Investors and developers are putting their time and resources into building luxury spec homes along the Southern California coast, from The Strand in Dana Point to the Balboa Peninsula and beyond.
Investors can expect to average a 30% return on a spec home, says Tim Smith of the Tim Smith Group, Coldwell Banker Previews International.
A spec home, as the term suggests, is a residence built on speculation—in standard cases, a home with features the investors believe will appeal to most buyers.
In a luxury spec home, however, builders aren’t aiming to appeal to “most” buyers.
They’re designing dream homes created with a specific type of buyer in mind: those who want—and can afford—a one-of-a-kind home with top-quality workmanship and want the latest in luxury appointments, all on an exclusive piece of property.
But finding available lots can be difficult, says Nicole Donovan of Surterre Properties. Oftentimes, she says, investors purchase homes on prime lots with the intention of tearing them down and building a brand-new home.
“Tear-downs in Cameo Shores are over $5.1 million,” she says.
An area like Cameo Shores in Corona del Mar can command such a high price for a tear-down property because, as Donovan puts it, “you can build into the grade and add a 2,500-square-foot garage that you enter from the street below, allowing you to max out the lot.”
Donovan says that her team, the Summer Perry Group, is building two spec homes in Cameo Shores, one on Gorham Drive and the other on Camden Drive, which will be listed at about $11 million and at upward of $9 million, respectively.
Building a luxury spec home isn’t a simple or necessarily quick process, says Rob Giem of HÔM Sotheby’s International Realty.
“Most of the places where one might build a $20-, $30-, or $40 million-dollar spec house are in neighborhoods with lengthy design approval processes and/or coastal commission approval. They are also generally more expensive build sites with extensive site-prep costs, such as excavation and retaining.”
Coldwell Banker’s Smith, who said he’s made four spec deals in the past year in Corona del Mar alone, can attest to the obstacles.
“The challenges with spec homes is that often the finished product doesn’t support the lot value, so there is a risk involved for the investor. That said, the last 24 to 48 months have been really great for spec deals.
“Most spec deals are staged, built with superior craftsmanship, and compliant with all current codes. We can sell new spec homes faster and for a higher price per square foot than their resale counterparts. I am confident spec deals will continue to be a key part [of] the vibrant coastal real estate market.”
Recent overall luxury home sales include:
Crystal Clear
The California Mediterranean-style estate at 38 Pelican Point Drive in Newport Coast—situated on a quarter-acre lot on the 12th hole of Pelican Hill Golf Course with views of the ocean, Catalina Island, and Crystal Cove State Park—sold on March 9 for $8.05 million, under its February list price of $8.9 million.
It has three bedrooms and four baths, as well as an exercise room, wet bar, movie theater and game room. The chef’s kitchen has a six-burner Thermador cooktop and two side-by-side Sub-Zero refrigerators. There is custom woodwork throughout, as well as coved ceilings and marble and granite appointments in the baths and kitchen.
The 7,566-square-foot home is in Newport Coast’s only oceanfront neighborhood with private access to the beach.
Kevin Kim of Kevin Kim Realty represented the seller, and Tim De Cinces of HÔM Sotheby’s worked on behalf of the buyer.
Coveted on Camden Drive
The custom-built, two-story home at 4539 Camden Drive in Corona del Mar offers 5,200 square feet of living space. It sold on March 4 for $6.1 million, off its August list price of $6.5 million.
It has six bathrooms, four bedrooms, a study, and unobstructed views of Catalina Island, the Newport Harbor jetty, and the Palos Verdes Peninsula from the master bedroom, breakfast nook, living room and formal dining room. The lot is 0.26 acres.
Summer Perry of Surterre Properties represented the seller, and Rob Smith of Surterre Properties worked on behalf of the buyer.
Find Your Happy Place
The 2,000-square-foot, fully restored and renovated Corona del Mar bungalow at 248 Hazel Drive features 2½ baths and three bedrooms.
The midcentury home sold on March 20 for $5.05 million, under its February list price of $5.4 million. The home, which is on a 6,098-square-foot lot, is situated on Buck Gully overlooking the canyon and ocean beyond.
Casey Lesher of HÔM Sotheby’s represented the seller, and Joanna Ganz of Surterre Properties represented the buyer.
