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Don’t Bank on a Price Plunge for Laguna Beach Homes

Don't count on Laguna Beach home prices dropping due oversupply. Banks will let their distress inventory trickle in.

For the longest time, you heard a familiar tale -- Orange County real estate prices are going up, up, up because we’ve passed market bottom. Recently, the news has been updated -- banks in every state are holding thousands and thousands of homes designated as either a foreclosure or a short sale. Which prompts this question for anyone considering a Laguna Beach home:

Do You Think Orange County Home Prices Are Coming Down?

Of course, a more basic question is – ‘Do you think banks would flood the market with distress sales, thereby depressing prices? Not in this universe. Banks will open the tap very slowly, allowing distress stock to trickle into the market and maintain high demand. Easy-does-it is the surest way to preserve higher profits and minimize losses. Doing otherwise would only whack their bottom line. And banks typically aren’t gluttons for punishment.  According to Reuters, Wells Fargo’s second quarter profit in ’12 was up 17%. Not exactly a figure that makes you say ‘ouch.’

Let’s Look at the Facts

A home whose value dropped from $900,000 to $650,000 currently is fetching around $750,000. Do you really think banks would let this home’s price tag sink back to $650,000?  That’s exactly what a property overload would do. We’re talking across the board, for virtually every price point. Believe me, if banks can afford to hold distress inventory for several years, they sure as heck can keep it in the stockroom for a few more fiscal cycles.

Drought Meets Demand

Banks currently are in command of a market marked by a distress drought. During the deepest doldrums of the downturn, about 1,000 short sale and foreclosure properties rushed into bank portfolios each week. How drastically have things changed since those dark days? Recently, I heard through the grapevine that the number has dwindled to about 75-100 weekly. From flood to raindrop in just a few years.   

Now couple this glaring scarcity with soaring demand for distress properties (those that have received a notice of default, are on the market as a short sale, or are in foreclosure.) Incredibly, only 56 single-family distress properties are available for buyers in Laguna Beach, Dana Point, Laguna Niguel, San Juan Capistrano, Mission Viejo, Costa Mesa, and Corona Del Mar. The rest have been snapped up. Currently in those cities, 210 distress properties are in escrow, waiting to close.

The trend already has surged ahead in the New Year. In just under two weeks, from the 1st to the 13th, 17 distress properties have closed escrow in Orange County.  Average Price: $500,000.  Demand is so frenzied that 30% sold in less than a week. And the vast majority have sold for MORE than the listed price -- some as high as 10% over asking. Do you think such roaring demand signals a coming price drop?

Let’s face it. The drought-demand scenario is an ideal setup for the banks. The only smart move  is to let the properties trickle in. So, will you put your money on this scenario? Or wait for a highly unlikely price plunge?  If you’re going with the trend, then the time to make your bid for a Laguna Beach property is yesterday, not tomorrow.

If want to learn more about your opportunities in the Laguna Beach real estate market, contact the caring professionals at The Coastal Property Experts to schedule your complimentary consultation. We promise you’ll get what you want in the Laguna Beach real estate and Orange County real estate market…much sooner than you think.

 The Coastal Property Experts

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