By Jennifer Erickson | LB Indy
The volume of home sales in Laguna Beach rose by 18 percent in 2010, the second consecutive year of rising sales, but the median home price of $1.15 million was unchanged over 2009, according to figures compiled by local real estate brokers.
The number of distressed properties selling also increased as a percentage of total sales, contributing to downward price-pressure in Laguna.
But by comparison to nationwide trends, California in general and Laguna Beach in particular seems to suffer a little less than the rest of the country. Home prices in 20 major cities dropped an average of 2.4% in December from the same month the previous year, according to the Case-Shiller Home Price Index released this week, and expert opinion is divided about forecasts for further price declines this year.
Here in Laguna Beach, a more nuanced and more hopeful portrait of the local market came from broker Michael Gosselin, of Surterre Properties. He thinks prices of homes in the lower end of the market, below $800,000, have likely reached bottom; homes in the $800,000 to $2 million range may still decline in value this year; and high-priced homes above $2 million are still trending downward or at best, will remain flat.
Of 334 home sales recorded in 2010, compared to 282 in 2009 and the low point of 206 in 2008, Gosselin noted a third of sales are under $1 million. “Hopefully, the increased activity in the lower end of the market will start to ‘trickle up’ to start move-up buying in the higher price ranges,” he said.
(His data was culled from Multiple Listing Service figures, which are based solely on reported data. Some transactions, typically at the top end, are not reflected in the database.)
Nationally, home prices seemed to recover last year, which experts suggested was buoyed by a federal home-buying tax credit, which expired last summer. When the stimulus ended, prices began to fall again.
Prices would have continued to fall if it weren’t for the tax credit, Dean Baker, co-director of the Center for Economic and Policy Research in Washington told the Los Angeles Times this week.
In Laguna, the tax credit was not a major factor in real estate trends since it only applied to first home buyers. Since the least expensive home in Laguna is in the $800,000 range, few people enter the market at that price point, said Gosselin.
Indeed, median home sale prices locally in 2010 were $1.15 million, unchanged and without appreciation from the previous year when prices had dropped 25.6 percent, according to Gil Thibault of Coldwell Banker, relying on Data Quick figures. The median price means that half of the sales were greater and half of the sales were lower.
The lowest priced home sold in Laguna last year fetched $299,000 for a two-bedroom, two-bath, 1,263 square-foot home at 109 Santa Rosa Court, which was on the market 91 days, said Thibault, based on MLS figures. The highest-price home sale reported to MLS was the $15.8 million paid for a four-bedroom, three-bath, 8,350 square-foot newly built ocean-bluff home on Coast Highway in South Laguna on the market for 371 days.
The examples reflect Gosselin’s estimation that the lower end of the market remains active.
Experts cited a plethora of reasons for real estate’s doldrums: uncertainty over mortgage-holding companies Fannie Mae and Freddie Mac; proposals to cut the mortgage-interest tax deduction; slow job growth and employment uncertainty; and stricter credit standards by lenders.
Resident Ora Sterling has directly experienced the pitfalls of a tight credit market. She is responsible for selling friend Frank Wales’ neighboring home, at 31711 Mar Vista, which has been on the market since last June and has been reduced to $999,000. Built by Wales in 1968 and never remodeled, Sterling admits that it needs some work. Still, it has ocean views and sits on nearly a quarter acre. “It needs someone to love it and move in,” said Sterling. One serious bid collapsed because the buyer, who was trying to sell two properties elsewhere, was unable to qualify for a loan.
Foreclosure and short sales in Laguna have depressed prices, including among high-end properties, Surterre broker Pamela Horton in Laguna said.
Distressed sales, including sales where owners owe more than a home’s current value or sales of bank-owned properties, accounted for about 15 percent of home sales in 2010, up from 10 percent the year before, Gosselin said. Less than four percent of sales were distressed in 2008, he said.
As a portion of current inventory, distressed properties account for 12.7 percent of 287 listings in Laguna Beach, according to figures complied by Steven Thomas, president of Aliso Viejo-based Altera Real Estate. That compares to a countrywide figure where 38 percent of listings are distressed, his figures show.
Newport Beach is comparable to Laguna with 13.7 percent; lower still are Newport Coast, at 7.8 percent, Corona Del Mar at 6.3 percent and Seal Beach at 4.3 percent. Irvine and San Juan Capistrano are closer to the average at about 30 percent each, and Foothill Ranch and Rancho Santa Margarita have the most distressed sales at 64 percent each.
Foreclosures and short sales are now diminishing, Gosselin believes, though he cautions that figures may be skewed by banks withholding inventory and delaying some foreclosures.
A “Laguna” factor is also at work here. While Laguna real estate prices have yet to recover, “there will always be folks who want to live here for the weather, the school district, the people, and the amazing sense of community,” Gosselin said. “Prices have not settled down yet, but I don’t believe they are going to fall off dramatically. It is just too special of a place to live with a finite number of homes and no room to build any more.”