2019 has been characterized as a stalled year for Orange County’s luxury residential market, with home prices and volume down from the prior two years.
That’s certainly true among the ultra-high-end of the luxe market: the cumulative sales prices for the top 25 deals here last year fell some 7% from year-ago levels to nearly $465 million, according to the Business Journal’s second annual listing of OC’s Top Homes Sales, which begins on page 32.
“The unit volume of sales over $10 million dropped significantly in 2019 from 2018, largely caused by a tremendous imbalance between what buyers want and what is available,” said Compass’ Rob Giem, who despite the challenging year has four deals showcased in this week’s listing.
Challenges aside, it’s still hard to brush off the prices generated for homes that traded hands throughout the region in 2019. Several of the top 25 brought in record-breaking prices for their respective neighborhoods, and many garnered national and international attention.
The top three deals alone—all in different parts of Newport Beach—represented $110 million in sales volume.
The average price for those homes on the list: a cool $18.6 million. The average price per square foot is $2,400, roughly six times what a new home in Irvine sells for.
Brokers are more optimistic when it comes to 2020, pointing to a resurfaced energy that occurred in the latter quarter of last year and has continued through the first quarter.
“The market started to slow toward the end of 2018 which carried over into 2019, but so far the market seems to be much stronger,” said Villa Real Estate’s John Stanaland.
“There’s been more pressure on pricing, causing a bit of a readjustment.”
When Over Where
A recurring theme in Orange County’s luxury market last year: buyers want new, turnkey properties that require little renovation effort on their part.
This is partially why sales volume wasn’t up to par with recent years, said Giem, noting that there is a dearth of new inventory available in the ultra-high-end segment, and little on the horizon.
Buyers are increasingly more interested in the type of home than the location, Giem said, noting that an “A” house in a “C” location has become increasingly preferred. That wasn’t always the case a few years ago, he said.
“People are choosing what’s new, what’s cool, what’s unique,” said Casey Lesher of Coldwell Banker Residential Brokerage. “Buyers have been more cautious when it comes to pricing, but they are willing to pay top dollar when it is perfect.”
Lesher pointed to his sale of 4541 Brighton Road in Corona del Mar, which sold for $20 million after the sellers put in millions for an extensive renovation.
“It was highly upgraded, and it paid off,” said Lesher.
The home marked a new record among single lot deals in CdM, Lesher said. It ranks No. 6 on our list.
Construction Cost Factors
Rising construction costs have underscored the demand for turnkey properties, according to Coldwell Banker’s Tim Smith.
“Construction costs have put downward pressure on lot values, prompting buyers to buy new rather than go through the hassle (of renovating),” said Smith.
Smith had the listing for the No. 3 sale last year: the $35 million deal for 1813 E. Bay Ave., along the Balboa Peninsula. The home became known as the Duffy house after Smith invested in a spoof music video called “Teach Me How to Duffy.”
The home wrapped construction in 2018.
“There’s a huge lack of inventory of new homes by the bay,” Smith said, which helped bring attention to the Duffy house.
The new build, location, and a solid team of builders and designers created strong demand for the property, he said.
The “dream team,” as Smith calls it, behind the rebuild was Newport Beach-based Patterson Custom Homes, Los Angeles architect Robert Sinclair, and design firm Blackband Design.
Close to Home
Despite a more cautious and pickier buyer pool, Orange County still brought in its fair share of billionaire executives and entrepreneurs in 2019, hailing from locally and abroad.
Local buyers made up the bulk of the top deals last year, offsetting a continued falloff from foreign investors.
In Laguna Beach, where eight of the top 25 homes were located, buyers came from Orange County, Northern California and out-of-state, specifically Texas, Arizona and Nevada, according to Stanaland.
He represented the buyer of 199 Emerald Bay, a 7,078-square-foot cliffside home that traded for $16.1 million.
The home was built in 1996, and was first listed for sale in 2016 for $22.5 million.
“The buyers were initially looking for something turnkey, but they saw the inherent value in this property and ended up buying it, and engaged C.J. Light & Associates to handle their own renovation,” Stanaland said.
The home was one of four sales coming out of Emerald Bay that made the list. Giem had the listing for that property, and worked on two other deals in the neighborhood as well.
The Emerald Bay neighborhood and nearby Irvine Cove community continue to represent hot markets countywide—though the latter is less active in terms of sales, residents who live there are reluctant to leave.
Harbor Homes
On Newport Beach’s exclusive Harbor Island, two home sales made the list.
The activity was unusual for the private enclave, which only counts 29 homes in total and has seen just five sales in the past three years.
The largest home on Harbor Island—a 14,200-square-foot estate built on multiple lots—sold for nearly $37 million, the second priciest deal last year.
The new ownership is tied to a Chinese entrepreneur: Eric Siliang Tan, chief executive and co-founder of mobile content aggregator Qutoutiao Inc.
Though 18 Harbor’s new owner is international, that hasn’t often been the case as of late.
Real estate experts have noticed a considerable slowdown in foreign investment locally, specifically from Chinese buyers for high-end homes.
“We have not seen as much international traffic. However, the demand for areas like Newport Beach has always been stronger from California and out-of-state buyers,” Tara Shapiro of Pacific Sotheby’s International Realty, who had the listing for the six-bedroom home, previously said.
Down the street, 3 Harbor Island traded in August for $14.3 million.
Compass’ Katie Machoskie had the listing for that property, which was “extensively remodeled” ahead of the sale.
Expect a much quieter year for Harbor Island in 2020.
“People stay on the Island for decades, passing their homes down to their family, so to see even two sales in one year is pretty significant,” Machoskie said.
Signs of Life
Further south, expect more deals to come out of The Strand at Headlands, where 30 homes at the Dana Point community are under various stages of construction.
Only one home that sold last year at The Strand made the list, but as new homes deliver, big sales will follow, brokers say, noting that many at the development will be priced in the $10 million to $30 million range.
“Buyers are more comfortable waiting for a home to wrap construction before they move on it,” said area expert Arlen Raubach of Compass.
Raubach represented the buyer and seller of 21 Beach View, the lone Dana Point deal on the list. It traded last May for $14 million, setting a record for the Strand’s second row of homes.
First row lots at the beach-front development could go for as much as $35 million.
Raubach currently has nine active listings at the Strand, including one vacant lot, two under-construction speculative homes, and several completed homes.
“More and more interested buyers have discovered The Strand, with many waiting for certain homes,” Raubach said. “I’m expecting this year to be a very busy one.”
Looking Ahead
Hopes for a busier year across OC’s luxe market abound.
“I think some buyers were hoping for a correction of some sort, and they’ve realized that’s not happening,” said Lesher. “I see more buyers out now than I’ve ever seen.”
The market is strong, Giem agreed, with signs pointing to continued strength.
“There’s a nice new breeze in 2020.”
