Barbara DiamondWhen Real Estate broker Wayne Baglin’s...

Barbara Diamond

When Real Estate broker Wayne Baglin’s grown-up children looked for

homes to buy, their dad researched what they could afford. It wasn’t

in Laguna Beach.

“Nothing here was within their reach,” Baglin said.

It’s not likely to get cheaper. Real estate is expected to

continue to appreciate.

“I don’t think we have seen the top of the market yet,” Laguna

Board of Realtors President Les Jenison said.

The median priced single family home in the 92651 zip code cost

$1.297 million in 2004, a 30% increase compared to 2003, according to

one real estate research firm. The median was neither the highest

increase nor the highest price in Orange County last year.

“I think the California Board of Realtors figures are more

accurate and they say the median increase [here] is 23 to 24,” Baglin

said. “But that is still a huge number.”

The median is the midpoint price at which half the homes sold cost

more and half cost less.

Using a mortgage lender’s popular formula, the monthly payment on

the median home could be $6,819, including property taxes and home

owner’s insurance. Depending on other factors, that could require an

income in the neighborhood of $19,000 a month.

“We are seeing a lot of two-income families, in their 40s moving

into our neighborhood, not so many young families,” Arts Commissioner

Les Thomas said.

However, the higher sales prices are good news for property

sellers, as well as the city and Laguna Beach Unified School

District, which depends on property taxes for revenue.

Under the rules of Proposition 13, homes are reassessed when

ownership is transferred or extensive, permitted remodeling

alternations increase the value of the property, bumping up the

taxes.

City Manager Ken Frank, who normally estimates revenue low and

expenses high, is counting on an 8% increase in tax revenue this

year, an all-time high for him.

Taxes can only be raised 2% a year on unaltered homes under the

same ownership

Last year, 496 homes sold in the 92651 zip code, which includes

all of Laguna Beach and Emerald Bay and Audubon 1 in Aliso Viejo,

both outside the city limits.

“It’s important to realize that the percentage of change in the

median sales price cannot always be applied to every house on the

market,” said Bob Chapman, planning commissioner and Orange County

vice president of Prudential California Realty.

And he cautions that statistics can vary.

“The market could be more time-sensitive than the year-over-year

comparisons of median prices, as [real estate measurer] DataQuick

uses them,” Chapman said.

January-to-January may not present the same picture as

April-to-April.

And statistics vary with the statistician.

“I don’t use statistics,” Jenison said. “The number of homes sold

affects the percentages, but price and number of sales have nothing

to do with one another.”

The highest price paid in the 92651 zip code in 2004 was $13.5

million for the late Bette Davis’s six-bedroom, oceanfront home in

Woods Cove, according to Baglin’s records. The lowest price was

$350,000 for a one-bedroom condominium on Cypress Street in North

Laguna.

Baglin said the inventory of 118 properties is relatively low.

“Typically, we are closer to 151,” Baglin said.

The most expensive listing is a South Laguna oceanfront home on

the market for $19.995 million. Escrow just closed on the $14-million

sale of Moss Point, which has three structures on a large parcel.

The least expensive property for sale now is $475,000 for a

two-bedroom condominium at the Terraces on Laguna Canyon Road.

Medians for condos and single-family homes are kept separately.

Median sales price for a condo in the 92651 zip code last year was

$841,250, according to some research, an increase of 39% over the

2003 median.

The old adage of location, location, location remains true.

“You are not buying a house, you are buying dirt,” Jenison said.

And the amount of dirt in Laguna Beach is limited.

“Last year, we had a sort of panic buying in January to April,”

Jenison said. “People were buying anything on the market because the

inventory was so low. About mid-April, we got back to what I would

call a normal market: a four month-inventory. That means it takes

four months to sell a property.”

The Laguna Board of Realtors has about 600 members, but Realtors

from other boards can represent buyers and sellers here, and vice

versa. Sales are their life’s blood.

Formerly, buyers and sellers sought out a Realtor that belonged to

the board in the area in which they were interested.

“That is no longer true,” Jenison said. “We no longer have a

captive audience.”

Baglin said independent brokers in particular rely on referrals

and former clients.

“Everybody in Laguna has a friend or a relative that is in real

estate,” Baglin said.

However, a buyer’s best friend is likely to be a mortgage lender,

who can arrange some creative financing, although the preferred term

among the professionals is alternative financing.

The old formula of 20% down and a 30-year fixed mortgage is just

one alternative and not the one most commonly used on the higher-end

market.

“It’s very rare to see a buyer plunk down 20% on a $1 million home

and take a loan off the rack,” said Rick Cerrilli, mortgage broker

and Laguna Board of Realtors Affiliates President.

When more than the standard 80% loan is needed, say on $1

million-plus home, the lender might arrange a $1-million loan and a

second for the rest.

To help a buyer qualify, lenders can offer such options as a

30-year loan, with a fixed interest rate for the first five years and

adjustable for the next 25, with a monthly payment of $5,368, not

including taxes or insurance; a five year interest-only loan, with a

monthly nut of $4,167, perhaps a good choice for a buyer who might

have a career move within a few years.

“It’s like leasing a car,” Cerrilli said. .

How much higher can 92651 prices go? When, if ever, will the

bubble burst?

“I got into this business in 1981 and people were telling me then

that prices were too high, and I have heard the same thing every year

since then,” Jenison said. “Eight years ago, the price for a home in

the Village was in the high $200,000 and in 1996 you could buy an

oceanfront home for under $1 million.

Wealth in California traditionally has been built on real estate

holdings, Jenison said. He doesn’t expect that to change.

“Even the people who got rich in ‘dotcoms’ come to California to

buy real estate,” Jenison said.

“The only ones who get hurt are those who buy at the high end and

have to sell. In real estate, gold or stocks, if you have to sell,

you have to take what the market is offering.”

Don’t get into that position, Jension said. Be in a position to

ride the ups and downs of the market, just as he did when the real

estate market headed south in the early 1990s.

“I bought two income properties in 1989,” Jenison said. “In 1995

the position looked really bad. I owed more on the properties than I

could sell them for. But I hung onto them.”

Besides, the possibility of appreciation, owning a home is one of

the few ways to reduce federal and state income taxes.

* BARBARA DIAMOND is a reporter for the Laguna Beach Coastline

Pilot. She may be reached at (949) 494-4321.