Friday, December 07, 2007

No midtown penthouse slump

Sacramento Business Journal
December 7, 2007

It's easier to sell a million-dollar home right now than one priced half that much, noted Sotiris Kolokotronis, the developer behind the L Street Loftsin Midtown, while giving a tour of the ballyhooed building that's nearing completion. When he launched the project, his colleagues told him he'd sellout before the paint dried. They were partly right. All but one of the 12 penthouses, priced at $749,990,have been sold in advance of completion -- including two of them to a buyer who plans to turn them into one large suite. But sales of the other units, starting at $389,990, haven't been as brisk. A total of 36 of the project's 92 units have been sold, according to HanleyWood Market Intelligence. The lofts will be largely finished by the end of theyear. Sales are still ahead of projected rates when the project wasenvisioned, Kolokotronis said.


Numbers like these should bode well for getting more high-end housing built in midtown. I've been lucky enough to go on a tour of the L Street Lofts and the penthouses are amazing. Not only is the view impressive but the layout of the two level floor plans are unique and creative too.


Central City said...

I took the same tour and found them to be quite nice - until I saw the incredibly inflated price .

There is no way that the space you get is worth the money they are asking .

Anonymous said...

Price to value ratio's have always been a major point of contention when it comes to buying real estate and often people complain about what is considered acceptable or affordable pricing. What most people don't understand, that some buyers do, is that the price of the home is never in direct relationship to physical home or property itself. What you are buying is a lifestyle, the convenience and pleasure you derive from living in a new, fully equipped modern urban home, in this case a penthouse loft. You buy a stunning view, you buy access to entertainment and you buy location, in addition to paying the wages of all the professionals that built that home for you.

When pricing is unduly inflated beyond a reasonable value, you are then paying for the inflated material costs (due in part to economic disasters like Katrina), or you paying for things like premium fixtures and equipment(the $4000K Viking hood), or in some instances you're paying for someone's profit (but not always). This is not a price/value issue, it's a personal issue about what you perceive as valuable to you in housing.

If you want more house, or a bigger lifestyle for you dollar, move to the Midwest or South America, there is nothing outrageous about $800k for these penthouses, just look at East Sacramento, $750 for a decrepit 70 year old 2/1 with aging fixtures, terrible style and atrocious finishes, that's upsetting.

Anonymous said...

The prices are inflated and there is no excuse for that. This is not San Francisco, where prices are more inflated in the California bubble.

wburg said...

anonymous (the first one): Which house are you referring to? The only 2/1 on MLS in that price range in 95816 right now is a 1650 sf bungalow with redwood shingle siding, finished basement and attic spaces (which probably don't count in that 1650 sf)on a comparatively large (1/8 acre) lot in McKinley Park. It also looks like the building itself is in pretty darn good shape: a building isn't automatically "decrepit" just because it is 70 years old.

And a lot of the reason for the $649,000 price (not $750K) is the location: McKinley Park, adjacent to the park, which adds quite a chunk to the price tag (because of location!) You can also buy a house of comparable size, condition and vintage (or a brand-new small-lot home at the New Faze or Tapestri Square developments) for around $350K in midtown.

LivingInUrbanSac said...

"This is not San Francisco"

The same new construction penthouse would cost a shit load more in SF.

Price still come down to what people see as value. It's a subjective thing. If they are being bought by someone then they see the value in it. Everyone has their own views on value.

Anonymous said...

East Sac has one of the highest costs/sf in the region - but the prices are high for the space you get because of the mixed-use character of the neighborhood, large trees, parks (McKinley) and short (4 miles max) commute to downtown. These are the very same reasons that MidTown is so high. Remember - location, location, location. If you want more space - move out to Lincoln.

Anonymous said...

Great point Zwahlen, people continually complain about the 'cost' but this is the lowest point we've seen in decades and it still doesn't satisfy. People want San Fran. amenities with all the style, all the bells and whistles at fire sale pricing. It's a joke. We live in the fifth largest economy in the world, an hour from one of the best wine regions, world class ski resort destinations, the coast, the capital, the rivers and so much more they still want some bargain.

McKinley Park is a perfect example of pricing based on lifestyle, your not buying the park, but you kinda are. Funny isn't it? That price is set by the home itself, but by the market and perks that surround it.

Decrepit isn't ageism, it's conditional, and as a designer with several projects in and around East Sacramento, most of these home are in fact decrepit with sagging foundations, dry rot, failing roofs and whole host of inherent structural problems due in part to age and neglect, all for $500K and up. Yet again, East Sac, McKinley, Landpark are lifestyles, you don't pay a premium and move into an old house because of real 'value' of that property but because you're investing a communal lifestyle. You're buying membership. If value is cost of what you are physically buying, you'd all go be build your own home for considerably less cost.

When we talk about inflated prices? What does that mean, I've lived here for about 25 years now and it's always been a higher median price than this mythical average everyone talks about. This isn't inflated, this is the heart of California in the hub of Western culture.

I think Sotiris' projects are a welcome addition and add value to all the mediocre homes that surround it. Granted there's always room for improvement. Build on, I'll buy it.

wburg said...

anonymous: Some good points. Buying a 70 year old (or older) home is buying more than just a structure to live in: it moves into the realm of things that are intangible but are very real to a buyer. The aesthetic value of older houses is an important factor for buyers: the craftsmanship, artistry and aesthetic value of many older homes simply isn't available in newer buildings. Also, many who enjoy older homes like the idea of stewardship. My home isn't just a box, but a place with a legacy of its own. Potentially, that legacy could outlive me, but it needs my help to be maintained properly and updated appropriately.

And yes, while many of these buildings need a lot of work, they tend to be built out of things like old-growth redwood and other materials that can stand the test of time if the damage is addressed before it gets too bad.

Aesthetics also come into play in newer homes: sleek modern design, "high-end" furnishings that differ from the merely affordable largely in surface finish, and breathtaking views have no value outside of the head of the purchaser, but they're important enough to add considerably to the price a modern condo will bring--if it delivers on its promises.

I also agree that when you buy a house you're also buying a lifestyle. The East Sac lifestyle isn't my cup of tea, but part of why I chose a midtown home (in addition to the "lovely century-old bungalow" part) was because I like the midtown lifestyle too. That's an aspect that is shared between the people who buy into Sotiris' project and those who buy Victorians: work proximity, walkability, community, recreation, and so on. I'll end up sharing the neighborhood with them, and saying "hi" to them as I walk to work, so it behooves me at least a little bit to have an idea of where they're coming from.