Real estate is always a good news – bad news story: what is best for the seller is not necessarily best for the buyer, and visa versa. However, despite high levels of inventory, downward pressure on prices, and a large number of distressed properties, 2011 ended with a significant improvement in the Laguna Beach housing market, and real estate professionals concur that the new year looks a bit brighter.
“2011 was similar to 2010 in that buyers are very cautious; they look at twice as many properties before they buy, but they are buying,” said Gary Boisen, of Surterre Properties’ Laguna office and president of the Laguna Board of Realtors. “Buyers are looking for value.”
The good news: Even as prices continued to decline throughout the country, unit sales locally returned to the peak level of five years ago: 328 properties were sold in 2011, versus 320 in 2006, representing a 30 percent increase compared to the previous years, according to the Multiple Listing Service. Perhaps more importantly, the percentage sold which were distressed decreased to 25 percent, compared to 31 percent in 2010.
The highest priced sale last year was the new contemporary LEED certified home at 990 Oceanfront, designed by Mark Singer Architects and filled with state of the art design features, originally priced at $14 million, that sold for $11.5 million. The lowest priced sale was a one-bedroom senior condo of just 450 square feet downtown at 485 Mermaid St. that sold for $261,000.
The bad news: The average home price was 30 percent lower than five years ago, and the currently high level of inventory bodes poorly for a short-term rebound. At year-end, 411 properties were on the market. Inventory may be historically high, but represents only three percent of the town’s total housing units, considerably lower than the national average of nearly 10 percent. Like Laguna, home prices throughout Orange County are also a third lower compared to five years ago, with the median home sales price at $400,000 versus $600,000 in 2006, according to the California Association of Realtors.
In other words, we’re still in a buyer’s market, and there are buyers.
Gayle Waite of Coldwell Banker saw an unusual buying surge at year-end, which is more typically a quiet time in the industry, and says buyers with cash have an edge. “I was showing houses the day after Christmas and New Year’s; why keep cash in the banks?”
The predominant wrinkle is that one in four homes on the market is a distressed property, requiring more time and administrative hassle to process, and more are expected to come onto the market this year as banks speed up the foreclosure process to clear out their books.
“Each foreclosure or short sale is a different process,” Waite said. “This is very frustrating for sellers and buyers because of a lack of responsiveness by institutions that hold the loans. A whole cottage industry has been created for legal forms and processes, and that adds to the buyer’s expense.”
Robert Bryson of Laguna’s Realatrends reports that clients are snapping up lower-priced properties throughout south county. “We have one client buying any single-family residence under $400,000; they are banking on a market turnaround in coming years.” He said that duplex and triplex pricing has held up especially well because of the increasing demand for rental units.
Waite also reports a high number of investors coming into the market last year. “The fourth quarter was the best time of the year and in the lower price ranges, especially in areas like Laguna Niguel and Irvine, we’re receiving multiple offers.” She said that she has a number of foreign buyers, who are withholding cash from volatile financial markets and investing in real estate instead.
“Lower prices will hopefully help burn off inventory,” Bryson said. “However, I suspect we’ll continue to see more distressed properties this year, so I don’t see prices improving just yet.”
Realtors agreed that investors see a time frame of three to five years for recovery, and closer to 10 years to yield a significant return on their investment. They also concur that
sellers have become more realistic about pricing.
“Properties priced to sell, sell, “ Boisen said. “This has been especially crucial for the very highest-priced properties, although at year-end, the middle range started to strengthen.”
The prognosis: not unlike most economic forecasts, real estate is expected to see a slow but steady improvement.
“Let’s face it, buyers are still looking to move here for business or personal reasons, and higher sales in 2011 prove that,” said Bryson.
“I would call it a nervous market; less seasonal, more in spurts, but sellers are becoming more realistic, buyers more optimistic, and mortgage rates are extremely low,” said Boisen, who pointed out that the impact of the upcoming presidential election remains to be seen. But that’s the good news – bad news story for next year.
Randy Kraft is a freelance writer and book review blogger for www.ocinsite.com.