What's Selling: East Edina

Demographics + New Construction + East Edina = Sold!

In a market where new construction is supposedly dead, and high net worth Buyers are thought to be licking their wounds, some developers are still finding strong demand for their product.

Case in point: 5420 Park Place in Edina.

Built "spec" (speculative, as in no upfront buyer) by a local boutique builder, Great Neighborhood Homes, this 4,000 FSF craftsman just sold --before it hit the market. List price: $1.5M.

What did it have going for it?

Multiple, overlapping selling points (see diagram):

--A location in coveted East Edina, on a large lot close to Minnehaha Creek
--New construction with quality finishes, classic design, and minimal maintenance
--A size (4 BR/4BA; 4,000 FSF) and floor plan that appeals to a wide range of Buyers, including families with small children as well as empty nesters interested in a condo alternative.

Build it right, in the right spot . . . and they'll (still) come.

Free House! (with qualifying land purchase)

Buy the Land . . . Get the House for Free

Benjamin Graham, the father of value investing, famously recommended buying stocks that trade at a discount to the company's underlying "book value" (basically, assets minus liabilities).

His rationale was that a company's book value established a floor under its stock price: even if the company's business went away, investors' share in the company's net assets would make them whole (if not a profit).

In the housing market, an analogous approach would be to buy homes selling for less than the value of the land they sit on. Even if the home is assigned a value of zero, in theory the value of the land literally puts a floor under the owner's investment.

Today, it's possible to find hundreds of Twin Cities homes selling for less than their "book value" -- that is, the tax-assessed value of the land underneath them.

However, before you rush out to buy one of them, two caveats:

One. A lot with a house on it is not the same as an empty, buildable lot. Transforming the former into the latter can easily cost $20,000 in demolition, permits, etc.

Two. Who's going to buy the lot? In a healthier market, demand would come from both developers, who would put up "spec" housing ("build it and they will come"), or, owner-occupants who wanted new construction.

In a recession, neither group is very active.