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.

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.

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.

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.

Recent Sales Weigh on 26 Cruisers Bluff

26 Cruisers Bluff, for sale at $5,300,000, is a White Sails model built by Taylor Woodrow in 2004.  It has 4 bedrooms and is about 5000 square feet and has very nice ocean views.  On a per square foot basis, it is priced at $1060 and this home last sold in mid-2008 for $5,175,000.

Two 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.  36 Gondoliers Bluff sold just 8 days later for $4,074,000.

Both of these recent sales were sold at prices of about $820 per square foot.  You can draw your own conclusions.....
One last data point - 2 Gondoliers Bluff is a fantastic home, as shown by the photo below:

Buyers Remorse Part III - Another Recent Crystal Cove Buyer Burned

Lets say you just bought a nice home on 20 Timor Sea in Crystal Cove in July 2010 for about $5,500,000.

So far, so good, if you can afford to buy at that price. But read on and you'll discover how to lose over $400,000. Per month. UPDATE: It appears that the 20 Timor Sea buyer paid full list price for the home. Amazing that anyone would enter a deal at full list price in this market.  Kudos to Jim Weisenbach of Surterre Properties Inc.for getting this for the home owner!

Anyhow, back to our history. July turns into August as months go by and sales slow even more in Crystal Cove.

Then your uphill neighbor, with a much bigger mansionesqe Crystal Cove home on 11 Currents, sells in October of 2010 for only $5,000,000. This is less than this home sold for in 2006.

Gulp. The 11 Currents sale is about 25% less on a per square foot basis compared to what was paid for 20 Timor Sea. That house on 20 Timor Sea is not looking so good now. A 25% decrease in value from $5.5 million is a loss of $1,375,000. In about 3 months. That's over a $400,000 loss per month. This is more evidence that the high end is declining........and that buyers need to be really careful - after the agents collect their commissions, it is the home owner that has to live with the transaction.

5 Shoreline Comp Casts Major Doubt on Crystal Cove Home Values

5 Shoreline, a 7000+ square foot mansion on the ocean side of PCH, just sold for $3,195,000. That's $435 per square foot. This home is on the ocean side of PCH and on the Pelican Hill Golf Course. Just south on PCH there are plenty of Crystal Cove home listings for homes on the inland side of PCH for up to double the price. Of course, most of these homes are just sitting there, with no buyer activity.

5 Shoreline is a 7000 square foot mansion on about a 1/3 of a flat acre. On top of that, it has ocean vistas, is on a golf course, and is walking distance to the beach. This is much better or equivalent to anything listed for sale at $5,000,000 or less in Crystal Cove. A comp it is.

In my opinion, this comp puts major doubt on most, if not all, of the asking prices for these homes.

A Buyer's 10 Second Guide to Bull$hit You May Hear From A Real Estate Agent (Part I)

Below is real advice from a real estate agent on why it is a good time to buy. And I'm of course providing the reality as to why this is complete BS.  If you are a buyer, you will hear such things every day.  And it needs to stop.

Real Estate agent: 
"Looks like you have conveniently "forgot" about all the sales in Crystal Cove with long time owners making some nice profits."  (fill in any neighborhood for "Crystal Cove")

Thanks to the comments on this blog, we have no shortage of stupid comments from real estate agents.  Problem is that some buyers actually believe this BS.

So, here is the reason why this real estate agent statement is BS:  Whether or not to buy depends on the price of the home and what you think will happen to the value of the home in the next year, as compared to the price of renting.  No doubt about this. You don't want to pay $3 million for something that will be worth $2 million only 12 months later.  This is happening. Right now.

So, back to the stupid real estate agent comment.  It just doesn't matter if the sellers have equity and are making "profits" or not.  Say someone bought in 2000. Likely they would be able to sell for a profit even now so long as they didn't take out second and third mortgages.  That doesn't mean YOU should buy.  In fact, it has no logical connection whatsoever.  There is no reasonable connection to the economic analysis a buyer must make.  It truly is BS.  By the way, the sunset is fantastic tonight. ;)

Glut of Seabourne Homes for Sale In Crystal Cove

Looked this morning and there are now 8 "Seabourne" model homes for sale. In addition to the couple of Seabourne homes that have been listed for sale at one time or another for *** years ****, there are now 6 more.  In my opinion, none of them are priced to sell and none have sold.  The proof is in the pudding, as they say.  Be careful buying - if any of the owners really wants to sell, I expect major price reductions.

52 Sidney Bay Price Analysis - Makes sense to Rent, not to Own

I have completed a rent versus buy analysis on 52 Sidney Bay Drive in Crystal Cove. Listed for sale at $2,895,000, this home recently rented for $6,000 per month.

The result? Renting wins hands down, costing $5,103 per month. Buying is a real disaster - it could cost $20,478 PER MONTH.

And this is a conservative estimate because it assumes only a 4.1% drop in the home's value over the next 12 months. If this drop in home value turns out to be in my opinion a more realistic 8%, then the cost of owning in the next year becomes a whopping $30,000 PER MONTH.

Of course, one interpretation of this analysis is that this home is hopelessly overpriced. And I agree with that.

Here's the backup data:

Rent		Own
Rent Payment	-$6,000	Mortgage Payment (20% down)	-$12,433
Monthly Return on Unspent Downpayment	$897	Principle	$2,800
Total Monthly Cost	-$5,103	Mort Tax Benefit	$2,040
		Insurance	-$200
		Maintenance	-$200
		Association Dues	-$615
		Property Taxes	-$3,016
		Prop Tax Tax Bene	$1,146
		Decline in home value	-$10,000
		Total Monthly Cost	-$20,478

5 Atlantis Cove Listing Has High Aspirations

5 Atlantis Cove in Crystal Cove was recently listed by Jane Polley for $3,195,000. Considering that two Seabourne type homes were listed and failed to sell at $2,995,000 or so, I'd say this listing is rather ambitious. Another Seabourne model without a view sold a while ago for $2,200,000 and in my opinion would sell for less today.

5 Atlantis Cove does not have the best ocean view because it mostly faces a gully, not the ocean. According to the property records, a notice of default for a huge loan on another property was mailed to this home in May. The listing also omits the square footage - I wonder if this is a way to avoid the question of what Seabourne models have been selling or listing for on a per square foot basis?

All in all, in my opinion, I'm all in on this one for $2,100,000!

Crystal Cove Listing Fail

Recently, 2 Baffin Bay was listed for $2,995,000. Several open houses were held. Much gushing about the extra rooms in this home, which was renovated to add square footage. This was touted as a "GREAT VALUE IN CRYSTAL COVE" Hah. Right.

No sale. Fail. Now being rented out.

What does this mean? This is more evidence of weakness in Crystal Cove. This especially demonstrates the falling home values in the "Seabourne" models on the lower part of the hill. They are all pretty much the same - interchangeable comps. If the listing price was somewhere close to the real market value of this home, it would have sold.

Someone could conclude then that the value of this home is much less than $2.9 million. $2.5 million? $2.4 million? The real value of these single family homes is probably lower than the high priced condo sale that happened earlier in the year. Ooops - wouldn't want to be that buyer. Any thoughts out there?

Foreclosure Activity Keeps Surging in Crystal Cove

Time for an update on foreclosure activity in Crystal Cove. Like anywhere else, a spike in foreclosure activity is likely to precede a drastic drop in home prices.

And the Crystal Cove foreclosure activity is UP since I last checked.

The foreclosure activity includes recorded notices of default, trustees auctions and then the resulting properties are "bank owned."

About twelve months ago, there was only one property in crystal cove that had foreclosure activity. About six months ago or so there were five properties involved in foreclosure. The twelve. And as of today, there are thirteen, according to Realtytrac.com. This pretty much proves out what I've seen with the homes in Crystal Cove - homes can't be sold for the debt they carry and home values are dropping fast. Homes that are priced high are just sitting there with a few exceptions...... Some listings have drastically reduced listing prices as some owners have determined that it is better to get the home value now rather than lose more in the coming months.

How many of those "good" real estate agents have told our readers about this spike in foreclosure activity in Crystal Cove? Or do you see agents citing the same old and tired statistics. Be careful out there......

LA Times - High End Owners Forced to Drop Prices

Good article on high end homeowners testing the market, then having to make huge cuts to their asking prices. Testing the market? Is that like a hunt for the rare moron who will drastically overpay for a house? I'd say there are a lot of owners "testing the market" in Crystal Cove, Neport and Laguna Beach.

Buyers Remorse Part III, More Recent Buyers in Crystal Cove Lose Big Just After Escrow Closes

We have been documenting the crash in Cyrstal Cove home prices.
More recent buyers have been burned - and their homes fell steeply in value only months after the close of escrow, if not on the very day escrow closed. This blog has warned buyers to be careful with plunging Crystal Cove real estate values. Buying a home in Crystal Cove is sort of like buying a new car - you leave the lot and you've lost a healthy chunk of what you paid.

Case in point - The buyer of 124 Sidney Bay Drive, bought last June, has probably lost well over $500,000 of value after only about 4 months of ownership. And things are not getting better.
The home was bought for $2,650,000. This is $684 per square foot. The buyers agent identified by Redfin.com, is Rick Langevin of Surterre Properties Inc. Read on for some nearby sales.

The homes on Sidney Bay Drive are largely the same kind of Tuscan stucco boxes, but I've adjusted the selling price for the differences in square footage.

Only 4 months later, 100 Sidney Bay Drive sold in October 2009 for $1,900,000. This is $491 per square foot.

Then 1 month after that, 106 Sidney Bay Drive sold in November 2009 for $1,652,000! This is $561 per square foot. Likely they never knew about the comp at 100 Sidney Bay drive because i sold only a few weeks before. Some may conclude that they paid $60 per square foot too much....

Factor all of this in and the 124 Sidney Bay property is worth a lot less based on these recent sales.

Be careful out there.......

Accurate Forecaster Warns - Don't Buy - High End Homes Such as Those in Newport and Laguna Beach Will Continue to Fall Through End of 2010

I recently had the pleasure of attending a presentation of Dr Esmael Adibi, who has a track record second to none at predicting the OC housing market. His presentation was very credible - he reviewed his predictions from last year and they have come to pass. His message? DO NOT BUY a home in places like Newport Beach or Laguna Beach until at least the end of 2010. He said that such high end value areas will continue to fall in value. For a median price house in cheaper neighborhoods, Adibi said it is OK to buy now.

My take is that buying a home in Newport Beach or Laguna Beach is just like buying a car - drive it off the lot and take a huge hit in value. Closing escrow is just like driving off the car lot - buy a house in these beach towns and close escrow and LOSE a ton of money from the value decline during the escrow period. And for these hapless new owners, more losses are coming, with every passing day. Of course, real estate agents get paid on the day escrow closes, so they have absolutely no interest in what happens after that - you're on your own if you are a buyer!

Esmael Adibi is director of Chapman University’s Anderson Center for Economic Research. He has a stunningly accurate track record on predicting the housing market. He was early with a prediction that the O.C. housing market was in for a fall.

I'm standing by watching the Laguna Beach, Newport Beach and Crystal Cove home prices decline...........

Values Continue Crash in Crystal Cove - Buyers Remorse Part II

In an earlier post I wrote about the decision of a recent buyer of 18 Rockshore Bluff to pay $4.4 million. The value of this home was questionable, I thought. If it is that obvious, I wonder what kind of advice the buyer's agent gave to the buyer who was forking over $4.4 million.

Well, hold on to your hats. And hold on to your loan docs, Bank of America, for the $3 million mortgage that you wrote on 18 Rockshore. It is worth much less now, only months later.

2 Rockshore Bluff recently sold. For about $2.6 million. Practically identical house. Same 3800 square feet. Same killer view. The photo is from 2 Rockshore.

Let me get out my calculator. $4.4 - $2.6 = $1.8 million dollar loss in less than six months.
The B of A loan on 18 Rockshore? Already underwater. The buyer? Underwater. The agents involved? My guess is that they are laughing all the way to the bank.

Crystal Cove home values are going down big time. And there are many overpriced listings. Do the due diligence and research. Be careful out there.....

Crystal Cove Home Values Continue Downward Plunge

During the bubble, many realtors lured buyers of Crystal Cove homes for $1000 per square foot. That price point was thought to be a rock solid value even well after the market started plunging downward.

Not so anymore. Awash in foreclosures, the asking prices on some Crystal Cove properties are squarely in the $600 per square foot range.

And the sale prices probably will be less than the asking prices.

Hello, $500 per square foot! A 50% decline. And more declines will come after the summer buying season fizzles to a close. Your agent won't tell you that, but I will.

Here are some of the properties:

1. 24 Sidra Cove; asking $665 sq/ft
2. 106 Sidney Bay Drive; Asking $690 sq/ft
3. 11 Secret Cove; Asking $746 sq/ft
4. 100 Sidney Bay Drive; Asking $616 sq/ft
5. 5 Secret Cove; Asking $574 sq/ft

UPDATE: All the above homes either sold in the $400 or $500 per square foot price area or didn't sell at all. (Dec. 2010)

Buyer's Remorse in Crystal Cove?

More data from Crystal Cove - 18 Rockshore just sold for $4.42 million after being listed for about $5 million. 18 Rockshore is a 3800 square foot, 5 bedroom home. Also, 16 Wharfside (3500 square feet, 6 bedrooms) sold in May for $3.1 million. A similar home at 7 Atlantis Cove sold in January for $3.2 million. All of these sold for hundreds of thousands less (or almost a million less) than the listing prices.

Time will tell and I'll certainly not wish anything bad on anyone, but in my opinion, these homes will take significant value hits as we go toward December, based on present trends. There are already Crystal Cove list prices in the low 3 millions that are poised to drop into the two million range and one home (20 Surfspray) up there by Rockshore is already listed in the mid 2 millions.

If I owned 18 Rockshore, I'd be needing "upside down" therapy right now. Not a good thing to need after just closing escrow. Any opinions about these values out there?