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The Real Deal Los Angeles

A slew of 8-figure luxury sales have Newport Beach sellers salivating

Luxury homes are hot in the ritzy Orange County enclave, but experts urge sellers to exercise caution
By Kavita Daswani | January 19, 2018 09:00AM

The 12-acre property at 1 Pelican Hill Road North in Newport Coast sold for $40 million in November.

The recent $40 million sale of 1 Pelican Hill Road North, in Newport Coast, had a somewhat polarizing effect on the outlook for residential real estate in the prestigious enclave. On the one hand, there’s reason for seller confidence to be boosted. This was, after all, the second-priciest sale of a single-family home ever in Orange County.

But dig a little deeper, and another story starts to emerge. As the largest private residence in the county, at over 12 acres, the compound was once valued at $87 million, according to Forbes. Hitting the market for $55 million in February 2017, the 18,000-square-foot, eight-bed, 14-bath estate sold for about $15 million less than its asking price and less than half of what it was once valued at.

“It was a wild ride,” said Realtor Eric Engelbert, founder of Orange County Real Estate, who followed the property’s ups and downs closely. Broker John Stanaland sold the home in November 2017 to undisclosed buyers. Linda Janger of Pace Properties had co-listed the home.

“Yes, it is good to have a home sold in the neighborhood for that price, but after reviewing the history and seeing a [large] price reduction, local homeowners are hoping the story does not negatively impact them,” Englebert said.

Ultimately, the takeaway is this, brokers said: As hot as the Newport Beach residential market is, and regardless of how spectacular the house for sale might be, do not overprice.

“One Pelican Hill Road North would definitely give sellers confidence in the luxury market,” said Andrew McDonald, a Realtor with The Agency in Orange County. “[But] sellers should continue to price appropriately for the market.”

The Pelican Hill deal capped off a year that had seen significant sales in the Newport Beach area. A 5,835-square-foot home in Newport Coast-adjacent Corona del Mar went for $19.5 million in mid-December, and according to McDonald, the area including Newport Beach, Corona del Mar and Newport Coast saw some 20 home sales priced at or over $15 million.

“This is a new high after years of growth,” he said, adding that the priciest sale in 2015 was $19 million, and $28 million in 2016.

For sellers in the Newport area —  approximately 40 square miles including the towns of Corona del Mar, Balboa Island and Newport Coast — expectations are high.

Eight Orange County zip codes landed in the top 100 priciest zip codes nationwide, according to an annual report by Property Shark. At the top of the local list is Newport Coast’s 92657, which comes in at No.  12 with a median sales price in 2017 of $2.95 million.

Demand for quality oceanview homes is so high that potential sellers are inclined to overprice their homes to cash in on the boom, leading to an average price reduction of about 10 percent at closing, Englebert said.

“In some cases, days on market have extended, not because of lack of demand, but because buyers know what the values are and won’t pay as much,” he added.

But sales volume is still up. In 2017 there were approximately 1,300 recorded sales, including off-market transactions, in Newport Beach, Newport Coast and Corona del Mar, at a median price of almost $3.2 million, according to figures based on MLS data and deeds filed with the county. In comparison, 2016 recorded about 1,130 transactions at a median price of $2.9 million in those areas.

Today’s potential buyers are seeking luxury features befitting the area. Homes can’t be more than five years old and must have high ceilings and tall windows, brokers said. Conventional marble is no longer as chic as Neolith slab, a material developed by a Spanish company. “Neolith slab is very popular right now,” said McDonald of the material, which typically comes in grey with charcoal marbling. “Another design trend that is in vogue is black with gold accents, as seen in sink fixtures. You light it and it creates a warm, soft glow to any space.

The residential demand has also extended to condos, where Engelbert says he is putting first-time buyers. In December, the median sales price for a Newport Beach condo was $730,000 — up from $634,000 in the same period in 2016, according to MLS data. In Orange County, the median December 2017 condo sales price was $461,000, the report found.

Meanwhile, on the commercial side, proposed projects are moving along, helped in part by the activity in the residential market.

National general contracting and construction management firm R.D. Olson Construction, based in Irvine, is building the luxury Lido House Hotel in Newport Beach. The hotel, on the site of the former City Hall, is part of Marriott International’s Autograph brand.

Slated to open in the spring of 2018, the 103,000-square-foot, four-story, 130-room hotel is located close to the Lido Marina Village, a shopping and entertainment center, which itself underwent a renovation last year. Developed by DJM Capital Partners, the 116,000-square-foot retail, dining and creative office project now houses trendy eateries such as Nobu and fashion brands such as Elyse Walker and Warby Parker in addition to a 47-slip marina.

The residential boom is driving more multiuse developments nearby, too.

One example is the Koll Center Newport, a 13-acre retail and condo project that is still awaiting approval. If the project goes through, it would add 260 condos within three buildings and 3,000 square feet of ground-floor retail.

Another is the Vue Newport, where about 10 of the 27 luxury homes in the soon-to-be-completed mixed-use community have already sold. With a starting price of $2.35 million, the homes — all have marina or ocean views — will be part of a planned neighborhood that will include restaurants and boutiques, with access to 22 boat slips, options for outdoor activities and a boat valet.

After all, that’s the sort of ritzy, beachy lifestyle that people move to Newport for, and that owners of older properties are increasingly realizing they can take advantage of.

“There are some incredible new homes along the oceanfront, and those owners are diligent about listing their homes,” said McDonald. “But even those that don’t have new homes, the houses that are considered teardowns, are wanting to sell as well. Everyone wants to ride that wave.”