Balboa Island Price Index (BIPI)
Click to updated results of the Balboa Island Price Index
BALBOA ISLAND PRICE INDEX (BIPI)™ Q4 2008 RESULTS – (1/1/2000 through 12/31/2008)
Balboa Island interior lot values in the fourth quarter of 2008 were again slightly lower compared to the previous quarter and decreased 14.1% from the same quarter a year ago according to the Balboa Island Price Index (BIPI)™ developed by Girling Real Estate Investment Group (www.girlingREIG.com). Interior lots are now valued at an average of approximately $1.675 mm compared to an average value of $1.72 mm in Q3 2008 and $1.95 mm in Q4 2007. The highest interior lot value reached was $2.1 mm in Q3 2006.
From 2000 through 2006, interior lot values grew at an average of 12.5% annually. In 2007 the annual growth rate slowed to 3.7% and has decreased through the four quarters of 2008. When compared to Q4 2006 when average lot values peaked, the current average value of a lot of $1.675 mm has decreased by 15.2%.
There are 166 sales included in the sample for the graph above
In 2008, there were 23 recorded sales transactions for interior lots and 28 recorded total sales transactions on the Island. Sales prices as a percentage of the original list price remained at 91% of original list price which is the lowest number in the period analyzed. This may show that sellers have continued flexibility in the price they are willing to accept. Compared to the past few years, the current level of sales activity is higher than in previous years but still falls short of the peak number of 39 sales recorded in 2004 (see below). Nonetheless, sales activity on the Island as measured by the number of transactions appears to be gaining some momentum despite the general decrease in real estate values.
|Balboa Island Sales Activity (2000-2008)|
|Interior Home Sales||All Island Sales|
|# of||Average||Interior||Sales Price/||# of||Average|
|Sales||Sales Price||Lot Values||List Price||Sales||Sales Price|
The numbers in the chart above (except for interior lot values) include new construction.
One recent development warrants mentioning that may contribute to future downward pressure on lot values. 219 Sapphire sold at foreclosure auction for $1,214,000 on 12/10/2008. A foreclosure sale is unusual for the Island and there were extenuating circumstances surrounding the sale of this property. A foreclosure sale is not a typical real estate transaction with customary terms in that there are risks associated with a foreclosure sale that are not present in normal real estate transaction:
• Financing-all cash is required at time of sale (cashier’s checks) and thus most financing is after-the-fact and considered a refinance
• Title-it is the purchaser’s responsibility to ensure clear title
• Liens-all liens go away except for property tax liens and IRS tax liens (with 219 Sapphire there was over $50,000 in arrears in property taxes which run with the property)
• Inspection- usually there is no opportunity to inspect the property
• Occupancy-there may be costs associated with removing the former owner/occupant
For these reasons, this transaction was not included in the results of the BIPI. However, if it had been included, the BIPI lot value would have been $1.51 mm.
It is also worth noting that an article in the Orange County Register on 1/26/2009 reported that only three of Orange County’s 83 ZIP codes posted price gains last year: Laguna Beach, Corona del Mar and Balboa Island, all of which had a median value of $1.5 million and above (see article at: http://www.ocregister.com/articles/price-county-sales-2291420-median-bottom).
According to the article, Balboa Island was an exception to the county’s overall trend, seeing both prices and sales increase last year. The article stated that the median price on the Island rose 18%, the county’s biggest increase, and that sales were up by 33%, the 16th biggest gain of that type. Although the results of the Girling REIG study confirm that sales increased on the Island, we were unable to duplicate the increase in the median value from 2007 to 2008.
As shown in the following graph, the number of transactions for interior lots increased from 13 to 23 while the BIPI values showed a decrease. And, according to the Girling REIG study, the median price for all property types (interior, canal & bay front) on Balboa Island in 2008 was down at $2,300,000 vs. $2,400,000 in 2007. All sales transactions on Balboa island almost doubled, from 15 closed transactions in 2007 to 28 in 2008. Tracking home prices is not a perfect science and there is a measure of subjectivity that enters into the process, thus the different conclusions reached in each study.
The high-end market, especially coastal properties has been somewhat resilient to the general decline in real estate values. Balboa Island has experienced some decline in values, both average and median values compared to real estate values for the rest of California which in some areas have experienced decreases for the past 18-24 months, by as much as 40% to 50%. Despite the downturn in real estate values, Balboa Island properties have decreased much less, in comparison, throughout this downturn, and still represent some of the most desirable and expensive (based on price per square foot for the land) real estate in the country.
Note: The BIPI focuses only on interior lot values since the uniformity of Balboa Island interior lots is more appropriate for creating an Index like the BIPI. Calculating a median value for all Balboa Island property types would not be representative of overall values on the Island since all three categories (interior, canal and bay front) are so distinctly different both in property characteristics and in value (bay fronts especially skew values for the Island, in general). And the sample of bay fronts and grand canal properties is much smaller than for interior properties.