical South Bay median priced sale ranging from $1.25 million to $2.6 million, the luxury market has fewer buyers and sellers. This scarcity can produce incredibly positive sale results, but at the same time extremely negative sale results.
Looking back over the past six months, alongside the wild pandemic year of 2020, we saw an interesting market of sellers who needed to sell, along with buyers who were extremely motivated to buy. As a result, there were luxury home sales that ended not so great for some sellers, but at the same time, went very right for other sellers depending on the situation.
This week’s blog post will bring to light three examples of luxury sales gone wrong and three examples of luxury sales gone right.
Palos Verdes Peninsula
The first property takes us to the beautiful Malaga Cove in Palos Verdes Estates, a submarket that underperformed compared to the rest of PVE in 2020. That said, this home sale resulted in a huge win for a seller.
- 824 Via Del Monte
- 6 bed, 8 bath, 9,853 sq. ft., 22,873 sq. ft. lot
- Sold Price: $10,430,000
Originally priced asking $12.995 million, this “Mediterranean Villa” sold in just under two months.
Despite the drop in price by over $2.5 million, this was a big score for the sellers after acquiring it just five years ago for $4.7 million. The owners obviously invested significant capital into the rehabilitation of the home’s finishes, but likely at a cost far smaller than their gain.
Considering the pandemic and the spec home at 941 Via Nogales struggles to command above $10 million, this is a big win for the seller on price and speed of sale.
Rolling Hills was the fourth best performing submarket of 2020 with median prices up 21.3%; however, a sale on Upper Blackwater Canyon was surely a huge disappointment for the seller.
- 15 Upper Blackwater Canyon Road
- 6 bed, 8 bath, 8,095 sq. ft., 252,764 sq. ft. lot
- Sold Price: $5,815,000
This home was originally purchased for $4.9 million all the way back in 2011…that is 10 years ago!
After a remodel sometime during ownership along with a failed listing in 2019 at an asking price of $7.95 million, it was re-listed in 2020 where the sellers eventually took a massive discount and closed for $5.815 million.
To hold a property for a decade and spend money on updates, a 19% gain that barely keeps pace with inflation over that time must be a huge disappointment.
East Manhattan Beach was one of the best performing submarkets in 2020 and this home sale was no exception.
- 117 S. Meadows Avenue
- 5 bed, 5 bath, 4,671 sq. ft., 9,511 sq. ft. lot
- Sold Price: $5,000,000
Coming to the MLS in September, this home made a deal in just 11 days and sold over asking by $105,000. That is just the tip of the iceberg as the owners purchased the oversized 9,500 square foot lot for just $1.6 million in 2013 and built the 4,600 square foot home a year later.
Considering the timing of the purchase and construction prices at the time, the owners got to enjoy an amazing, custom home for six years and score a hefty profit. Tough to find a sale that can go much more right than this.
A listing adventure for five years ends with over a $10 million discount on the Manhattan Beach Strand.
- 2722 The Strand
- 8 bed, 9 bath, 6,025 sq. ft., 6,927 sq. ft. lot
- Sold Price: $17,750,000
Originally listed in 2015 for a whopping (and outrageous) $28.5 million, this double corner Strand lot property had an awfully long journey to sell.
Take a look for yourself:
- 2015: $28.5 million
- 2017: $25.65 million
- 2018: $23.995 million
- 2019: $22.75 million
- 2020: $17.75 million
Now, by no means did the seller lose here. Per public records (that are not always correct), the property was purchased by the owner for $2.3 million in 1995. So, they did just fine.
That all said, can you imagine if the property had been reasonably priced in 2017? Perhaps it would have sold for more during a better time in the economy…or, even just sold for the same amount. That money could have been invested elsewhere and grown beyond the $17 million dollars.
In terms of timing and result, this was a prime beachfront property that should have never taken five years to sell. Also, it definitely could have had a shot of getting more than $17 million with a different pricing strategy…and, as a result, would have avoided selling into a pandemic market at a massive discount.
While Hermosa Beach single-family homes saw their median prices go higher by almost 20% in 2020, it is not easy to sell a luxury home in under two years from the previous purchase.
- 1921 Power Street
- 6 bed, 5 bath, 4,718 sq. ft., 13,135 sq. ft. lot
- Sold Price: $6,150,000
This estate home by the beach, located in the Hermosa Valley, landed a big price of $5,962,430 in April of 2018.
Less than two years later, the owner came out asking $6.5 million in February of 2020. This was right as the Coronavirus was taking hold of the world as a global event. Not great timing at all.
Despite the economic woes and pandemic, this property made a deal in May and closed at $6.15 million. After commissions and closing costs, the Seller likely incurred a very small loss, but to come out even in under two years during a very scary time in this financial market is a sale that definitely went right.
Finally, I leave you with a risky spec development on the Hermosa Strand that did not work out as planned.
- 212 The Strand
- 7 bed, 12 bath, 12,640 sq. ft., 9,996 sq. ft. lot
- Sold Price: $8,200,000
This spec home lot was purchased in 2015 for $5.8 million.
In 2019, a long four years later, it was finally completed and listed for $10.9 million. Unfortunately, it sold for a sizable discount in July of 2020 at a final price of $8.2 million.
When factoring the lot price, cost of building, holding costs, and closing/commission expenses, this spec investment broke even at best. Five years and a substantial amount of risk, this luxury sale was a massive disappointment and another example of how you hope for things to go right, but sometimes they just go wrong.
If you are looking to invest in or sell luxury real estate, you need to really understand the high risk, high reward market when jumping into the game. Be sure you’re on the side of having it “go right.”