Newport Beach analysis

[quote author="garrison" date=1249726811]Hey folks,



I'd appreciate any help and guidance from the number crunchers here. Specifically, I've decided to relocate to the Newport Beach area, and have really taken a liking to the EastBluff area off of Jamboree. It seems as if there is very little turn over in this neighborhood and it feels very family friendly and established...sans the snobbery too.

<img src="http://www.cdn-redfin.com/stingray/do/region-chart-small/6/13193/MEDIAN_HOUSE_SQ_FT_BY_TIME.png" alt="" />





Looking at this chart off of Redfin, it seems as if there is a big divergence between asking and selling prices (duh). But more to the point, it appears as if those in the Newport area are still listing their homes at the same price point as they did during the peak (asking price seems relatively constant). And sales are still closing escrow at a very large premium to say, 2000-2002 prices; this is a WAG, but I believe they're still hovering at 2005 prices. Looking at the chart shows that the area had a delayed peak in late '07 and current closed sales look to be around 40% off of that. How much further can it go?? Many posters feel that when all is said and done, the bottom should return to 2000'ish prices. Would a "flight to quality" stall out or even dampen this process?



Here's a house I'm interested in (the redfin "view" pictures don't do it justice - you can see the sun setting over Catalina): <a href="http://www.redfin.com/CA/Newport-Beach/2229-Alta-Vista-Dr-92660/home/4639523">http://www.redfin.com/CA/Newport-Beach/2229-Alta-Vista-Dr-92660/home/4639523</a>



Looking at the pricing history, any guesses as to how low this property could go for by next year? While I know I won't be able to time the bottom perfectly, I'm willing to risk a little loss if I find just the right property (I'm planning on staying for 15+ years)



I'm an admitted unfrozen caveman lawyer that slipped and fell into a crevass...any help would be most appreciated.</blockquote>
Yeah, I've peaked around Newport for one of my buyers and we've found there is a HUGE spread between asking prices and closing prices. There are some really stubborn sellers out there I tell you and they seem to be looking for a sucker. haha The ones that sold seem to have been more motivated sellers most likely (either via a job relocation, divorce, or other need to sell). It's tough to say how low prices are gonna go out there, it will be dependent upon the number of distressed and motivated sellers because the WTF homes will just be sitting and collecting dust.
 
[quote author="CapitalismWorks" date=1249727510]Seems overpriced. You can pick up another 2000 square feet for 200k more in the port streets right now. http://www.redfin.com/CA/Newport-Beach/2324-Port-Carlisle-Pl-92660/home/4723153And, even that one is overpriced. I am looking in the same general area. Very little is moving, and there is a heck of a lot of inventory on the market.</blockquote>
Sooner or later someone will crack and bring down the comps for everyone else.
 
<img src="http://occoastalnews.com/wp-content/uploads/2009/07/Average-Days.png" alt="" />

Says it all.



Newport is a stubborn city, they would rather sit on the market in denial before reducing their prices and selling. (For the most part). You could always put in a low offer, maybe $475/sq foot and see what happens. Your offer will either be countered or ignored and then you mvoe on with your day. Otherwise I would recommend holding off. Wait until they sit a little longer and reduce. But, more importantly wait and keep a close eye on homes coming on the market. Most of them will also be overpriced and just sit, but every 1 out of 200, there is a motivated seller that comes on at a reasonable price. Those are usually the ones that have been selling and they sell rather quickly because it's easy to spot them out in Newport.



Very very quick look in case you were interested. Granted smaller square footage usually means higher price per sq foot, but it's obvious that all the homes listed for sale are overpriced.



<img src="http://occoastalnews.com/wp-content/uploads/2009/08/CMA1.jpg" alt="" />
 
Recent sales in that area suggest that a reasonable price _today_ is $100K less than the asking price. The sales were around $560-$570/sqft.



Even that would be overpriced, in my opinion. Personally, I don't feel that this house is worth more than $1M... but that's just my opinion, of course.
 
Heh... I remember when it was only less than a year ago that NB broke the 150 mark on Foreclosure Radar, now it is more than twice that.



http://i32.tinypic.com/2m7i7pv.jpg



Not sure if West Bluff is your thing, but one house went back to the bank and one investor picked one up on Somerset this <strong>week alone</strong>.
 
[quote author="garrison" date=1249731179]I'm not in any rush, I just wonder where the floor could realistically reset to. Like I mentioned, I'm willing to accept a little loss (maybe 10% max) if the house and location felt right. I'm just not willing to lose a good portion of my downpayment in order to secure it.



Thanks for the replies folks, please keep 'em coming...</blockquote>


10% is a pretty decent cushion. Error on the safe side and sit on the sidelines until maybe the end of winter. Right now, if they wanted to sell it would probably go for around $1.2 - $1.25. In turns of the bottom? I'm not sure, but the next couple of months will give a much clearer picture.
 
[quote author="garrison" date=1249731179]I'm not in any rush, I just wonder where the floor could realistically reset to. Like I mentioned, I'm willing to accept a little loss (maybe 10% max) if the house and location felt right. I'm just not willing to lose a good portion of my downpayment in order to secure it.



Thanks for the replies folks, please keep 'em coming...</blockquote>How are you going to feel when all your equity is gone and you are another 10% underwater? What fundamental evidence is there that home prices will drop another 10% and stop?









I have been hearing realtors call the bottom for the last three years, non stop. Why is now any different?
 
[quote author="awgee" date=1249774209][quote author="garrison" date=1249731179]I'm not in any rush, I just wonder where the floor could realistically reset to. Like I mentioned, I'm willing to accept a little loss (maybe 10% max) if the house and location felt right. I'm just not willing to lose a good portion of my downpayment in order to secure it.



Thanks for the replies folks, please keep 'em coming...</blockquote>How are you going to feel when all your equity is gone and you are another 10% underwater? What fundamental evidence is there that home prices will drop another 10% and stop?









I have been hearing realtors call the bottom for the last three years, non stop. Why is now any different?</blockquote>


I don't think he was saying they will drop 10% and stop or even that they will drop. He was just asking when the correct time to buy would be and that he has a 10% cushion if it wasn't exactly at the bottom.
 
I would guess $200-$300/sf at the bottom, depending on how recently the house has been updated.



I'm sure that will engender a lot of "it can't possibly go that low in NPB" sentiment, but for a house that isn't really *that* unique (for NPB at least), the prices still need to reflect income levels. Maybe the top 10% of the NPB market can be disconnected from income, but the other 25,000 houses are going to be occupied by wage slaves like us.



<strong>Even with a generous $250k household income estimate, and a substantial down payment, that means $700k to $900k for houses like this.</strong>





And that assumes that our current "green shoots" don't wilt, so that the wages for all the lawyers and traders stay buoyant.
 
[quote author="freedomCM" date=1249780967]I would guess $200-$300/sf at the bottom, depending on how recently the house has been updated.</blockquote>


I agree that this house is not unique, but it should still command a significant premium over a similar property in Irvine.

I mean, halving your distance to the beach has got to be worth something. And unlike in Irvine, they aren't making more land in NB.

I have been wondering the premium should be. Certainly it's not the 100% that some sellers expect today, but maybe as high as 50%?

If you believe that houses like this one will go down to 200-300 then you must believe that Irvine is going down to 150-200 for the mid-high end. Seems a little low.
 
I was guesstimating around 1 million at the bottom myself. You can't deny the premium that is afforded to homes with unobstructed views of the ocean (again, the redfin pictures don't highlight it well, but it was a gorgeous view)
 
[quote author="garrison" date=1249777526]I didn't articulate my point well. To give you a hypothetical, here's a scenario:



I continue renting for another year or so, accumulating more to my already decent sized down payment. The market in N.B. is down 55% from the peak (let's say, another 15% from where it is today). I happen to be browsing with my wife on refin and come across a property that is just "it" for us. I can comfortably afford it on my single income stream (even more so once my wife heads back to work as my daughter starts kindergarten). My question to all of you was where the lubber line was eventually going to go to, at the very bottom (all theoretical, I know) If all of you said, "N.B. should eventually reset to 70% off of peak", and I find this house at a time when it's only down 60%, I'm comfortable taking a potential 10% loss if your prognostications are accurate; getting into the right house in the right neighborhood was worth a potential 10%'ish downside risk. I'm not saying I'm buying next week, next month or next year....but if a diamond in the rough comes along, I want to compare it's price point against an overall backdrop.



What I don't want to do is find this dream home (one that I could still afford), close escrow, and two years later watch my 30+% down payment evaporate. Again, I fully feel that we are nowhere close to the bottom, I was just hoping for an educated, "best guess" as to when and how low things will go in N.B.



**IrvineRenter, would you care to chime in and offer your opinion?**</blockquote>


The beach communities have not seen their pain yet. Buying there now is likely to result in a complete loss of equity. There are many neighborhoods where you can buy below rental parity, but Irvine and the beach communities are not among them. I wouldn't buy in either location with today's prices. These markets are still in denial. They have not even begun to feel fear much less capitulation. They are not at the bottom.
 
[quote author="RobertLarsen" date=1249777391][quote author="awgee" date=1249774209][quote author="garrison" date=1249731179]I'm not in any rush, I just wonder where the floor could realistically reset to. Like I mentioned, I'm willing to accept a little loss (maybe 10% max) if the house and location felt right. I'm just not willing to lose a good portion of my downpayment in order to secure it.



Thanks for the replies folks, please keep 'em coming...</blockquote>How are you going to feel when all your equity is gone and you are another 10% underwater? What fundamental evidence is there that home prices will drop another 10% and stop?









I have been hearing realtors call the bottom for the last three years, non stop. Why is now any different?</blockquote>


I don't think he was saying they will drop 10% and stop or even that they will drop. He was just asking when the correct time to buy would be and that he has a 10% cushion if it wasn't exactly at the bottom.</blockquote>
I did not say that he said they would only drop another 10%. I asked how he was going to feel when they dropped much more than 10%. His calculations of his comfort level include a possible drop of 10%. Why 10%? Why is he not including a drop of much more than 10%? Does he have evidence that they will only drop another 10%?
 
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