Address: 1147 Centinela - 90403Details: 5 bed/6 bath 4,700 sq ft house, 9,000 sq ft lot, new construction
Description: WOW! Brand New Construction! Franklin School District! Custom Cape Cod! Beautiful tree-lined street south of Montana in upscale Santa Monica quiet neighborhood. This never before lived-in 5 bed/6bath home boast approx 5000sq ft of living space including a bonus basement great for storage/wine cellar. Hardwood floors throughout, spacious bedrooms, gourmet kitchen and Viking appl's with a wide open floor plan. Grassy backyard with room for a pool on a 9000 sq ft lot. Close to Brentwood golf, shops and restaurants. No expense spared. A MUST SEE!
Previous Lot Purchase: 11/21/07 - $1,475,000
Listing History: 10/8/09 - $2,995,000
Reduced down to - $2,795,000
Re-Listed: 1/27/10 - $2,795,000
SOLD: 4/7/10 - $2,650,000
I saw that this spec house sold and wanted to run the numbers. From the buyer's point of view, this works out to having paid $564/sq ft for the whole package. But another way to look at it is to see what they paid for just the construction (holding the lot value constant at the price that the builder paid for it). If we do that, we see that they paid exactly $250/sq ft for the construction. Not too shabby. If we bring the lot value down to what it might be worth today, we need to chop off somewhere between $300k-$450k...Let's use $375k as our discount, which would bring the lot value down to $1.1mm. Even after doing this, the buyers today just paid $330/sq ft for the construction.
From what we keep hearing, it seems like you would probably be hard pressed to build something for yourself for $330/sq ft; especially when you factor in all the architecture, landscaping, permitting, etc...then there is the holding cost that you incur if you are building for yourself...you've got to still pay property taxes on the lot and you've got to pay rent for a year while your house is being built! So I guess my point here is that it seems the buyer saved themselves a lot of hassle and maybe even a fair amount of money.
From the builder's perspective, we see they are into this thing for lot value + taxes + money holding costs (we'll just use 5% on the lot value amount to be conservative) + all building and related costs + 1/2 realtor fee ("owner is listing agent" so they only pay half).
= $1,475 + $40 + $185 + $65 + building costs
So basically the big question mark is what it cost them to build this. If we use $200/sq ft and assume the builder is the seller (thus, no markup), we get $940k.
Using $940k for the build cost, we come to a total of $2,705,000 when including the other costs. That is not much more what the buyers just paid! If I had to take a guess, I would say the loss for the builder is larger than $55k though because I think my assumptions here are overly conservative on their costs.
This doesn't add up. It's lunacy. But I repeat: the last bubble in the 90s took 6 years to go from peak to trough. That bubble was MUCH smaller, and there was no corresponding financial crisis.
ReplyDeleteWe're in year 3. We're a long way from the trough. Example after example keeps showing this. Be ready for 2015.
Wow...no wonder the spec market dried up! Can't make a living on that job....
ReplyDeleteI don't get how any builder/developer can profit at today's lot prices. They're still too high when you factor in all expenses and then look at a reasonable listing (selling) price.
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