PPSF Not as Important as You Might Think
A very common question buyers ask agents is, “How much is the price per square foot (PPSF) of this property?” In many instances, this is a big determining factor when contemplating the purchase of a home. A property that shows $300 ppsf seems to be more valuable than a property that shows $200 ppsf. Today, I am here to tell you why in the South Bay, specifically Manhattan Beach, this factor is just one of many that determines value.
The NUMBER 1 reason why ppsf is NOT the determining factor in pricing here in the beach is because no structure is worth the land it sits on. Period!! Because of this fact, the South Bay has created it’s own “Bubble” for home prices and why we seem to not have as many issues as other outlying areas, such as Riverside or Palmdale. Let’s look at a few examples, 440 7th St and 128 6th St in Manhattan. Both wonderful locations, built by two of the top builders in the area, Matt Morris & Dennis Maloney. Both builders build around the same dollar/sq ft construction costs (hard construction cost, which are actual costs to build the house and soft construction costs, which are plans, permits, building fees, contractor costs, etc). Both are new construction with very similar floor plans and square footage but one is located on the 100 block “view” walk street and the other is on the “child friendly” 400 block flat walk street. 440 7th St sold in construction for $3.660 million while 128 6th St. sold for $5.595 million in 2011. Having said that, let’s look at the PPSF for each. 440 7th shows $915 PPSF while 128 6th shows $1,390.75. A difference of $475.75 PPSF! So at $475.75 and only 23 sq ft. difference of the two properties, $10,942.25 more is what 128 6th St. should cost than 440 7th if you went on the PPSF indicator.
But it didn’t sell for only a mere $10,942.25. Rather, it sold for a significant $1.935 million more. But how could it be worth that much more when the specs were roughly identical? In this particular example, the 100 block location is far more expensive than the 400 block because of the view aspect. As I mentioned earlier, NO STRUCTURE IS WORTH THE LAND IT SITS ON!! The land at 128 6th is far more valuable than the land at 440 7th St. Those are just two factors why PPSF is NOT the best indicator of value in Manhattan Beach.