This Laguna Beach property is not the "bought at the peak and is now upside down" type of short sale. It's the other kind - when refinancing and mortgage equity withdrawl come home to roost.
533 Lombardy Lane, 92651
Asking price: $799,000-$849,000
Asking price/ sq ft: $695
Income requirement: $212,250
Purchase price: $494,045
Purchase date: 9/20/00
Size: 2 beds, 1 bath, 1,150 sq ft (built in 1927)
MLS: S515870 (209 days on Redfin)
ZipRealty price tracker: Price Reduced: 3/11/08 -- $899,000 to $849,000
Zillow Zestimate: $1,072,000
Type: Single Family Residence
Style: English
Stories: 2 Levels
Lot size: 1,800 sq ft
From listing: APPROVED SHORT SALE!!! LOOK AT THE PRICE ON THIS SFR IN HIGHLY SOUGHT-AFTER LAGUNA BEACH!!! The last word in style & charm this unbelievable home is tucked on a quiet street in great neighborhood. A perfect 10 in curb appeal you will fall in love with this great home from the moment you see it. Dramatic living room entrance showcases rich hardwood flooring, exposed beams, custom lighting & massive brick fireplace with elegant oversized mantle. Nifty chefs' kitchen with clean tile countertops, garden window & access to formal dining area. Main floor bedroom - a great perk! Other great features include: large office/den + enormous loft - an easy 2nd/3rd bedroom! This home will not stay on the market long - totally turnkey and priced to sell fast! WOW!
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As you can see from the purchase price, this property should not be in this situation. Shoulda, coulda, woulda right? The owner purchased this property in 2000 for $494,045 using $458,150 worth of financing in two loans. So far, so good.
But she refinanced in 2003 into a $640,000 loan. Between May 2004 and July 2005, $230,000 more worth of credit/loans were added to the property - one or both may be HELOCs and we don't know for sure if they were fully tapped.
But, it seems likely the money was pulled out since another loan for $200,000 - we think a standalone second - appeared in April 2006. Assuming all the cash was used, the total amount of loans added to the home over the course of just two and a half years could be as high as
$1,070,000.
To give you an idea of the significance of tapping the house for money: If the owner never refinanced or pulled any additional money out, and they could sell the home for $849,000, they would earn a profit of about $300,000, including 6% sales costs.
Instead, the owner is underwater and had to lobby the lender(s?) for a short sale, which we know from the listing has been approved.
The $640,000 loan also is now delinquent, and a notice of default for $26,394 was filed against the property in May. Too bad the home did "not stay on the market long" as the listing proclaimed.
Thursday, July 17, 2008
"Shouldn't be" short sale in Laguna
Tuesday, July 15, 2008
Quasi Laguna Beach short sale
Terraces Laguna Beach is technically Laguna Beach, but its location is realistically closer to much of Aliso Viejo than it is to the heart of Laguna.
Values here seem to have held fairly well, though there seems to be a lot of properties up for sale right now. Here's one of them that is also both a short sale and a preforeclosure...
404 San Nicholas Ct, 92651
Asking price: $440,000
Asking price/ sq ft: $325
Income requirement: $110,000
Purchase price: $535,000
Purchase date: 5/26/05
Size: 2 beds, 3 baths, 1,353 sq ft (built in 1988)
MLS: S536733 (28 days on Redfin)
Zillow Zestimate: $513,000
HOA dues: $377
Type: Condominium
Style: Cape Cod
Stories: 2 Levels
From listing: Laguna Beach at this price! Charming 2 masters. Open floor plan w/1/2 bath downstairs. Kitchen has been opened up to include 'new' breakfast area with counterspace and sink. Private back yard opens to greenbelt and great privacy. Very quiet location in complex. Main beach and all the charm of downtown Laguna minutes from your front door.
We counted 11 properties for sale on the MLS in the immediate area around this property. The cheapest two-bedroom is asking right around $400,000. The most expensive three-bedroom is trying to get $625,000. There is also nearby California Cove, a single family home neighborhood that's priced a bit higher.
The current owner purchased the property for $535,000 at the peak using (gasp) 100% financing in the form of two loans. Then, the genius lender allowed him to refinance into $595,000 worth of loans a year and a half later.
The mortgage has since gone delinquent and an $18,351 notice of default was filed on the first loan in May. Assuming the lender allows the sale to go through at the current asking price, it would mean a loss of about $155,000, not including sales costs, because of the increased debt on the property.
It would also mean a depreciation of "just" 18%.
Thursday, June 26, 2008
21% off in Laguna Beach
Today's property is one of six REOs in Laguna Beach (1060 Flamingo Road is actually a vacant parcel that has been re-engineered by the city).
It's being offered by the lender for more than 20% off the peak 2006 price.
943 Tia Juana St, 92651
Asking price: $784,900
Asking price/ sq ft: $491
Income requirement: $196,000
FB purchase price: $999,000
FB purchase date: 10/30/06
Size: 3 beds, 2 baths, 1,600 sq ft (built in 1972)
MLS: U8002228 (44 days on Redfin)
Zillow Zestimate: $1,000,500
2007 property tax: $7,659
Type: Single Family Residence
Stories: 2 Levels
Lot size: 2,500 sq ft
From listing: Great Ocean Breezes from this secluded light & bright single family property.Master suite has vaulted ceiling with french doors leading to private deck(Made of beautiful hardwood)Has ocean view from living room deck.Large living room with ceiling fan.Hardwood floors through out.Private serene backyard. Close to nearby park
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The previous owner purchased the home one day before Halloween in 2006 for $999,000. No downpament required. First Magnus Financial funded the purchase with a $749,250 first loan and a $249,750 second.
Less than six months later, he refinanced into $1,079,990 worth of loans from WaMu. By December, the first loan was in default. The home ended up going back to the bank for $1,021,078.
Don't feel too bad - this wasn't his primary residence anyway.
Assuming the property sells for the current asking price, it would be $214,100 or 21% below the previous sales price.
Here is a map of properties in some stage of foreclosure within one mile of this property, courtesy of ForeclosureRadar.com:
Tuesday, June 10, 2008
Going for the short sale in Laguna
It's no secret that the Laguna Beach real estate market has hit some bumps in the road - there is nearly a year-and-a-half's worth of inventory backlog (and rising).
Laguna has always played by its own rules a bit, and considering the very small percentage of people who can actually afford to buy there with the prices the way they are, the buyer pool is significantly smaller than in many other areas. Remember, a significant chunk of the "demand" for real estate right now is in the $500,000 and below category.
Here's an illustration of how buying at the peak of a real estate bubble can be disastrous, no matter what the ZIP code, or even the view.
1420 Del Mar Ave, 92651
Asking price: $1,089,000
Asking price/ sq ft: $412
Income requirement: $272,250
Purchase price: $1,364,500
Purchase date: 8/16/06
Size: 5 beds, 4 baths, 2,640 sq ft (built in 1997)
MLS: L26348 (29 days on Redfin)
ZipRealty price tracker: Price Increased: 5/13/08 -- $1,470,000 to $1,595,000
Price Reduced: 5/23/08 -- $1,595,000 to $1,089,000
Zillow Zestimate: $1,444,500
2007 property tax: $15,603
Type: Single Family Residence
Style: Modern/Hi-Tech
Stories: 2 Levels
Lot size: 2,867 sq ft
From listing: HUGE PRICE REDUCTION FOR SHORT SALE! MOST SQFT FOR THE PRICE IN LB! BUILT IN 97 WITH BIG OCEAN VIEWS.FEATURES INCLUDE HEVAULTED RYRCEILINGS ,SKYLIGHTS,2 FIREPLACES,SLATE FLOORS, WOOD CABNETS IN KITCHEN,WETBAR,2 OUTDOOR TERRACES. SHORT WALK TO MOULTON MEADOWS TO SHOW CALL RAY AT ....
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Interesting that the owner inserted their own name and phone number on the listing as the one to call. Why hire a real estate broker, then, if you're not going to let them do most of the work?
Look closely at the sales history, and you will see the property changed hands for $832,500 in 2003, $1,000,100 in 2005 and again for $1,364,500 in 2006. What happened to allow the home to jump in value by 39% in three years?
Yes, the bubble, for one, plus what appears to be a successful flip (the 2005 buyer's "name," Del Mar Avenue Trust #1420 - as in the address of the property, is a dead giveaway). It also looks like the investor(s) picked up the home as the previous owner was facing foreclosure. Then, they turned it around for a solid gain.
Assuming 6% in sales costs, the profit before renovation costs was $282,530. Not too shabby for 10 months' work.
Our unfortunate buyer and current owner not only purchased a flip, but they took possession of the
home at the peak of the market. He secured a $1 million first loan from Indymac and was apparently able to open a $227,500 HELOC, also from Indymac, the same day. Less than three months later, the owner took out a $500,000 stand-alone second from Coast to Coast Funding Group.
How bad were the lenders' judgment? The homedebtor fell behind on his first loan and his stand-alone second at the same time, and received two notices of default in February - one for each loan. The NOD amount on the $1 million loan was $26,285, and it was $23,394 for the stand-alone second.
As the listing description seems to happily proclaim, this is now a short sale! (It's also a preforeclosure!) The owner originally put the property for sale for the quasi-bailout price of $1,470,000, but no dice. Now, it's already been reduced by about $380,000 to attract a buyer.
Assuming the home can be sold at the current price, it would mean a depreciation of $275,500 or 20% off the peak price, not including any sales costs.
Friday, May 09, 2008
Now an REO in Laguna Beach
Back in December, we profiled this property in Laguna Beach - a short sale that would have been a 21% loss had it sold.
Now, the property has completed the foreclosure process and is back on the market as an REO. Here are the basic details:
1601 Louise Street, 92651
Asking price: $1,300,000
Bank purchase price: $1,300,000
Bank purchase date: 4/9/08
ZipRealty price tracker: Price Reduced: 4/10/08 -- $1,499,000 to $1,399,900
Price Reduced: 4/24/08 -- $1,399,900 to $1,351,000
Size: 2 beds, 1.5 baths, 1,466 sq ft (built in 1953)
MLS: U8001487 (41 days on Redfin)
Type: Single Family Residence
Lot size: 6,500 sq ft
Description: If you like quaint, look no further. This is a two bedroom, with an office and one and one half bathroom single family home located in one of the most sought after cities along the california coast. The home features wonderlull outside entertainment space, nice views of the coastline, city lights, and the ocean. You are located close to all the good things in laguna, cresent bay, shopping, entertainment and dining. Come home to laguna beach, and start living the southern california coastal lifestyle today.
You couldn't make this kind of stuff up if you tried: The previous owner purchased the home at the peak in 2006 for $1.775 million with 100% financing from...No Red Tape Mortgage (we're not joking!). The funding came in the form of two loans, one for 75% ($1,331,250) and the other for the remaining 25% ($443,750).Her notice of default came in October 2007, and the notice of trustee sale was filed in January 2008 for $1,404,721. Despite this amount, the opening bid at auction was set $1.3 million, and even that wasn't enough to attract a buyer as the property went back to the bank.
Assuming a buyer can be found who is still willing to drop $1.3 million for this property even though they could have already bought it for the same price at auction, the sale would represent a decline of $475,000, or about 27% off the previous price, not including any sales costs.
Thursday, May 01, 2008
$12.8 million preforeclosure in Laguna Beach
This property is simply amazing - it's a luxury beachfront home in Laguna Beach that is right off Coast Highway. But, as we know, it works the same no matter where the address is: Stop paying the mortgage, and the lender gets unhappy and begins the foreclosure process.
This property became a preforeclosure in March and also is up for sale on the MLS. Got all your pennies saved for the downpayment on this one?
31091 S Coast Hwy, 92651
Asking price: $12,800,000
Asking price/ sq ft: $2,977
Income requirement: You can't afford it
Purchase price: $4,800,000
Purchase date: 6/24/04
Size: 3 beds, 5 baths, 4,300 sq ft (built in 1992)
MLS: L25935 (31 days on Redfin)
Zillow Zestimate: $2,487,040
2007 property tax: $54,497.34
Type: Single Family Residence
Style: Contemporary
Stories: 2 levels
Lot size: 6,251 sq ft
From listing: Breath taking beach front contemporary home. Recently completed a $2 million remodel in 2007. Rare luxury property with every amenity imaginable. Enjoy short walks on the sand to the montage resort & spa with private beach access. Bang & olufsen tv and sound system, security cameras, automatic window coverings, custom temperture controlled wine room, partner's office, gym and entertainment room complete with pool table and professional bar. Hotel inpired master retreat with ocean views from every angle. Kitchen boasts his and hers sub-zeros, beverage center, convection range & gaggenau hood. Custom sie-matic cabinetry and zodiac stone counter tops designed by euro-kitchens. Home is elegantly completed with honed marble and limestone floors. Enjoy the magical sunsets nightly from the comfort of your living room or from one of your beautiful decks.
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(Google street view maps are a wonderful thing. We will now be including these with our featured properties whenever available. Don't forget to use your mouse and poke around the street if you feel so inclined)
Here's the recent financial history on this property:
10/23/03: Sold for $4.5 million.
6/24/04: Sold again for $4.8 million. Buyer put $960,000 down and financed $3.84 million through Loan Link in Aliso Viejo. Funding came in the way of a $3.36 million first loan and a $480,000 second (70/10 financing).
3/14/08: Notice of default filed - $12,714.
3/31/08: Appeared for sale on Redfin.
If you were compelled to read the long listing description (which sure as heck is warranted with a house of this price), you would have seen that this property underwent a $2 million remodel just a couple years ago. But does this alone warrant an appreciation of $8 million - a 167% total increase, or roughly a 28% gain per year - from the previous sales price in 2004? What is it really worth today?
Only a very small group of people can answer those questions - they make up the very tiny pool of potential buyers who would be interested in a property like this and have the financial wherewithal to pull the trigger (for all cash, we would presume). Consequently, they would be bailing out the current owner at the same time.
Will the "location, location, location" rule win out here and provide the current owner with enough appreciation to spring them from the foreclosure trap? We will certainly be watching to find out.
And, guess what: This isn't the only distressed property in Laguna Beach...
Sunday, April 06, 2008
Update: Beat the bank in Laguna Beach
A reader has updated us that this Laguna Beach property we posted on in January has, in fact sold. The house's journey is complicated and fuzzy, but with some help from our source and a bit of digging here is what appears to be the timeline:
8/29/06: Listed for sale for $1.125 million
2/15/07: Sold for $1.095 million, 1st loan for 80% of purchase price, or $876,000, from Indymac Bank (171 days on market)
9/12/07: Notice of default recorded, delinquent amount $38,141
12/10/07: First installment of 2007 property tax bill ($6,070.83) unpaid and becomes delinquent
12/14/07: Notice of trustee sale recorded, minimum bid established at $880,982
1/3/08: Listed for sale with asking price of $1,100,876. Listing would later carry the following description: *******Approved Short Sale At Between $830,000 Bom Back On Market Subject To Cancelation Of Current Escrow*************** Beat The Bank Pre-Foreclosure, Panoramic Ocean Views, Spectacular North Coastline Views, Catalina Sunsets. Spacious Living Areas Include Two Remodeled Viewing Decks, Open Living Room With Fireplace, Dining Area, Open Kitchen. Good Sized Bedrooms, Master With Two Closets. Freshly Painted Interior. Flowering Landscaping, Large Private Rear Yard With Decking. Situated Toward End Of A Cul-De-Sac Street, A Wonderful Residence With Outstanding Ocean Views!
4/2/08: Reader update - property sold for $830,000
4/3/08: Was on the list to be sold at auction at Santa Ana courthouse; had been postponed from 3/6
It appears, then, that the property may well have been successfully sold at the last minute before it was to be sold at auction (where it may have been kicked back to the lender). Assuming a purchase price of $830,000, that would mean a decline of 24%, or $265,000 from the previous sales price in early 2007, not including any sales costs.
Thursday, March 06, 2008
Laguna Beach REO discount
Thanks to a reader for pointing us to this Laguna Beach REO property. You heard right - REO. It's also pretty evident that the bank is not interested in letting this property sit on the market indefinitely, and has priced it very aggressively. Wasn't this sort of thing not supposed to happen in a luxury market like Laguna?
1044 Wykoff Way, Laguna Beach, 92651
Income requirement: $194,750
Purchase price: $1,348,500
Purchase date: 1/31/2008
Size: 2 beds, 1 bath, 931 sq ft (built in 1960)
Type: Single Family Residence
Lot size: 2,600 sq ft
From listing: Renovated 2006, designer floring, custom fireplace, recessed lighting, Remodeled kitchen, minus Appliances , upgraded countertops, limestone flooring. Private upper viewing deck provides ocean/serene canyon views. Relax/entertain in the Village home nestled on private street.
This property went back to the bank at the end of January and is now on the market. Things get even more interesting if you consider Zillow's sales history has this property changing hands for $1.6 million in early 2007 - that would be right after the renovations were completed. It would also signal an even greater reduction now.If that peak price is accurate, then this REO would have been listed at an astonishing 51% off. Pretty safe to say this property will be sold before too long...even though it is listed at $837 per square foot, which in just about any other area would be considered completely absurd.
According to this Laguna Beach real estate report, in January the average MLS sales price was $3,235,216, a number that was 51% higher than the previous January. But, new listings increased by 33% year over year and the average days on market (161) went up by 53%. Oh, and the number of houses sold was down by 31%.
Sunday, February 24, 2008
UPDATE: 13% discount in Laguna Beach
A reader tipped us off that the Laguna Beach property featured in this December post did, in fact, sell.
Zillow pegs the sale on Feb. 5, at a price of $1,025,000. Considering the sale amount is less than the seller paid (and the times we are in) it is not out of the realm of possibility that this in fact ended up going back to the bank.
Assuming 6% sales costs, the loss on this sale would have been $286,500. In Laguna Beach. What immunity?
Info from original post:
Asking price: $1,090,000
Asking price/ sq ft: $662
Income requirement: $272,500
Purchase price: $1,250,000
Purchase date: 6/20/2005
Size: 3 beds, 2 baths, 1,646 sq ft (built in 1948)
Price Reduced: 8/25/07 -- $1,299,999 to $1,199,999
Price Reduced: 11/26/07 -- $1,199,999 to $1,090,000
2006 property tax: $13,814
Type: Single Family Residence
Lot size: 5,810 sq ft
From listing: Two story open floor plan, kitchen has granite counters and stainless steel appliances, masterbath has walk-in closet, marble counters, spa tub and seperate large stone shower. Hardwood floors in most of the house. Cozy fireplace, french doors leading to a sprawling deck with small ocn and wooded view. Large storage shed and spacious yard with carport for 4 cars and boat parking on the side. Walk to town, beach and high school.
Sunday, February 17, 2008
$6 million bubble profit in Laguna?
That's exactly what this Laguna Beach owner is hoping to achieve after holding their luxury property for less than two years. Never mind that even this market has shown a few small cracks in recent months (the latest DataQuick figures reveal sales volume is down more than 50% and the median is down about 10% from the same time last year, though these numbers are very volatile).
And, never mind that this property was purchased about as close as it gets to the peak of the Great Housing Boom. Well, with a property this nice, perhaps anything is worth a shot...
Income requirement: Ridiculously high
Purchase price: $11,000,000
Purchase date: 5/18/06
Size: 4 beds, 5 baths, 4,500 sq ft (built in 1963)
Type: Single Family Residence
Lot size: 6,370 sq ft
From listing: Lagunita oceanfront residence that is a work of art in itself. Crashing white water and pristine sand at your doorstep with direct steps to Victoria Beach. Panoramic 180 degree oceanviews. Soft contemporary style architecture. Custom teak doors, art glass walls etched with sea life motifs, a copper roof, and climate controlled wine loft that holds approx. 800 bottles.
Obviously, this property is marketed towards a very select group of possible buyers - the all-cash variety, to be specific. Let's look at a portion of the sales history that shows up in Zillow:June 1988: $1,225,000
December 1997: $2,150,000
May 2006: $11,000,000
Taking this information into account, we see it took about nine years for the property to increase in value by 76% between 1998 and 1997. That's a pretty significant amount, but hey, this is a luxury property, so the rules are different. The nominal increase in value between those two sales was $925,000.
Then, between 1997 and 2006, the property increased in value by $8,850,000, or 21.4% per year for a total appreciation of about 412%. We speculate that some significant remodeling took place in order to increase the value by this much, but in a bubble market all bets are off.
The latest owner is gunning for a $5,989,000 profit, not including sales costs. That would equate to an appreciation of about 54% during a horrible housing downturn - now that's bubble immunity if we ever saw it.
If we were to tack on 6% in transaction costs, the profit would "dwindle" to $4,969,660.
Friday, January 18, 2008
Beat the bank in Laguna Beach
Sure we've got a mounting foreclosure problem right now, but did you think this kind of thing was going on in a luxury market like Laguna Beach as well? It is...
Income requirement: $225,000
Purchase price: $1,095,000
Purchase date: 2/15/2007
Size: 2 beds, 2 baths, 1,200 sq ft (built in 1968)
2006 property tax: $5,883
Type: Single Family Residence
Lot size: 2,500 sq ft
From listing: Beat the Bank Pre-Foreclosure, Panoramic ocean views, spectacular north coastline views, Catalina sunsets. Spacious living areas include two remodeled viewing decks, open living room with fireplace, dining area, open kitchen. Good sized bedrooms, master with two closets. Freshly painted interior. Flowering landscaping, large private rear yard with decking. Situated toward end of a cul-de-sac street, a wonderful residence with outstanding ocean views!
* Redfin has a range of $800,000-$900,000
Is there still time to beat the bank considering this one's been on the market since July?This property does not have the greatest location because it's fairly far from the ocean (at least for Laguna standards). The asking price per square foot is pricey for just about anywhere.
Assuming a pre-foreclosure sale can be arranged at a price of $900,000, the loss would be $249,000, including 6% sales costs. If the final sales price is at the low end of the asking spectrum for $800,000 then the loss would be $343,000, also including sales costs. That would also represent a 27% decline from the peak (not including transaction costs).
Is that really possible - 27% off in Laguna Beach?!
Saturday, December 22, 2007
Bank deal in Laguna Beach
Is the holiday spirit working its magic...or is it merely the bottom line that's motivating the lender to cut the price on this Laguna Beach house turned REO to try and get it sold? Hint: It's probably not the first explanation.
Income requirement: $204,975
Peak purchase price: $885,000
Peak purchase date: 10/04/2006
Size: 3 beds, 2 baths, 1,039 sq ft (built in 1941)
Price Reduced: 11/21/07 -- $869,900 to $844,900
Price Reduced: 12/15/07 -- $844,900 to $819,900
2006 property tax: $1,281
Type: Single Family Residence
Lot size: 2,080 sq ft
From listing: * * REO * * Awesome South Laguna Beach Cottage with Ocean and Sunset Views! WALK to Beach! Property is a 3 BR upstairs/downstairs unit w/ separate entrance. Hardwood floors, New carpet, New heater. Wonderful Location! This 2-story home boasts beautiful ceilings, large picture window & a charming balcony with ocean/sunset views! Views from Living Space, Kitchen & Balcony. WALK to Laguna Beach/Village. Close to Thousand Steps. Very private location. Come see why this is such a desirable place to live!
I don't know the story behind this property...but it might be an interesting one considering it went back to the bank only 10 months after the peak purchase in 2006.The location is there, obviously - complete with great ocean views. The inside could use a little sprucing up, though. In the right hands this place could certainly turn into something special.
The total amount of price reductions is now $70,000. Will this latest $25,000 one be the straw that reels in a buyer? We will see.
If a buyer can be located for the full asking price, the property will be $65,100 off from the peak. That's not any significant amount - but this house is in a pretty prime location. Is the high end immune? Nope, not always.
Thursday, December 13, 2007
21% decline in Laguna Beach
This nice-looking Laguna Beach property appears to be in for trouble. It's been on Redfin for 114 days so far and no sale. If they already did the planned remodel and expansion would it have sold already?
Income requirement: $350,000
Purchase price: $1,775,000
Purchase date: 12/15/2006
Size: 2 beds, 1.5 baths, 1,466 sq ft (built in 1953)
Price Reduced: 9/20/07 -- $1,900,750 to $1,598,900
Price Reduced: 10/20/07 -- $1,598,900 to $1,475,000
Price Reduced: 11/20/07 -- $1,475,000 to $1,400,000
2006 property tax: $13,814
Type: Single Family Residence
Lot size: 6,500 sq ft
From listing: Beautiful Spanish style home. Spacious office/den which can be used as a 3rd bedroom. Private courtyard entry with fountain, french doors and windows throught. Two large decks, granite in kitchen and bathroom, stainless steal appliances, saltillo tile. Great for entertaining. Plenty of room expansion and pool! Walk to Cresent Bay beach and restaurants. Includes plans for expansion and remodel.
If the past is any indicator, expect the next scheduled price reduction to occur Dec. 20. I still don't understand the tactic of setting an asking price and then jacking it up considerably the same day. Reeks of attempted deception.At this price, in this market, I would hope they don't need to play games involving price.
It's also a shame there aren't more pictures - particularly of the outdoor space. It is Laguna after all, right? It is a $1-million-plus property, right?
Judging by the cost of this property, I will speculate the owners put a good amount of money down and will be the ones who will mostly lose out if the property sells at a loss - not a bank. They've chased the market down for nearly four months. How much longer will it take to sell?
Assuming a sale at this price, the loss would be a staggering $459,000 in about a year, including 6% sales costs. Yes - $459,000! The depreciation would then be a mind-blowing 21%, not including sales costs.
Monday, December 10, 2007
13% discount in Laguna Beach
Not even a Park Avenue address (whoops, wrong state) could save this Laguna Beach property from the housing decline. Nope - not even the luxury market is completely immune, folks.
The asking price is 13% off from the purchase price in 2005, and no takers after 300 days on Redfin.
Asking price: $1,090,000
Asking price/ sq ft: $662
Income requirement: $272,500
Purchase price: $1,250,000
Purchase date: 6/20/2005
Size: 3 beds, 2 baths, 1,646 sq ft (built in 1948)
Price Reduced: 8/25/07 -- $1,299,999 to $1,199,999
Price Reduced: 11/26/07 -- $1,199,999 to $1,090,000
2006 property tax: $13,814
Type: Single Family Residence
Lot size: 5,810 sq ft
From listing: Two story open floor plan, kitchen has granite counters and stainless steel appliances, masterbath has walk-in closet, marble counters, spa tub and seperate large stone shower. Hardwood floors in most of the house. Cozy fireplace, french doors leading to a sprawling deck with small ocn and wooded view. Large storage shed and spacious yard with carport for 4 cars and boat parking on the side. Walk to town, beach and high school.
Now this is an old school property. As in built the same year the Surf and Sand hotel opened. Nice updates in the kitchen, but there's not much in the rest of the interior pictures (or exterior for that matter) that really stands out to make the place look modernized and luxurious.This property is located right near Laguna Beach High. Not bad at all (as if there was really a bad part of Laguna - it's more like good location or better location), but then again it's not a prime oceanfront property, either.
Since this home has sat unsold for a really long time, it's pretty safe to assume it's probably overpriced. The original listing called for a price of $1,375,000 - that amount would have yielded a $42,500 profit assuming 6% sales costs. Didn't work out so well.
With the current asking price, we're looking at a loss of at least $225,400, including 6% sales costs. Depreciation has been 12.8% compared to the previous sale two and a half years ago.
Wednesday, November 07, 2007
Laguna Beach: immunity or ridiculosity?
There is talk about the possibility of high-end immunity in real estate - that is to say, more expensive properties (usually either on the coast or in a prestigious area) can get the best of both worlds: They appreciate along with traditionally less-expensive areas during bull markets, but when the inevitable correction comes, they don't seem to fall much in value at all (or even show gains). Perhaps it's because "land is scarce," or that "there is never-ending demand for these exclusive places."
This demand, some would even argue, means escalating prices of luxury homes are of little concern to those with excess cash who want to buy coastal properties and don't care how much more they have to pay for the privilege. In that scenario, these types of properties really could go up in value perpetually, assuming more people with huge cash reserves are ready to step in and continue to bid prices up.
We will use Laguna Beach as a case study of what can happen to prices in a luxury market before, during and after the past two real estate bull markets. This city is one of the most expensive areas of South OC, and home values are still generally holding up fairly well in comparison to the rest of the region (though the median here has been getting clobbered recently, if that means anything).
After a few clicks on Redfin, it's very apparent that even sellers who purchased in 2004 and later think their properties have not only staved off any sort of depreciation, but that they've instead continued to steadily increase in value.
We'll use the example of 1089 Miramar St., since the past two times it was sold happen to coincide with bottom of the market in 1997, and the general peak in mid 2005. Note: We assume the house has not undergone any extreme renovations (e.g. a teardown and rebuild situation), but instead the homeowners renovated as necessary to maintain and update the property to keep it in good condition as it aged. Here is the sales data:
7/18/1997: $260,500
5/24/2005: $1,195,000
The realized appreciation for that eight years of ownership was $934,500, or 21.4% per year. Notice the years of ownership include a few (1997-2000) that occurred before values really shot up. That means a large amount of appreciation probably occurred in the final few years of ownership as real estate in general took off.
By the way, the current owners are now trying to unload this place for $1,425,000. If they sold at full asking price, it would equate to a gain of about 19% since 2005 (about 12% per year annually). Not exactly 20% per year, but not half bad for only holding a property at a time when most other areas have seen prices fall precipitously.
So, then, is the "normal" appreciation rate for a Laguna Beach property with a killer ocean view that has been held for more than a couple years still running at about 21% per year?
Well, let's look at 21673 Ocean Vista Drive #27. This property also, coincidentally, saw an appreciation rate of exactly 21.4% between the sales in 2000 and 2003. But check out the sale before that: $225,000 on 8/2/1988, which means an appreciation rate of 5.5% per year for 12 years (1988-2000). Yes, the property was going up in value, but at a much more modest rate than it did later on.
To sum it up:
*Laguna Beach was always a nice place to live and commanded a justifiable premium before the real estate boom. What really changed between the time before and after the market started shooting up (other than the town being the scene of an MTV show) to justify the types of price run-ups experienced here? If places like Laguna Beach participated in bubble behavior that catapulted prices, it seems only natural that it would have to take at least some tangible hit as the market deflates.
*If the first property we mentioned had seen the 5.5% yearly gains the second one experienced during 1988-2000, it would only have been worth $399,786 when it sold in 2005, not $1,195,000. The appreciation rate it actually saw between 1997-2005 was almost four times higher than the one experienced by the second property between 1988 and 2000.
*If the second property had continued to rack up 21.4% appreciation every year since 1988, it would now be worth a whopping $8,960,610. Instead, the actual appreciation rate between 1988 and 2003 was a much more modest 7%.
*Some current sellers believe the area still warrants appreciation rates similar to those seen during the boom years. If these asking prices are still in line with what buyers can and are willing to pay, they will sell. If these prices are out of line with the current market, these properties will sit unsold.
It's likely that, when all is said and done, well-appointed, ideally located properties like these that were held long-term will keep some of the paper gains recorded during the real estate boom even after a down market (after all, our second example weathered the storm of the 1990s bust quite nicely). But it's not realistic to assume that recent appreciation rates are, in fact normal, and that they could somehow