Summer Recap - Risky to Buy

Time for a summer recap on the housing market from Newport Beach to Laguna Beach. 
Bottom line is that it was a terrible summer for home values in these areas, especially Newport Coast and Laguna Beach.  Sales fell flat compared to last summer, which was itself less than fabulous.  Sale prices are declining, as are the number of sales.  You can hear a pin drop for the lack of homes selling.
In my opinion, buying a property at this time is very risky.  The main risk being that the property you buy continues to go down in value, losing you 10's of thousands of dollars a month. Of course, you won't hear that from your real estate agent, who is hungry for a commission..........

Summer Buying Season Flops - Beach Town Home Values Continue Downward Plunge

Normally, a lot of homes sell in the summer buying season in the OC beach towns.  Not this summer.
The OC Register just reported that the number of sales and the median price in the OC beach towns is down.  The median price is down 7.8% and the number of sales is down 5.3%.

What does this mean to potential buyers?  It means that home prices are going down and, as a new owner, you will lose value on your new home, month in and month out.  The median price and lack of sales will put downward pressure on home values.  The lack of sales could be interpreted to mean that there are many overpriced home listings on the market. Buyers need to be very careful.....

These 12 Real Estate Stats Scream One Thing

Interesting article posted by Terran on Talk Irvine: http://www.wallstreetdaily.com/2011/05/26/cme-real-estate-prices/?source=patrick.net#content

The bottom line:

"Whatever you do, though, don’t rush to buy residential real estate. As I’ve hopefully demonstrated by now, prices are headed one way from here – down. So even though local markets differ, chances are you’ll get an even better deal the longer you wait."

Laguna Beach continues to sink, just like the broader, declining market...

South Laguna Comp Check - 2 South Portola - 37% off Orginal List

South Laguna is far off the beaten path.  It is thankfully free of tourists compared to the rest of Laguna Beach, but for those of us who work, the drive takes almost as long as traveling from the office to San Clemente via the toll road.  

Historically, real estate in South Laguna has been much cheaper than the rest of the town.  Come the bubble, that difference more or less disappeared, and the asking price of most homes in South Laguna still reflect this bubble valuation. 

Anyway, enough of the history, how about a comp in South Laguna's 3 Arch Bay? Let's get down to it and talk about 2 South Portola.

I think the takeaway here is that an older family home on the primo beach side of 3 Arch Bay sold for about $750 per square foot and that list prices should be viewed with healthy skepticism by buyers.  2 South Portola ended up selling for about 37% less than its original asking price of $3,250,000.

2 South Portola is a rather nice 5 bedroom/3 bath.  Per the listing:  "Traditional Three Arch Bay home with ocean and sunset views. Vaulted ceilings, fireplace, view deck, open floor plan and enclosed sun porch. The most wonderful and charming Lower Three Arch Bay home. Close to beautiful beach."  You can view the MLS listing at here.

Original List price: $3,250,000
Listed: September, 2008 (yeah, about 1000 days or so on the market!)
Sold: May, 2011
Selling Price: $2,050,000
Selling Price/List: 63%

So, what kind of a rollback does this represent?  2 South Portola sold in May, 2005, for $2,500,000, so this most recent sale price represents, say, a mid or late 2003 price.  If you are trying to value a property in Laguna Beach to determine how much to offer, try to figure out what it was worth in 2003 and you should be on the right track.

Buyers be careful out there. Lots of homes have wildly overpriced asking prices.

Home Robberies Shock Crystal Cove Residents

The relative calm of Crystal Cove was shattered recently by two bold home robberies.

You know those imposing gates and guard shacks that drive the association dues toward $700 per month in Crystal Cove?  Apparently, these amenities are of limited effect in keeping crime out.

Rumors are flying about the crimes and while it may be the talk of residents and at local real estate offices, no one apparently is eager to publicize this in the news because it could further depress Crystal Cove home values.  The rumor is that two homes on Sidney Bay Drive were "cleaned out" by robbers using trucks.  Virtually everything is said to have been taken.  One of the homes was for sale.  It is unknown if the other home was a vacation home or if the residents were simply away from their home.   In Crystal Cove, many of the homes are vacant or used sparingly, so there are less neighbors who can report suspicious activities - apparently allowing the robbers to clean out entire homes, furniture and all, without being noticed. Fortunately, no one was hurt.

Comp Check - North Laguna Modern Luxury - $601 Per Square Foot

Its often tough to sort through comparable sales data when you are trying to decide how much to offer on a home.  Here's something that could be of help - 535 Dunnegan Drive recently sold for $601 per square foot.  It is a high end, custom,  4 bedroom, 4000 square foot north Laguna Beach home - so it is a good benchmark.

You can see the entire listing for 535 Dunnegan here.

In the past month, it has become apparent that the high end market (over $1,000,000) in Laguna Beach is really dead.  This means values will continue to go down.  Look for the price per square foot to be in the $500's by summer - another 10% decline.  Buyers who overpay are really asking for huge losses.  Be careful out there.

January 2011 - California Home Price's Biggest Fall in 14 Months

As you can read here in the Orange County Register, California home prices fell in January on a year-over-year basis for the fourth consecutive month, according to real estate tracker CoreLogic’s math.  Certainly looks like we are firmly in a housing double dip.  Buying a house now is buying a depreciating asset - one that loses money every month.

CoreLogic’s latest reports shows ..

• The last time California prices were falling at a faster rate was 14 months earlier — November 2009, when year-to-year depreciation ran 4.78 percent.
• National index declined on year-to-year basis for the sixth month in a row: off 5.7 percent vs. January 2010. Declined 4.7 percent in year ended in December.
• Orange County? Prices down by 3.25 percent in year ended January 2011 vs. dip of 4.29 percent in previous month.

Mark Fleming, chief economist with CoreLogic, said, “A number of factors continue to dampen any recovery in the housing market. Negative equity, which limits the mobility of homeowners, weak demand and the overhang of shadow inventory all continue to exert downward pressure on housing prices. We are looking out for renewed demand in the coming months as the spring buying season gets underway to hopefully reduce the downward pressure.”

Coldwell Banker Fail - Coldwell Quietly Closes Office In Laguna Beach

Coldwell Banker quietly closed its Laguna Beach Office on North PCH.  This reflects the Laguna Beach home market, which is sinking as well.....Buying a high end home in Laguna Beach is buying something that will lose value, month in and month out for the foreseeable future.

CnnMoney - Housing Double Dip Near

According to CnnMoney.com, the recent housing data indicates a coming double dip in home values.  Not wise to buy a home right now if you can wait .......just sit back and let the market bring down those prices for you!

January Home Sale Data Shows Continued Weakness in Laguna Beach

The latest housing numbers for sales during January 2011 have just been released and have been published by Dataquick, a reliable source.  The median price numbers show a continued plunge in Laguna Beach, while Newport Coast has posted a good increase. The takeaway? Buyers in Laguna Beach need to be careful that they are not paying too much for a home that is declining in value every month.

I doubt home values in Newport Coast are actually going up - the median price increase probably is likely to more sales of discounted high end homes as compared to a year ago.  More high end homes than low end homes sold in January in Newport Coast as compared to last year.  Less high end homes sold in Laguna Beach and Corona Del Mar, as compared to low end homes.

The highlights:
Laguna Beach:
only 27 homes sold, median price down 16.7% to $1,020,000.

Coronal Del Mar:
only 12 homes sold, median price down 12.5% to $1,570,000.

Newport Coast:
only 11 homes sold,  but median price up 11.2% to $1,890,000

The changes in the median price statistic probably indicate that the mix of homes sold has changed.  When the median price goes up, that indicates more higher value homes have sold as compared to lower priced homes. 

Crystal Cove Sale Trend Points to Huge Declines By Summer 2011

If the trend for Crystal Cove White Sails homes continues to next May, the price per square foot will be in the $500 range - down from the $800 range today.  This means huge losses for any new buyers and existing homeowners. Chart below.

Yet Another Recent Buyer Burned in Crystal Cove as Values Continue Crashing

 
28 Cruisers Bluff sold in June 2010 for $5,195,000.  And its value today? - Recent comps show a sagging market that has crushed the value of this home.  When someone loses a million dollars in home value after owning a home for only six months, there probably are some lessons learned and some important trends that a buyer should become aware of.   More detail below.

Crystal Cove, long resistant to falling home sale prices because its owners could simply afford "not to sell" is now at the tip of the deflating housing bubble in Orange County.  Of course, you won't hear this information from any real estate agent, but that's why I'm here - to make sure you get more than the positive fluff you may hear at open houses.

28 Cruisers Bluff had been languishing on the market for more than 700 days - being originally listed for sale in September, 2008.  It is a White Sails model with great ocean views, and 4 bedrooms in 5000 square feet on a large lot.  The White Sails models are all more or less the same kind of tract built homes.  The June sale price works out to $1039 per square foot.  This house was last sold when it was new in January of 2005 for about $3,300,000.  Common sense would put its value closer to that sale price than the listing price of the languishing listing.  But we don't need to postulate about the value - we have comps:

Three other White Sails homes have recently sold, both about 5000 square feet in size.  2 Gondoliers Bluff sold on November 8 for $4,100,000 ($820 per square foot.).  36 Gondoliers Bluff sold just 8 days later for $4,074,000 ($823 per square foot.). Then 6 Cruiser's Bluff sold in December for $4,150,000 ($756 per square foot.)

You can draw your own conclusions on the impact on the value of 28 Cruisers Bluff.  In my opinion, that home has lost more than 20% in value in about 6 months.  This is a huge loss, a million dollar loss. Buying an expensive house that is rapidly losing value is a bad idea!  A proven, bad idea.

In the $2.5-5 million price range, I believe there is a larger trend of Crystal Cove home values decreasing about $100,000 to $200,000 per month.  Buyer beware.

The main purpose of this blog is to focus on the importance of valuing a property accurately and discounting the fluff that is common from buyer's agents and listing agents.  When I point these things out, I'm not making  fun of any buyer - I feel for them, but I want to help that next buyer avoid the same mistake.