Sunday, March 30, 2008

Luxury Comp Killer - 304 Weymouth in North Laguna

You may have seen this home for sale since April of 2007 for $3,200,000. I visited this house and it was really modern (which I liked) and really spacious with top of the line everything. Architectural quality.

Well, it just sold in January for only 2,425,000. This is only $638 per square foot and a whopping 25% less than asking price. Homes in North Laguna generally are more expensive, so this means a house like this in South Laguna should sell for less. Similar lux homes in the 4000 sq. ft. range are a good fit for this comp.

This home also shows that buyers shouldn't lack courage. Figure out what something is worth and make the offer - regardless of the dream asking price set by the seller and their real estate agent!

Tuesday, March 11, 2008

30% Markdown In Laguna Beach

1089 Miramar Street. Our early march price indicator. Do houses speak to you? This one should - and it should say something like "You are nuts if you buy a house in Laguna Beach and pay more than a 2004 price, because you will lose money starting the day you move in."

Miramar was listed in August of 2007 for $1,549,000 and is in Arch Beach Heights, a nice area.
Several months and markdowns later, the asking price has been reduced to $1,150,000.

This is a $400,000 reduction (about 26%) and the place is not sold, so the ultimate selling price could well be less than 30% below the original asking price.

But wait, there's more.

The Miramar house was bought in May, 2005 for $1,195,000!! The flippers put additional money into it ($100K?) and now are all but guaranteed to sell the place for much less than the 2005 purchase price! With a 6% commission and assuming a $100K remodel, the loss could top $250,000!!! Laguna Beach home prices are coming down, and fast.

Wednesday, March 5, 2008

What Shoud a Buyer Offer These Days In Laguna Beach?

The chart above is the updated Zindex showing the decline in Laguna Beach home prices and how the market now reflects October 2004 price levels. AND IT IS GOING DOWN RAPIDLY.

A buyer these days has to operate without a lot of good information. Some buyers are lucky to be experienced in the market and do not have to rely on a real estate agent to spoon feed selected information. There aren't a lot of comps and most listing prices are wildly high. What amount should one offer? How far under asking price is justified?

I've been looking at the market on the "rollback" principle. That is if a market indicator has decreased to the same level as a point in the past, say 2004, I will make offers on a home based AT MOST on what that house would have sold for in 2004.

With that said, look at the latest Zindex for Laguna Beach. It has decreased to the point where it has rolled back to about October 2004. So my operating rule of thumb will be to make an offer based on the market price of a property slightly before October 2004.

Tuesday, March 4, 2008

Blue Lagoon Update

Condo complexes are great market barometers. There is enough sales history to see some trends that may reflect the broader market in the local area.

Blue Lagoon is a rather old condo complex with good amenities such as tennis and pool, located between PCH and the beach just north of the Montage Resort.

In any event, we reported on 15 Blue Lagoon late last year. What's up with it? It is still for sale, now priced at a reduced $1.599M. This is $100,000 less than it's 2006 purchase price. Factoring in a 6% commission, the actual sale price realized by the seller will probably be at least $200,000 less than the 2006 purchase price.

This property has been listed for nearly a year.

Other Blue Lagoon units have recently come on the market and some of them are flips where the units were upgraded and relisted on the MLS. We'll see how they do. I often walk through Blue Lagoon and the whole place seems rather dated, run down and the units don't even have garages. Multi million dollar units with car ports? Yes. Here. In Laguna Beach.