South Redondo’s “The Avenues” New Home Prices Keep Climbing

The South Redondo new construction home market has been on a consistent, steady rise for the past few years. New construction is in demand for affluent buyers in the area, and developers are getting bolder with their home builds.

For this post, we are going to focus on “The Avenues,” a market which is ground-zero for new construction spec homes. The climbing prices follow a similar trend we see in the Manhattan Beach Tree Section market.

New Construction Data

Let’s compare some Avenues new construction year-over-year data from 2018 versus 2017 to see what might be in store for 2019.

2017 New Construction Sales

• 703 Avenue A
  • 4 bed, 5.5 bath, 4,200 square feet
  • Sale Price: $2.85 million

• 825 Avenue A
  • 5 bed, 5.5 bath, 4,376 square feet
  • Sale Price: $2.65 million

• 743 Avenue B
  • 5 bed, 5.5 bath, 5,141 square feet
  • Sale Price: $2.85 million

2018 New Construction Sales

• 626 Avenue C
  • 5 bed, 4.5 bath, 4,000 square feet
  • Sale Price: $3.2 million

• 703 Avenue A
  • 5 bed, 5.5 bath, 4,200 square feet
  • Sale Price: $2.98 million

• 740 Avenue C
  • 5 bed, 5 bath, 4,674 square feet
  • Sale Price: $3.1 million

Although the method is inexact, we can take the median spec home prices above to determine the price growth over the year.

• Median Price
  • 2017
    • $2.85 million
  • 2018
    • $3.1 million

As you can see prices rose $250,000, which is about 8.8%. This is strong and solid growth for any new construction builder resulting in either a quarter of a million dollars in extra profit or the same amount of equity gain for a home owner.

Lot Sale Data

As my readers have come to expect, as new construction prices go higher, so should lot values. But does it add up below? Let’s find out.

2017 Lot Sales

• 326 Avenue E
  • Lot Size: 5,500 square feet
  • Sale Price: $1.31 million

• 742 Avenue A
  • Lot Size: 6,103 square feet
  • Sale Price: $1.3 million

• 746 Avenue A
  • Lot Size: 6,086 square feet
  • Sale Price: $1.36 million (re-sold in 2018 for $1.3 million off-market)

2018 Lot Sales

• 631 Avenue C
  • Lot Size: 6,081 square feet
  • Sale Price: $1.35 million

• 400 Avenue D
  • Lot Size: 6,400 square feet
  • Sale Price: $1.3 million

• 325 Avenue G
  • Lot Size: 5,511 square feet
  • Sale Price: $1.36 million

When you take the median price of these above sales, you are looking at a growth of about $40,000, which is about 3.1%.

• Median Price
  • 2017
    • $1.31 million
  • 2018
    • $1.35 million

What gives here? Developers are making $250,000 more than they were the year before, yet lot prices are up only $40,000. Let’s see what some of the larger existing home prices are doing.

Existing Home Sales Data

These existing homes sales are MUCH harder to compare because of all of the nuances from the year built, to sizing, finish level, condition, etc.

But, let’s do a quick-fire list of somewhat similar existing sales…

2017 Existing Sales

• 844 Avenue B
  • Sold Price: $2.4 million
• 613 Avenue A
  • Sold Price: $2.3 million
• 401 Avenue D
  • Sold Price: $2.61 million
• 641 Avenue C
  • Sold Price: $2.525 million

2018 Existing Sales

• 313 Avenue F
  • Sold Price: $2.795 million
• 230 Avenue D
  • Sold Price: $2.225 million
• 206 Avenue B
  • Sold Price: $2.5 million
• 202 Avenue H
  • Sold Price: $2.55 million

There are a ton of differences between all of these sales but when you take the median sales price, you realize a growth of about $62,500 or about a 2.5% increase in prices year over year.

• Median Price
  • 2017
    • $2.4625 million
  • 2018
    • $2.525 million

Conclusion

So what can we make of all of this data on the Avenues?

1. New construction is up 8.8% or $250,000.
2. Lot sales are up to a lesser degree at 3.1% or $40,000.
3. Larger existing sales are only up 2.5% or $62,500.

Since new construction is normally the driver of prices going higher, here are my thoughts on why the other sales are not keeping up.

1. Construction costs have been surging from 2017 through 2018. With the California wildfires in Northern and Southern California, labor costs are growing and material costs are inflating as well due to tariffs.
2. The 11 months of 2018 before the December stock market “mini-crash,” new construction Buyers could afford the higher prices with ease. However, existing home buyers were more sensitive to interest rates which were climbing higher throughout 2018, which put a cap on buying power for those homes.
3. Last but not least, developers have to see new construction sales close at higher prices before they can pay higher lot prices. Look for lot sales to begin to climb higher with the $250,000 surge in 2018 new construction prices.

All in all, with new construction climbing higher and interest rates coming down expect other Avenues asset types to slowly catch-up in price as this is the natural “push-pull” effect of real estate prices going up and down. Some sections of the market run first, and other sections follow suit a bit later.

In light of this post’s topic, I have a new pocket listing in the Avenues!

748 Avenue A is a 6,100 square foot property that will likely be the best lot deal on the Avenues in 2019 so you don’t want to miss out. The trustees have decided they are willing to sell off the MLS at a discounted price in exchange for a fast close and certainty.

• 748 Avenue A
  • Lot Size: 6,100 square feet
  • Asking Price: $1.3 million

Give me a call as this one will sell quickly!

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