This is interesting. I met the seller of this lovely little cottage in Sherman Oaks a while back (sweet lady) and we mulled over whether we would be selling to builders or owner users in this market. Her home was built in 1929 and while cute as can be, we were not sure if someone would live in it, of if a builder would scrape it and build. The seller and I noticed fewer and fewer sales of new construction homes and agreed that we did not think it would pencil out for many builders, so we decided to clean the house up and offer it for sale to both. As you can imagine, we received many offers (7!) and surprisingly was the amount of offers from builders dying for a new project.
What was happening simultaneously (and we could have no real valuable clue as to how this would affect us at the time) was Studio City passing their vote on the overlay to the existing Mansionization Ordinance. The net effect of this was new rules and regulations for home builders specifically an impact not only to the FRA (Floor to Area Ratio) but more specifically the requirements for these builders to obtain the variances required to hit 53% of a lot size. Since none of them wanted to be the first guy in and get clobbered by the new law, they came knocking on our door!