Irvine and Laguna Beach are very close, and although the lifestyles are very different, the housing markets draw from the same buyer pool. Pricing in one community impacts the other.
Asking Price: $1,998,000
Address: 20 Wildland Irvine, CA 92603
Wild thing…you make my heart sing…
You make everything
Groovy
I said wild thing…
Wild thing, I think you move me
But I wanna know for sure
So come on, hold me tight
You move me
Wild Thing — The Troggs
Some of the high-end properties in Irvine and Orange County are really groovy. With the wild and unpredictable pricing in our markets, the attachment of people to their properties can become a love-hate relationship.
In a housing market crash like we are witnessing now, no neighborhood is immune. The most desirable neighborhoods crash last, and they come back the soonest, but they too must walk through the valley of the shadow of death (Psalm 23:4). Right now, they fear no evil.
Despite the fact that they fall last and come back first, it does not mean that these neighborhoods crash least. Due to The Immunity Syndrome, some of these neighborhoods will crash the hardest. The prices in these neighborhoods was not pushed up so high by cash buyers, and although cash buyers can float things for a time, the lack of financing creates a vacuum that sucks the air out of the housing bubble.
For now, buyers with substantial cash positions dominate the market in Irvine. Large financing amounts will not be common any time soon as the loan programs of the bubble are dead. Will cash buyers sustain the market forever? No.
Asking Price: $1,998,000
Income Requirement: $499,500
Downpayment Needed: $399,600
Purchase Price: $1,713,500
Purchase Date: 12/16/2005
Address: 20 Wildland Irvine, CA 92603
| Beds: | 5 |
| Baths: | 5 |
| Sq. Ft.: | 3,900 |
| $/Sq. Ft.: | $512 |
| Lot Size: | 8,367
Sq. Ft. |
| Property Type: | Single Family Residence |
| Style: | Other |
| Stories: | 2 |
| View: | Canyon |
| Year Built: | 2005 |
| Community: | Turtle Ridge |
| County: | Orange |
| MLS#: | P699886 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 2 days |
throughout, Security Systems, Built in Speaker Systems, Chandelier
lighting System throughtout House, Custom made curtains, 20X20
Travertine tiles throughtout downstairs, All Upgraded Viking
Applicances, Cabinets, Counter Tops, Door Knobs, Built in Media Center
and Wall units, Built in Walk in Closet, Custom Paint Throughout with
designer Wall Paper in dining area, Powder Room and Master Bedroom,
Built in BBQ, Water Falls (X2), Large Built in Fire pit, Fruit trees(
Jujube, Peach, Persimmon and Avocado), and much more… Cul-de-sac
Location, Back to private Views and Trees, Very Quiet,
If they spent $300,000 on upgrades, we know where the WTF asking price comes from.
throughtout?
Do you know what Jujube is? I didn’t.
Back to private Views and Trees, Very Quiet? I call BS on that one. This property backs to the intersection where all the traffic in the subdivision comes and goes, and it sides on to a collector street.
What is that staged on the couch?
The owners of this property do have a mortgage over the deduction limit, but even if they had to reduce price, this would not be a short sale. I still think they will fall underwater, but that is not today’s market.
If this property sells for its current asking price and a 6% commission is paid (it will probably only be 5%), the late 2005 buyer and current owner will make $164,620. Perhaps there was no bubble?
The Substitution Effect
People searching for a $2,000,000 property are generally going to look at all the lifestyles available to them. If nearby cities have superior properties and lower prices, people and money will flow there.
Asking Price: $1,999,000
Income Requirement: $499,750
Downpayment Needed: $399,800
Purchase Price: $1,120,000
Purchase Date: 6/23/2002
Address: 2255 BRIDGE Rd Laguna Beach, CA 92651
| Beds: | 5 |
| Baths: | 4 |
| Sq. Ft.: | 3,697 |
| $/Sq. Ft.: | $541 |
| Lot Size: | 7,500
Sq. Ft. |
| Property Type: | Single Family Residence |
| Style: | Craftsman |
| Stories: | 3+ |
| View: | Canyon, Catalina Island, City Lights, Hills, Ocean, Panoramic, Has View |
| Year Built: | 1976 |
| Community: | Laguna Village |
| County: | Orange |
| MLS#: | S558331 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 233 days |
WELL below the average SOLD price per s/f~ Enjoy remarkable Ocean,
Catalina Island, canyon, and city light views from this stunning true 5
bedroom, 3,697 square foot, three story Laguna Beach home. Each day
brings a new sunset to view from multiple levels of balconies, DUAL
master suites, and a hot tub in the yard to soak up the many views.
Enjoy morning coffee on the patio adjacent to formal living and dining
rooms, or unwind in the family room with corner windows framing in the
stunning landscape. Located on a private cul-de-sac with a two-car
garage, this spacious home resembles the feeling of being in a resort
while in the comfort of your own home. Close to dining, Resorts, John
Wayne Airport and Laguna Canyon.
I guess that $$$ MONSTER price reduction did not close the deal because another one followed. Perhaps their WTF starting price was part of the problem.
| Date | Event | Price |
|---|---|---|
| Aug 20, 2009 | Price Changed | $1,999,000 |
| Jul 25, 2009 | Price Changed | $2,095,000 |
| Jul 17, 2009 | Price Changed | $2,240,000 |
| Feb 10, 2009 | Price Changed | $2,350,000 |
| Jan 02, 2009 | Listed | $2,450,000 |
Take a good look at both of these $2,000,000 properties. In your opinion, is the Irvine property as nice as the Laguna Beach one? Personally, I think the views and proximity to the water make the Laguna Beach property far superior, but some may favor the Irvine home for its convenient location.
Competing properties in neighboring communities have an impact on property values. All high-end communities in Orange County equally immune to price declines? If one crashes, with the substitution effect bring them all down? It should.
{book5}
The substitution effect also down the housing ladder within the same communities. As prices on properties like the one featured below continue to decline, that will apply pressure on the better properties in the area.
Asking Price: $839,900
Income Requirement: $209,975
Downpayment Needed: $167,980
Purchase Price: $817,000
Purchase Date: 4/17/2008
Address: 39 Bower Tree Irvine, CA 92603
| Beds: | 3 |
| Baths: | 3 |
| Sq. Ft.: | 1,665 |
| $/Sq. Ft.: | $504 |
| Lot Size: | – |
| Property Type: | Condominium |
| Style: | Tuscan |
| Stories: | 2 |
| Floor: | 1 |
| Year Built: | 2004 |
| Community: | Turtle Ridge |
| County: | Orange |
| MLS#: | U9003739 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 2 days |
PRISTINE ARBOREL PLAN 3 – 3 BEDROOMS + DEN/OFFICE, 2.5 BATHS.
CUSTOMIZED & UPGRADED THROUGHOUT WITH HARDWOOD FLOORS, CROWN
MOLDING, PLANTATION SHUTTERS, CUSTOM PAINT, RECESSED LIGHTING, BUILT-IN
SPEAKERS, FIREPLACE AND MORE. GOURMET KITCHEN WITH STAINLESS STEEL
APPLIANCES, GRANITE COUNTERTOPS, CUSTOM CENTER ISLAND & WALK-IN
PANTRY. REAR YARD WITH BUILT-IN BARBECUE, STONE PATIO & GRASSY
AREA. IMMACULATE MOVE-IN CONDITION. DEN/OFFICE CURRENTLY USED AS
PLAYROOM, COULD BE CONVERTED TO FORMAL DINING ROOM. LOW TAX RATE OF
1.04%, LOW MELLO ROOS APPROX. $2930/YEAR.
ALL CAPS
LOW TAX RATE OF
1.04%? Low compared to what? Isn’t every house taxed at 1% (plus a few miscellaneous fees) because of Proposition 13?
The second property looks suspiciously like a flip gone bad. Our flipper knife catcher paid $817,000 in 2008 for a property that sold for $903,500 in 2005. I imagine they figured they were getting a bargain. It hasn’t worked out in their favor.
The current asking price is 3% over the price they paid. If one of the owners is a realtor, they probably have listed it with a 3% markup to cover the cost of the buyer’s broker. At least that is their thought process. I wonder if comps or the declining market figured into their calculations. It doesn’t look like it.
That very first property description encompasses almost everything that a realtor can do wrong. It’s basically one long run-on sentence with no structure. Is everything in that sentence part of the $300,000 upgrade?
Why did the realtor lead off with “7 (foot) crown molding”? Wouldn’t the kitchen, or the master, or the jujube be a more important selling point to start with. It’s like the realtor just has a list of notes and starts tossing random data into the description.
What is a “chandelier lighting system throughout”? I see mostly recessed cans throughout. Does the realtor mean dimmers? Dimmers installed throughout? Or maybe it’s a typo…maybe Chandler from Friends will come by and turn on your lights for you.
lol that is so funny.
What about designer paint? I see this so often. What kinda BS is that.
For the first one, someone with a $400k DP, and income of $500k/year won’t flinch about getting speakers installed themselves, or getting their own ‘custom’ paint. Custom to you is not custom to me.
WTF – for the tax values, the lot in Irvine is 300k more than the lot in LB? I understand the purchase date p13 effect, but still.
The descriptions of the two $2M’s are also noticeably different in sentence structure. The LB makes you want to see the home, while the Irvine one is just a list of stuff, which is probably an apt comparison of the two.
Prop 13 means the tax valuations are more affected by purchase date than anything else. I’ve seen properties near the beach listed at a million buck that have tax values of forty thousand dollars since the same owner (or transfered between prop 13/58/193 exempted group of owners; IE, from parents to children) owned it for fifty years.
Is there any reason for the third property to sell for more than ca. 539,000?
1st house: Who has a chandelier in their bedroom? I mean really, who?
2nd house: Gorgeous, no complaints. okay the cielings look a bit low, and the pure white makes it hard to judge the room sizes from the pictures such that yu need to see it in person, but that’s not a bad thing
3rd house: $500/sq foot for a condo? Really? A condo that you didn’t even take an outside picture of?
I’m really enjoying your new tone, IR. Less combative, more analytic. However, I would like more explanation for how exactly the prices on the “$800k” condos effect the price of the “$1.9million” houses. Which one drops which? I would say, (1) you need a few more rungs there. (2) It’s more that as nicer homes become available to the same buyers demand for the lesser home slackens pushing those prices down. People on the market for a 1.9mil home aren’t going to even look at the $800k condos, especially not once they’ve fallen another $200k or so.
Or are you refering to the move-up equity part of the equation? One can go from a $300k home to a $600k home after only having paid down a good chunk the loan, and getting to keep $150k from a mix of inflation and principal payments, such that you go from say a $200k mortgage to a $450k mortgage, if you have also in that time gotten sufficient raises and job advancement. But going from $800k to $1.9mil isn’t exactly the same math. Percentage-wise sure it is. But I percieve there to be more of a step-jump there, in that a lot of professions max-out at an income of around $250k/year or less.
Alternatively in the move-up equity equation, you could assume a much longer hold time, and the same mortgage payments before and after. That to me is implausible, as after 20-30 years of ownership most will want to turn some of their equity into retirement wealth as opposed to rolling it all into a new home. (or use some of it for a vacation home)
Barnabas Collins had a chandelier in his bedroom.
Nice work on the obscure reference — been awhile since I last saw a mention of Dark Shadows. 🙂
Cara,
There are a few rungs in the property ladder between those properties. The point was that substitution applies both to location and to product. People may want a McMansion, but if the next step down is considerably less expensive, they may substitute down. They may not step down as far as the difference between the two Turtle Ridge properties today, but the effect is real.
Indeed, that’s essentially what we’re doing. To get something with a nice of a neighborhood location and parking as the place we’re trying to buy we’d need to pay $125k more if we also wanted more space or a garage. So in a sense we are substituting down for a better value ($220k if the seller’s bank accepts it).
(everything in between has more space but not as nice of a neighborhood, and serious parking issues)
Looks like a similar home two streets over was able to fetch $2.445, but most of these seem to have found a floor at $1.7-$1.8. Substitution works both ways. For every buyer swapping out Laguna Beach, you’ll bring in one from Northpark or Quail Hill.
What home closed for $2.445?
Found it. 21 Woodcrest closed for $2.445 in June. That is only one street away and is an excellent comp for this property. The Woodcrest home was a 4bd 3900 sq ft.
Laguna Beach house, no doubt at all. Hopefully it won’t slide down that cliff when the rains come. The staging on the couch (Irvine house) looks like the daughter’s cotillion or the other thing when they are presented to society. Dang, what is that called?
I think it’s the real estate agents’ flier on the home, but that’s a very odd place to put it.
That is what I was thinking too.
Debutante ball.
I was thinking the same thing – Laguna Beach unquestionably, … after a very thorough assessment of that hillside by someone highly competent and double-checked.
A “coming out” party. Although it may have additional meanings today :). A marriageable young lady makes her debut, thus debutante.
It amazes me that people put a high premium on Irvine.
For your money Irvine is one of the worst communities to live in. Irvine epitomizes cookie cutter community. There is no style in Irvine. There is no uniqueness.
Being born and raised in West LA, I’m applauded that anyone would consider Irvine desirable. The only thing it has going for it is a quality University and Jobs. Authenticity is lacking.
Laguna Beach on the other hand is far superior in uniqueness, authenticity and lifestyle. Laguna Beach has the restaurants the views, the beach, and the people.
You’re being applauded because people think Irvine is desirable? Cool!
Re: “the people,”
Most of my friends and acquaintances who live in Irvine tend to be friendly, down to earth and well rounded.
By contrast, I know several arrogant DB’s who call Laguna their home.
So you’re saying that there are lots of truly arrogant, but truly authentic and unique DB’s who call Laguna their home. Makes sense to me. It’s easier to be that when you’re living in a city featured on TV. They somehow feel they are special to have the privilege to live in LB. Whatever makes them happy I guess.
When you’re just a normal schmoe living in a cookie cutter house in Irvine, it’s not as easy to be a DB. They just want to live in and raise their family in a safe environment with great schools and weather.
The people of Irvine are fine. I was referring to the types of people in Irvine. There is not enough young single people in Irvine. You have your families, students, and professionals. Considering that Irvine is a city with a quarter million people I would expect more artist, workers, musicians,etc.
Laguna Beach has only 23K people, so its somewhat exclusive, but there is more people diversity as far as types of people.
Not enough single people! Wrong! According to CNN. Irvine is ranked #9 for best cities for rich and single. Who whudda thunk it.
http://money.cnn.com/galleries/2009/moneymag/0906/gallery.bplive_richsingles.moneymag/9.html
Two of the main reasons people overpay for properties in Irvine are good schools and low crime. Single people don’t care about the first at all, and care somewhat less about the second than families with children.
Aw jeez… now you backtrack…
Irvine’s got lots of scientists too. We’re as good or better than your typical bum bohemians you so wish for.
And, in the West Side of LA you don’t have too many bohemians either. Most of them are rich artists, rich musicians, rich workers… or maybe they’er bums in Santa Monica living in a rent controlled apartment.
Jeez… besides, my son has a garage band. They’re loud, very loud, pretty good and they piss off the vinegar’d witch across the street. The rest of the neighborst think it’s cool.
See, don’t make so many rationalizations about Irvine.
I know several people who have lived in Laguna beach all of their lives and they are the nicest, generous, and most modest and humble people I have known. I also know a snob or two who have called Laguna Beach their home for the past five years.
Irvine is the same way – people who have lived there a long time seem much more grounded than the recent arrivals. Living in Irvine, I can assure you that I have met plenty of obnoxious, status conscious and entitled snobs.
you are correct. of all the boring, bland south oc suburbs, irvine is the worst.
i always felt tustin was the scrappy, older brother to irvine.
tustin wasn’t master-planned, has some rough edges, but on the whole is preferable to irvine IMO.
Where Irvine has cookie cutter, Tustin has character and variation — from mansions to cookie cutter to mid-century modern. Tustin has community where Irvine has apathy. Irvine canceled its Harvest Festival; Tustin’s Tiller Days is still running strong. Holiday lights are all over the place in Tustin (at least 3 walkable hotspots come to mind); Irvine is spotty at best. The HOA has truly replaced the grassroots community. Schools are a mixed bag, but Northpark and West Irvine are all TUSD, so there’s parity there.
But Tustin isn’t planned, has some seedy spots, and is generally warmer (though on par with West Irvine / Northpark — I know tonyE — nothing like TR).
If we moved back to OC from LA, Tustin would be on the top of my list. Now to convince the wife….
Hey, don’t knock jujubes just because the house is wtf priced! I think most asian households have them when they’re in season. That’s actually a pretty solid set of fruit trees for attracting a taiwanese buyer.
IR wrote: If this property sells for its current asking price and a 6% commission is paid (it will probably only be 5%)…
I’ve often wondered how often a realtor’s fee reduction occurs in times like these when a home sells for, say, $1M or more. $60,000 is a whopping amount of money and, in my experience, realtors have reduced their commission to bring a deal together. I know, it’s split between the listing and selling agent, etc., but, nevertheless, it’s huge. Anyone know?
This one is probably a discounted commission because the sale obviously isn’t worth the effort to spell check the description.
“throughtout”
Commissions drop from 6% to 5% somewhere around $1,000,000. There are no rules or procedures on this. At those price points, you can afford to cut price (commission %) to get the deal. Also, it is much more difficult to justify a commission quite so large.
I’d love to have a Jujubee tree!
Three bank owned homes in Turtle Ridge (“The Ledges”) sold for $1.1 million this year. Homes listed for sale by home owners are listed at nearly twice that amount. The lowest priced listings are around $1.7 million.
I can’t help but think the reason behind this is that the debt on the homes is higher than the market price.
There is a stalemate.
Are large numbers of OC residents going to make it big this year and flock to Turtle Ridge to buy these homes?
What needs to occur before there is a dollar amount at which the buyer and seller can meet?
“…although cash buyers can float things for a time, the lack of financing creates a vacuum that sucks the air out of the housing bubble.”
I would change that to “the lack of Ponzi financing creates a vacuum that sucks the air out of the housing bubble.” For those who have high credit score, 20% down payment, proof of income with reasonable DTI, they won’t have problem getting financing.
All fundamental elements helping support a stable housing market in OC are still largely missing: unemployment rate is still going up, wage income remains down or stagnant, mortgage rates have no where to go but up ….
Was the buyer who snatched up that 1,665 SF condo for $817K in April 2008 (I really got some laugh out of this) a large cash buyer? Just how many more of those who itch to toss their money down a toilet like this?
No one mentioned that one home has $400+ HOA dues and the other one doesn’t. Isn’t that a comparable item? For $2mil I would like to also be able to paint my house any color I want etc..
Check out this article from Barrons.com. Looks like USD has replaced Japanese Yen to become the currency of the choice for global carry-trade thanks to Fed’s QE policy that fueled another round of speculation and asset bubble. Instead of trickling down to benefit the real economy, the cheap money Fed pumped into the system has more likely trickle up and become the catalyst for more asset inflation.
http://online.barrons.com/article/SB125115029648154985.html#mod=BOL_hps_dc
—————————————————————————————————————————————-
“ …. The process by which cheap money — and the Federal Reserve’s 0-0.25% target for its key interest rate, overnight federal funds, certainly qualifies — is through financial alchemy called a “carry trade.” The term derives from the commodities world, referring to the cost of keeping, or carrying, a stock of a good such as copper or wheat.
For financial assets, that cost of carry is the interest rate at which investors can borrow to fund their holdings. At ultra-low borrowing costs, they can invest in higher-yielding assets and reap the difference. Therein lies the attraction of the carry trade.
The risk, of course, is that the cost of borrowing rises — either because of higher interest rates or an increase in the value of the currency the carry trader used to fund the trade. For instance, borrowing yen at near-zero interest rates had been a favorite financing for the carry trade since everything in the world yielded more.
That’s no longer the case. Every major central bank around the globe has pinned its policy rate to 1% or less. Now, borrowing in dollars appears to have become the favored way to finance the carry trade, both because the rate will remain low and the greenback’s value is more likely to fall than rise.
……
Borrowing dollars to buy something else means that a carry trader has a short position in the currency. During the darkest days of the financial crisis, the dollar shot higher, not only from investors’ seeking a safe haven, but because carry traders had to buy back greenbacks to repay their borrowings; that is, they were forced to cover their dollar shorts.
Since March, the carry traders appear to be putting those positions back on with increasingly confidence, even impunity. That’s been borne of the bungee jump in risk assets, from stocks to emerging markets to junk bonds, as well as the declining cost of borrowing. They could be certain the Fed would not be raising rates any time soon, as confirmed at Jackson Hole. Moreover, it seemed clear the downward course of the dollar had resumed after having been interrupted by the forced short-covering during the credit crisis.
… Howard L. Simons of Bianco Research …… concludes: “These low rates represent the fuel for a renewed asset bubble, the manifestation of inflationary pressure from monetary creation transmitted via the carry trade.”
……
But the asset-backed securities market (aka, the Shadow Banking System) remains moribund. And in the formal banking system, credit continues to tighten — albeit more slowly, but still not easing (“Still Exiled on Main Street,” Aug. 17.)
In simplistic terms, this means that the Fed’s efforts have gone primarily to stimulate the financial markets rather than the real economy, and to drive down the dollar and push up commodities such as crude oil.
…….”
I live in this community and the location on this house is awful. Good luck parking in front of your house when the clubhouse is being rented out. This condo is not worth $800K? What a joke, we had a similar plan (Chantory) sell for $638,000…58 Clouds View.