Price per square foot is the wrong number on a view lot

Price per square foot divides the price of a property by the size of the house on it. On the Palos Verdes Peninsula, where most of the price is the lot and the view, that arithmetic assigns the value of the ocean to the drywall. It makes a 1,900 square foot original on a Lunada Bay bluff look absurdly expensive and a 6,000 square foot 1980s house with a peek of Catalina look like a bargain, when in fact the first may be the better buy and the second the worse one. The number is not wrong. It is answering a question nobody on this hill is asking.

This is how we separate the land from the house when we price a view property, what the appraisal profession says about the same problem, what the research says a view is actually worth, and why a protected view is a different asset from an unprotected one.

Why does price per square foot fail on a view lot?

Because it treats the house as the thing being bought. Price per square foot works reasonably well where houses sit on similar lots and the lot is a small share of the price, a tract in the Valley, a townhome block in North Redondo. It breaks where the lot varies more than the house does. On the Peninsula, two houses of the same size and age can sit on a flat interior lot in Peninsula Center and on a bluff above the water in Lunada Bay, and the difference in price is the lot, not the house. Divide by the square footage and the bluff house shows a number that looks like an error. Compare it to a larger, older house on a lot with a distant view and the larger house shows a number that looks like value. Both readings are artifacts of the divisor.

The appraisal profession has known this for a century and structures its own work to avoid it. Fannie Mae’s appraisal standards require the appraiser to describe and analyze the site, including its view, in a section separate from the improvements, and to indicate whether the present use of the site is its highest and best use. The Uniform Appraisal Dataset that every lender’s appraisal has used since 2011 rates the view on its own line, as neutral, beneficial or adverse, and then by type: water, city skyline, mountain, park, pastoral, woods, residential, city street, industrial, power lines and limited sight. A “B; Wtr” view and an “N; Res” view are different properties to the underwriter even if the houses are twins. The cost approach, when it is used, goes further and states a site value as its own dollar figure with the depreciated value of the improvements added on top. None of this is price per square foot. The profession abandoned the single number on view property long ago; the listing portals never did.

How do you separate the land from the house?

Three steps, in the order an appraiser or a builder would take them.

First, establish what the lot is worth as land, from the sales that were really land sales: tear-downs, vacant lots where they exist, and houses that sold to buyers who then pulled a demolition permit. Sort them by view type and by neighborhood, because a Catalina view lot in Lunada Bay and a harbor view lot on the Miraleste slope are different markets. The lot value that emerges is the floor of the property’s value and, on a view lot, often the majority of it.

Second, decide what the house adds. A house adds the cost of building it, less depreciation for age, condition and design, and only up to the point where a buyer would rather build new. On a bluff lot a 1962 original in good repair might add a few hundred thousand dollars to the land value; a 2019 rebuild by a known architect adds most of its cost. This is the step where price per square foot has a legitimate use: the depreciated cost of improvements per square foot is a real number and an appraiser will estimate it. It is the square footage of the house priced as a house, not as a share of the ocean.

Third, check the total against sales of the same view type. Not against sales of the same size house. If a 2,400 square foot house on a full ocean view lot in Malaga Cove sold for $6.8 million and a 4,800 square foot house with a filtered view in Valmonte sold for $5.2 million, the second is not “half the price per foot.” The two lots are the difference, and the only useful comparison for the Malaga Cove house is other full ocean view sales, whatever size the houses were.

The reason the tax bill does not help with any of this is that the assessor’s land and improvement figures are an allocation, not an appraisal. The State Board of Equalization’s own handbook says so: California requires land and improvements to be assessed separately but does not require them to be appraised separately, and the split on the roll is usually an allocation of the total. A property bought in 1978 shows a land value that has nothing to do with the lot’s market value today. Use the bill to find the factored base year value, not to learn what the dirt is worth.

What is a view actually worth?

More than most buyers expect, and less uniformly than most sellers hope. The most cited study of the question is Benson, Hansen, Schwartz and Smersh’s “Pricing Residential Amenities: The Value of a View,” published in the Journal of Real Estate Finance and Economics in 1998, which analyzed roughly 7,300 single-family sales in Bellingham, Washington over a decade. Relative to no view, a full unobstructed ocean view added 58.8 percent to the price, a superior partial ocean view 30.8 percent, a good partial view 29.4 percent and a poor partial view 8.2 percent. Distance mattered as much as the view: the full ocean view premium was 68.3 percent a tenth of a mile from the water and 30.6 percent two miles away. A later study of about 5,000 sales in Auckland by Bourassa, Hoesli and Sun found wide water views adding roughly 59 percent, again falling quickly with distance from the shore.

Those are not Palos Verdes numbers, and we do not know of a peer reviewed study of this coast. But the structure of the findings matches what we see in the sales: the premium is large, it steps down sharply from full to partial to peek, and it decays with distance from the water, which on the Peninsula means the bluff lots in Lunada Bay, Malaga Cove and along Palos Verdes Drive South carry a different premium from the same view a mile up the hill. The other lesson from the research is that “view” is not one variable. A view has a type, a width, an obstruction status and a distance, and the price responds to each. That is why the MLS has so many words for it.

What do the words on the listing mean?

The California Regional MLS view field is a list of checkboxes, and the ones that matter on the Peninsula are these. The definitions are ours; the MLS does not define them, which is exactly the problem.

One local term has no checkbox. The “Queen’s Necklace” is the arc of shore lights from the Peninsula north around Santa Monica Bay to Malibu, seen at night from the west facing slopes and from the overlooks along Palos Verdes Drive West and Via del Monte in Palos Verdes Estates. A house that has it will say so in the remarks, and the buyer should visit after dark to confirm it.

What is a protected view worth?

A view is worth what it is worth for as long as it lasts, and on the Peninsula that depends on which city the lot is in. Rancho Palos Verdes has a view preservation and restoration ordinance, adopted by the voters as Proposition M in November 1989 and codified at section 17.02.040 of the municipal code, that gives an owner a process to have foliage on a neighbor’s lot trimmed when it exceeds 16 feet or the ridgeline of the neighbor’s house, whichever is lower, and significantly impairs the view from the owner’s viewing area. It also runs the other way: the height of any new construction in the city is reviewed for its effect on neighbors’ views, and a house taller than 16 feet needs a height variation permit with a view analysis. We wrote a full guide to it in the Rancho Palos Verdes view restoration ordinance. The practical effect on price is that a view in Rancho Palos Verdes is a defended asset, and buyers who understand the ordinance pay for that.

Palos Verdes Estates has no citywide ordinance of that kind. View protection there comes from the recorded restrictions and easements on individual parcels, which vary lot by lot, and from the Art Jury and the neighborhood compatibility review, which weigh a new house’s effect on its neighbors without guaranteeing anyone a sightline. A buyer of a view house in Palos Verdes Estates should read the title report for a recorded view easement before paying a view premium, and should look at the neighbor’s roof and ask what the neighbor could build. Rolling Hills is single story by rule and its lots are an acre or two by zoning, which protects views by geometry rather than by ordinance. Rolling Hills Estates falls somewhere between. In every case the question a buyer should ask is the same: what would have to happen on the lots between this window and the water for this view to change, and who has the power to stop it.

Where does price per square foot mislead most?

In two directions, and both cost people money. The first is the large, dated house on a good lot. A 5,500 square foot 1979 house with a Catalina view on an acre in Rolling Hills or on the upper slopes of Lunada Bay shows a modest price per foot, and buyers read that as value. Often it is, but not because of the square footage: it is the lot. The house may add little, and a buyer who plans a full remodel should price the house at what it costs to make it what they want, which can approach what a builder would spend starting over.

The second is the small, good house on a great lot. A 2,000 square foot mid century house on a bluff in Malaga Cove or on Paseo del Mar shows a price per foot that makes comparison shoppers laugh, and that laugh is how they lose it to the buyer who understood that they were bidding on the last white water lot to trade that year. Sellers of such houses are routinely told by portal algorithms that their house is overpriced by a million dollars, because the algorithm did what price per square foot does. The algorithm is not wrong about the house. It has never seen the lot.

The right question for a view property is: what do lots with this view, in this neighborhood, sell for, and what does this house add to that. We keep those numbers by MLS area and by view type across the Peninsula, from Lunada Bay and Malaga Cove on the west side to Miraleste and Eastview on the harbor side, and later this year we will publish the price per square foot by view type for the whole hill, so that the number can finally be read the way it should be: land first. In the meantime, if you own a view property on the Peninsula and want to know what the lot is worth apart from the house, send Neil the address. The house is the easy part.

Sources

• Fannie Mae Selling Guide, B4-1.3-04, Site Section of the Appraisal Report; B4-1.3-05, Improvements Section; B4-1.3-10, Cost and Income Approach to Value
• Fannie Mae and Freddie Mac Uniform Appraisal Dataset, quick reference guide (view ratings and view types)
• Benson, Hansen, Schwartz and Smersh, “Pricing Residential Amenities: The Value of a View,” Journal of Real Estate Finance and Economics 16:1 (1998)
• Bourassa, Hoesli and Sun, “What’s in a View?” (2003), later published in Environment and Planning A
• California State Board of Equalization, Assessors’ Handbook Section 501, Basic Appraisal (separate assessment of land and improvements; highest and best use)
• CRMLS residential input form (View field values)
• City of Rancho Palos Verdes, View Preservation and Restoration and the guidelines and procedures
• City of Rolling Hills, development and planning FAQ (RAS-1 and RAS-2 lot minimums)

Written April 2026. The view studies cited were conducted in other markets and are described for their structure, not as Palos Verdes figures. Ordinances are summarized as they stood at the time of writing; confirm any view protection on a specific parcel with the city and a title report. This article is general real estate information, not legal, tax, lending or investment advice.

Keep reading