Tracking the value of houses that have recently sold helps me determine where the market is going.
841 Diamond Street in Laguna Beach recently listed for $2,699,999.
It was bought in June 2010 for $2,850,000.
This represents a loss of about $6300 per month in value, assuming the house will sell for its asking price, which is doubtful, in my opinion.
If the house sells for less, say $2,550,000 or $2,400,000, that represents a loss in value of $12,000 and $18,000 per MONTH since the last sale. This does not even include the mortgage interest cost in any monthly payments, which could DOUBLE the loss. It might even sell for way less than $2.4M - stay tuned.
Renting this house in 2010 clearly would have been better than buying it. But real estate agents don't make that much commission off of rentals, so why would any given agent tell you that renting is better? The difference in commission in my opinion creates a conflict of interest and an incentive for any given agent to focus on the sale or buying of a home, as compared to a mere rental. When is the last time you have even heard an agent at an open house even say the word "rent?" Why say anything that would prevent that all important home sale?
In my opinion, property valued at above $1,500,000 continues to see monthly losses in Laguna Beach and Newport Coast. Buyers should be really careful. An asking price listed by a real estate agent may have no sound basis. I have run into that numerous times. Calculating what a home's value would have been in 2001 or 2002 is the best way to avoid overpaying. Be careful out there!