More Buyer's Remorse in Crystal Cove

The real estate market picked up during the summer, not really in price appreciation, but in the number of sales. That doesn't mean that buyers don't need to be careful.  Some buyers lost big time.

Take for example 22 Sidney Bay in Crystal Cove, which sold for $2.249 million at the end of June.  Although the listing made a big deal of the "ocean," the dining room and living room at what would be the ocean-facing end of this home have huge sit down views of .....

a brick wall.
Uggg.

That's right. Practically speaking 22 Sidney Bay has no ocean view because of the house located behind it.  The inside is very nice, though, and i suppose that is what sucked the buyers in.

All this is not so bad until you come to know that 27 Atlantis Cove then sold for about the same price -- $2.350 million.  Not so bad?  No, it is bad.   27 Atlantis Cove is a bigger home with a HUGE ocean view. No brick wall view.  A big ocean view from the kitchen and living room in a Crystal Cove home is worth about $500,000.

Did the buyers of 22 Sidney Bay overpay by $500,000?  Probably.  Especially when you consider 11 Secret Cove, which is the same size with practically the same no-ocean view. It sold for $1.892 million.  11 Secret Cove closed about a week before 22 Sidney Bay - did the Sidney Bay buyers know about this comp that was priced more than $350,000 less? I doubt it!!

Buyers need to be careful out there - do your own research and don't assume your real estate agent is keeping you informed.

Home Values Down Again in Laguna, Newport Coast

I have been hearing some real estate agents lately hyping the market (again).  Don't believe it, at least in Newport Coast and Laguna Beach.

The latest housing numbers for sales during July 2012 have just been released and have been published by Dataquick, a reliable source.  Guess what?  The median price numbers show a continued plunge in Laguna Beach and Newport Coast.  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.  Corona Del Mar is showing a resurgence - up a lot from the dog days of last summer.

July is the height of the summer buying season, when things are strongest.  It will be downhill to December in these markets.  In my opinion, the buyers of this summer could lose more on their home values as we get closer to December.  More buyers remorse on the horizon.....

Here are the numbers:

The highlights:
Laguna Beach:
Only 40 homes sold, median price down 5.7% to $1,375,000.

Coronal Del Mar:
only 19 homes sold, median price UP 49.2% to $1,750,000.

Newport Coast:
only 13 homes sold, median price down 8.1% to $1,590,000

Cyrstal Cold

Crystal Cove?  More like Crystal Cold.  What do you mean, you ask?  Simple.  The geography of Crystal Cove - a hillside close to the ocean -  results in a microclimate of cold temperatures and sometimes fog.  In my opinion, that cold ocean breeze just dominates. Even during sunny summer days.

Have you ever looked at the beautiful real estate listing photos of the back yards in Crystal Cove overlooking the ocean?  It would be easy to assume that these homes would enable a perfect warm California beach lifestyle.  Think again.  Good thing for the real estate agents and sellers that you can't tell what the temperature is from a photo.  What good is such a backyard if you need a heater to enjoy it or just stay indoors to avoid the cold?  This isn't the recipe for a very good place to have a vacation home, unless you want to vacation in August.  The winter months in Crystal Cove are pretty cold.  The California lifestyle is build around the outdoors and warmth.  Not easy to align this ideal with my views about Crystal Cove.  

I've been to numerous open houses in Crystal Cove and not once has any agent mentioned this to me.  

In addition to the frigidity problem, there are other things a buyer would want to know about Crystal Cove.  So let's get into a review of Crystal Cove.

First, for an super upscale neighborhood, it doesn't have many amenities.  Sure it has a clubhouse with a gym and a pool.  But the clubhouse has no bar or food service.  Huh?  Further the neighborhood doesn't really have many events that would be a draw.  There is one Saturday concert in the park each summer featuring a local band (there used to be more).  There is one other barbecue in the park during the summer.   Other events at the clubhouse typically draw only a small crowd and are nothing special.  For parents, the association doesn't even run "parent's night out" programs where parents can drop the little ones off for a few hours at the clubhouse.  They do run a Christmas program for the kids, movie nights for kids and parents, as well as an Easter egg hunt at the park, but again, these are pretty run of the mill type events.

More Buyer's Remorse - Laguna Beach

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!

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.