Home Prices Reach a New Record

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The median price of homes sold in Laguna Beach last year neared $1.8 million, exceeding the previous peak median price of $1.7 million achieved in 2006.

In a year-to-year comparison, the median sales price for single family homes in Laguna jumped 16 percent in 2014.

Sales volume did not keep apace with the record prices, with just 411 deals finalized in 2014, a 1.9 percent drop compared to the previous year, according to figures compiled by broker associate Frank Hufnagel of Surterre Properties.

Examples from the opposite ends of the price spectrum in Laguna Beach: A buyer paid $261,600 for a 450 square foot one-bedroom downtown condo on Mermaid Street last January.
Examples from the opposite ends of the price spectrum in Laguna Beach: A buyer paid $261,600 for a 450 square foot one-bedroom downtown condo on Mermaid Street last January.

Even so, home sales are strong enough to buoy the city budget, which will receive an infusion of $750,000 in new unanticipated property tax revenue, Gavin Curran, the city’s finance director, said in a midyear budget report presented to the City Council this past week. Property taxes provide half of the city’s ongoing revenue needs.

The lowest price Laguna Beach transaction in 2014 was the $261,600 that purchased a 450 square foot one-bedroom downtown condo on Mermaid Street last January. At the opposite extreme was the princely sum of $23.6 million ponied up last June for a nearly 12,000 square feet home on Abalone Point in Irvine Cove, according to Multiple Listing Service records.

And another buyer paid $23.6 million for a nearly 12,000 square feet home on Abalone Point in Irvine Cove last June. Photos courtesy of the Multiple Listing Service.
Another buyer paid $23.6 million for a nearly 12,000 square foot home on Abalone point in Irvine Cove last June.
Photos courtesy of the Multiple Listing Service.

Laguna’s real estate market in 2014 was mirrored but not matched by statewide trends. In California as a whole, the number of homes that change hands declined 7.6 percent compared to the previous year and the median sales price climbed just 1.7 percent, says a report by California Association of Realtors.

Statewide, the median sales price — where half the homes are above the median and half below – stood at $452,570 last month, CAR economist Leslie Appleton-Young said in a presentation to the Laguna Beach Board of Realtors last month.

In a measure of how far the market has rebounded, just 203 homes changed hands in Laguna Beach in 2008, the low point in sales during a nationwide recession. The median price continued to decline locally for five years, dipping to a low of $1.1 million in 2011, 35 percent off the peak, Hufnagel’s figures show.

Prices proved even more volatile statewide where median prices of single-family homes have yet to return to their 2007 peak of $594,530, CAR figures show. Median prices statewide plummeted faster and farther to $245,230 in 2009, 59 percent off the zenith, CAR reports.

But even after four years of gains in the median prices of homes sold in Laguna, sellers are not exactly flooding the market. Just 189 homes were for sale in December, traditionally the year’s low point for listings.

That contrasts with the summer months in 2009 and 2010 when twice as many property owners were entertaining offers for Laguna Beach homes. In part, sales volume then reflected that “so many of those properties were troubled,” said mortgage broker Rick Cirelli of Laguna’s RTC Mortgage.

Between 2009-11, as much as a third of properties for sale statewide were distressed, either owned by banks or on the brink of foreclosure, CAR figures show. Last January, just 24 properties for sale in Laguna Beach fell into that category, a CAR report says, or 13.8 percent of the active listings.

Today’s lower sales volume in Laguna reflects a lack of inventory, both Cirelli and Hufnagel conclude.

Such a consequence means “sellers have less competition and buyers have fewer choices,” added Hufnagel, president of the Laguna Board of Realtors.

Conditions have changed remarkably in another way since the mortgage meltdown brought on the Great Recession.

Prior to the downturn, many buyers purchased homes by taking advantage of loans offered by lenders that didn’t require income documentation, so-called stated income loans. With the imposition of tighter credit restrictions, now half the buyers are foregoing mortgages altogether and making all-cash deals, Hufnagel said. Cash deals close in as little as 21 days, a delight to sellers, he said.

That trend may abate in 2015. As growth slows in China and India, economists predict a slowdown in cash home-buying from overseas investors, Cirelli said. That shouldn’t slow the local real estate market though, he predicted.

More traditional financing for jumbo home loans, which exceed $625,000, has become easier to obtain again. Non-bank lenders, mortgage companies such as Stearns Lending in Santa Ana, are again making loans to borrowers if they can document their cash reserves, Cirelli said. These lenders can make these loans because Wall Street’s appetite has returned for securities backed by mortgages, he said.

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