The Flipping Indicator – New Projects Vs. Flipped Homes

The previous Landed blog posted by Land Advisors’ Los Angeles Urban Infill Team highlighted the value increases placed on flipped homes throughout a variety of Los Angeles neighborhoods.  (Re-read: Flipping Over L.A.: Out With the Old, In With the New)

For this post, we take our analysis a step further and compare how values of flipped single family detached homes correlate with those of newly constructed small lot detached and townhome units.  Conveniently, two public homebuilders have opened up projects in Northeast Los Angeles within the past week:

  • The first is Pulte Home’s project in Eagle Rock called Mosaic.  The project consists of 18 Small Lot Detached Units.
  • The second is D.R. Horton’s project in Echo Park called 36 on Echo.  The project consists of 36 Townhome units.

The first chart below represents average sales prices for flips that occurred in Eagle Rock and Echo Park.

This second chart below illustrates the asking prices at both new projects.

In comparing the two charts, note that the average square feet of the flips in each neighborhood is between the smallest and largest unit size at each new project.  You can see that the average flip pricing on a price/sq. ft. basis in each neighborhood lands squarely within the expected price/sq. ft. revenues at each project.  On a nominal pricing basis, the project in Echo Park exceeds the average flip values in the neighborhood, while the project in Eagle Rock is in the same range as the flipped homes in the area.

Why is this significant?  In our experience, properly projecting revenues on infill projects is a difficult task and has chased away a fair share of possible builders and developers.  By utilizing the correct data and local market indicators, the Urban Infill Team has created a system that helps instill a sense of comfort on project pricing for planned infill developments.

Land Advisors’ Urban Infill Team was involved in the acquisition of both of the above referenced projects, and our projected pricing was very similar to the values illustrated above.  If you are interested in discussing valuation, acquisitions or dispositions in the Urban Los Angeles market please contact…

Source:  Chris Gomez-Ortigoza, Marketing Consultant, (626) 376-9840 ext. 14; Richard Byrd, Senior Marketing Consultant, (626) 376-9840 ext. 13; and Tim Barden, Marketing Consultant, (949) 852-8288 ext. 30