“They” say the higher end of a market is immune to financial fluctuation.
“They” don’t live here.
Economic flux—rising interest rates, income tax deduction caps and global and domestic political turmoil on tariffs and in stock markets—conspired to contribute to higher inventory in key Orange County luxe home markets to start 2019, a sign of waning interest by buyers and sellers for much of last year.
Steve High, president of Newport Beach-based Villa Real Estate said in his two main markets, “We’re starting out the year with a much greater inventory than we did in the start of 2018.”
High said Laguna Beach has 60 more listings this year compared to last year and Newport Beach began the year with more than a hundred additional homes on the market—523, up from 420. Newport Beach sold 300 fewer homes in 2018 than in 2017 he said, and fourth-quarter sales activity was down “quite a bit.”
CoreLogic Inc. data confirms this: in the most recent quarter available, September through November, the Irvine-based real estate services provider reports the number of sales fell 4.5% year-over-year for homes priced $1 million to $1.9 million and 3.8% for those costing more than $2 million.
Come Spring
The flux capacity—call it a “de-luxe-ing” in local markets—began in earnest after a fairly healthy spring. By midyear, brokers tell the Business Journal, luxe flight was in full swing.
Tax season brought a slowing; tariffs continued it; and year-end stock volatility, the CoreLogic report said, “Could have contributed to the high-end pullback. Market corrections can spook high-end buyers.”
Uncertainty led to delayed sales.
Marketing time for a listing has risen steadily the last several years, up 35 days from 2015, Villa Real Estate’s High said.
“Deals are taking longer to put together because we’re having to educate buyers and sellers,” added Gary Legrand, co-founder of Newport Beach-based brokerage Surterre Properties.
“In the past, you only had to educate the buyer because the seller was at a price people were willing to pay,” he said.
Now sellers need to know, “You’re not at 2017 prices; you need to adjust.”
Big Shows
It wasn’t all bad.
High said 150 spec homes in Newport Beach and Laguna Beach sold last year with an average asking price of $4.4 million.
Popular areas of the county included Coto de Caza and Nellie Gail Ranch in Laguna Hills, said Surterre broker Ben Tate. Bigger lots and lower per-square-foot prices—as coastal prices “got kind of frothy”—appealed especially to international buyers.
“You get the perception of having a lot of land,” he said.
The three highest-dollar sales took place in Laguna Beach.
Two 10,000-square-foot homes in Irvine Cove on Riviera Drive, each with private steps to the sand, sold at around the same time for $35.8 million—more than $800,000 over the asking price—and $32.7 million, respectively. A third 10,000-square-foot property four miles east on Coast Highway sold for $32 million.
Billionaire bond trader Bill Gross bought the costlier Riviera Drive home and the one on Coast Highway. Prices paid by Gross aren’t indicative of the market as a whole, brokers emphasize.
2019
Legrand said buyer uneasiness brought increased inventory but the market is regaining health after 2018’s malaise.
“People hear bad news, react to it for a few months and finally accept it and move on,” he said. Bad news “affected everybody for probably six to seven months and [now] everyone is saying OK, this is the new norm let’s get back to business.”
High noted spec homes might be due for an adjustment after a good 2018.
“You have two houses on Ocean Boulevard in Corona del Mar, not on the waterfront but across the street, selling at $17 million and $18 million. There’s no historical data [to back] that sort of price tag.”
Altogether, while luxe homes aren’t completely inoculated against economic illness, such homebuyers and sellers are still in some rarefied air.
OC home sales overall declined more than luxe numbers, for instance (see story and chart, page 1 and above), and brokers noted that despite tepid results the luxe market tends not to feel the pinch as much as others—again, because of that economic difference and distance.
Homes at this level exist with a built-in buffer: participants sometimes don’t buy or sell because they don’t have to.
“The wealthiest of the wealthiest [aren’t] feeling pressure,” to cut prices or buy now, said High—though he sees a certain flattening on the way in prices, based on supply.
“It will be more of a buyers’ market.”
