If you wanted any more proof that the beginning of 2013 could be a dud, take a look at these two. It is feasible that you could make $300,000 on a flip, but when the purchase prices are available with a couple of clicks, buyers will expect that a major renovation has occurred:
A premiere auction Saturday of the historic Villa Rockledge in Laguna Beach, an ocean front property built by Frank Miller, the man who had a hand in shaping the famed Mission Inn Hotel & Spa in Riverside from 1918 to 1922, has been cancelled.
That’s because the iconic property is under contract for a sale, Villa Rockledge owner Roger Jones confirmed. “We reached a deal,’’ Jones said. “There will be no auction.”
The purchase price for the oldest ocean estate in Laguna Beach, one carrying a list price in 2009 of just under $35 million and fell to $24.9 million in 2011, exceeded the minimum auction bid price of $10.5 million, Jones said.
But the final purchase price has not yet been revealed.
Todd Wohl, of Premiere Estates Auction Co., on Friday said those details – and the buyers’ name — are being withheld until property closes escrow later this month.
Jones, likewise, declined to name the buyers, but did say the couple hailed from Denmark and has made prior real estate investments in Laguna Beach.
He described the sale as an “all-cash” deal that involved multiple bids. Contract terms reportedly include a provision allowing Jones and his wife, Sherill Bottjer, to stay at Villa Rockledge for three-months after the 8,064-square-foot estate closes escrow.
“They’re very nice people,’’ Jones said. “We’re very happy to report there will be a sale.”
The largely hand-hewn estate, which Miller fashioned out of rock, thick timber, iron and tile as a summer home for his second wife, Marion, cost $100,000 to build and is best known for architectural features that replicate Spanish mission design elements in the Riverside lodge.
The Mission Inn draws thousands of guests every year, especially at Christmas.
Villa Rockledge had quieter appeal, but its significance in the realm of California architecture is unflappable. The lofty, cliff-side estate was put in the National Registry of Historic Places in March 1984.
The estate features a main home with six villas, a saltwater tide pool on the private beach, coiffed garden with meandering stone walkways and a commanding seaside view. Brick and mosaic tile elements in the home replicate design elements in The Mission Inn, down to mosaic tiles that depict a macaw.
Jones, who wrote the book, “The History of Villa Rockledge,’’ paid $420,000 for the estate in February 1973 to become the fifth owner, after renting a studio-sized villa on the grounds for $85-a-month for five years.
“It’s a good way to end the year,’’ said broker Jeff Knowles of Sage Lang Investment Real Estate.
Wohl said Premiere Estates Auction received three pre-auction offers the Joneses considered before deciding to ink a contract that put the home into escrow.
“We have a 100 percent closing rate once it goes under contract,’’ Wohl said. “The sellers are ecstatic they found a buyer with the same type of passion for this historic property.’’
Buyers who pre-qualified for the Saturday, Dec. 15, auction hailed from Russia, China and California. A pre-auction gala drew more than 250 brokers and real estate agents from Pacific Palisades through the Orange County area, he said.
Our humble thoughts and prayers are with the families and friends of the victims of the Sandy Hook Elementary School tragedy. These senseless acts of random violence upon innocent people will hopefully be discussed until a solution or solutions are found to stop them.
What does it mean for real estate?
Home buyers will gravitate towards the more secluded, private settings in an attempt to gain a more safe and secure feeling. Gates, alarms, cameras, and other security devices will likely be appreciated, and all sorts of home-security kits will be offered.
Shy away from buying homes that have an exposed, out-in-the-open feeling. Those may not have registered any concern when we were kids, but it is a different world now. People are much more aware of their own personal security, and will be making home-buying decisions with those in mind.
God Bless America.
Kingside left this comment regarding the Norris seminar:
I attended Norris’s presentation at SDCIA on Tuesday. Well worth attending.
He acknowledged that wages have not gone up, but he believes we are truly in a new normal. The phrase “lowest interest rates in 50 years” we hear is because they don’t keep records older than 50 years. He recently went to DC to research the history back to 1850 and said that rates have never been this low. It is an unprecedented event.
His perception of course is based on the Riverside market, but he made a big point of saying that a 20% price increase will not significantly affect a buyer’s mortgage payment, and even after such an increase the rent to buy comparison will still be overall cheaper for the buyer to buy than rent. This affordability comparison is a rare event for California. He believes there is a lot of room for price increase in California as long as rates stay low, and everything he sees is that there will be no government policy change that will affect rates.
Some of the many other points he made:
A 20% increase will eliminate a lot of negative equity. Banks know this and there will be no dumping of inventory. Their strategy to not foreclose for years and leave the borrower alone might actually be better for them financially.
If the fiscal cliff or whatever creates a national recession next year, the national government response will be to lower rates further, and California real estate prices may actually benefit from a national recession.
An excellent thought regarding the increase in pricing:
The run-up in prices caught the attention of Dean Baker, co-director of the Center for Economic Policy and Research in Washington, who regarded the trend as “serious grounds for concern that these markets are being driven by speculation.”
“While some speculators buying up homes at a bottom can be positive, the sort of price rises that you are seeing there may be excessive,” Baker said in an email to The Times.
He noted that a big factor in the rising median price is increased sales of high-end homes, which skew the results to the upside. Indexes that track specific home resales, such as Case-Shiller, show far lower price appreciation.
Still, Baker said he thought the California market could experience “serious gyrations” because of the heavy purchases by investors hoping to sooner or later flip the homes at a profit.
“The speculators likely have pushed prices above where the market would put them in some markets,” he said.
Ed Leamer, director of the UCLA Anderson Forecast of the economy, had a more sanguine take on the trend than Baker.
“I am inclined to think that what he calls speculators know more about the market than he does,” Leamer said. “It’s a good thing for professionals to be putting a floor under home prices.”
http://www.latimes.com/business/money/la-fi-mo-california-home-sales-20121213,0,5057854.story
Just a few stories from the street – many are not selling too:
1. An agent told me of an Irvine short-sale that he “comp’d” at $550,000, but listed for $525,000. They wanted to make the price attractive to sell it right away, and only did one open house. He had 37 offers, with two over $600,000:
http://www.redfin.com/CA/Irvine/89-Passage-92603/home/5895173
2. This Oceanside REO got the typical Wells Fargo carpet-and-paint treatment before hitting the market for $359,900 last Tuesday. They received 25 offers, and took $397,500 cash from an owner-occupant buyer. (10.4% over list):
http://www.redfin.com/CA/Oceanside/2092-Tiffany-Dr-92056/home/3393861
3. The previous sellers paid $670,500 in September, 2010, and these sellers paid $795,000 in June. They put it back on the market for $869,000 in November with nothing changed – they even used the same photos from the previous listing! Yet, it only took 24 days to go pending:
http://www.redfin.com/CA/Carlsbad/3242-Sitio-Avellana-92009/home/22496850
4. These sellers paid $829,000 for this in 2010. The model-match sales since then have been $680,000, $720,000, $740,000, and $762,500. They listed for $875,000 to $925,876, and only had one exterior photo, yet went pending after two days:
http://www.redfin.com/CA/San-Diego/13273-Courtland-Ter-92130/home/4458979
Photo from previous listing showing the view/pool, which doesn’t look that spectacular:
5. This hit the MLS on the Friday after Thanksgiving, and had four offers within 24 hours:
http://www.redfin.com/CA/Carlsbad/3474-Circulo-Adorno-92009/home/3871106
It’s a hot market – for a few lucky folks!
Even after paying a $67 million settlement to the SEC and being banned from the mortgage industry Angelo Mozilo, founder and former president of Countrywide Financial Corp still says his company never made a loan “that we knew the borrower could not pay.”
Mozilo defended Countrywide in a deposition made last year in connection with a law suit by MBIA, Inc against Bank of America (BoA) which bought Countrywide in 2008. The deposition was filed in the New York Supreme Court earlier this week.
The MBIA lawsuit is one of many brought against Bank of America since it acquired Countrywide. It is estimated that the bank has so far spent more than $40 billion trying to clean up defective mortgages and improper foreclosures caused by the mortgage company’s lax lending standards.
But according to an article in Bloomberg, Mozilo said that he had no regrets about how he had run his firm, and denied that Countrywide had caused the housing crisis. “This is all about an unprecedented, cataclysmic situation, unprecedented in the history of this country. Values in this country dropped by 50 percent,” he said.
Mozilo contends he only agreed to the $67.5 million regulatory settlement in 2010 to protect his family. “It had nothing to do with anything that I did at Countrywide or anything I did in my personal life.” Relatives “were being harassed in school. My name was in the paper every day nationally and internationally, accusing me of things that were absolutely untrue. I could not have my family go through it anymore, and that’s why I settled.”
MBIA’s suit in the New York State Supreme Court is seeking judgments against BoA for home loans written by Countrywide between 2004 and 2007 which were later packaged into securities. MBIA guaranteed payments to investors who purchased the securities which the bond insurer maintains were riskier than promised. The suit claims that more than 56 percent of some 200,000 loans were materially defective; an amount plaintiff’s attorneys equate to $12.7 billion.
Bloomberg quotes Philippe Selendy, an attorney with Quinn Emanuel Urquhart & Sullivan which represents MBIA, as saying that the risk should never have been passed to the insurer; “The loans should have never been in there. The probability of default is exceptionally high.” He said the loan files were missing key documents and cited examples of loans where borrowers had substantially misrepresented their income.
Another spokesperson for MBIA told Bloomberg that the company has already paid more than $3 billion in claims to investors and that its claims against BoA total more than $4.5 billion. The firm is seeking $3 billion in damages and repurchase by BoA of more than $12 billion in loans.
The bank’s Countrywide division maintains that MBIA insured the securitizations even though they knew the lender’s loans were becoming riskier and did not do proper due diligence before doing so. “Rather than accepting responsibility for the insurance policies it wrote, MBIA seeks to walk away from its contracts,” a spokesperson for Countrywide said.
Mozilo, in his deposition, continues his long standing defense of his former company. “I have no regrets about how Countrywide was run,” Mozilo said. “We were a world-class company in every respect.“
“We never made a loan knowingly — and it would be stupid to do so — that we knew the borrower could not pay. Never,” Mozilo said. “All our loans had that one standard from 1968 to the end of my rein at Countrywide.”
His record $67.5 million payment settled an SEC claim that he had known about the deteriorating quality of loans made by Countrywide but continued to mislead investors even while his internal communications described some products as toxic. He was accused also of insider trading, accelerating his stock sales to make a reported $140 million. He admitted no wrongdoing in resolving the accusations.
http://www.mortgagenewsdaily.com/12132012_countrywide_boa.asp
A blog reader asks:
I wanted to get your thoughts on pricing. As you mentioned we are up 17%, though wages are not increasing. Low rates, foreign buyers, and lack of inventory (whether artificially created or organic) are keeping things afloat.
Do you see any kind of resistance to pricing increases with low rates and low inventory? The CV median price is probably in the 9’s for probably around 3k sq ft. At what point do people say, “wait a sec this is just too expensive”? What is the foreseeable ceiling, if any, do you see?
I posted the +17% story to show the realtor propaganda being pushed on people. The realtor association isn’t lying to you, they are just too lazy to dig any further, or publish an explanation. Yet these soundbites are influencing the common perceptions.
The reality?
There is a 10% range of pricing for all neighborhoods, depending on location and condition. Today’s buyers recognize how slushy prices can be, and are diligent about comparing the benefits of the subject property to the comparables – far more diligent than agents or sellers.
The buyer discipline should keep prices range-bound in a community like Carmel Valley, where it is easier to compare apples and apples.
Here is an example.
There are three different Carmel Valley neighborhoods that have a 3,708sf plan. The locations and conditions of each home can be dramatically different (some are on canyons), but to simulate a same-house-sales comparison, let’s review the recent history:
2009 – $1,025,000, $1,220,000, $1,250,000, $1,325,000, and $1,380,000.
2010 – $1,050,000, $1,059,000, $1,100,000, $1,125,000, $1,200,000, and $1,265,000.
2011 – $1,000,000, $1,068,000, $1,217,500, and $1,250,000.
2012 – $970,000, and $1,100,000.
Even though the SD Case-Shiller has risen 8.5% since the trough in May, 2009, would you pay $1.3-something for a 3,708sf model today, unless it was on a canyon and had all the trimmings?
There are exceptions, but they are usually those that are decked out. Here’s an example:
The house we saw on Reedley was highly upgraded by a remodeling firm who used it for a showcase that ultimately was featured in Luxe Magazine. It is 3,502sf at the end of a cul-de-sac, and closed for $1,450,000:
http://www.sdlookup.com/MLS-120048842-4738_Reedley_Terrace_San_Diego_CA_92130
But the same model across the street has been struggling to sell since 2010, listed at $1,449,000:
http://www.sdlookup.com/MLS-120060301-4745_Reedley_Terrace_San_Diego_CA_92130
You might see an occasional high sale, but buyers are determined to stay within reason. I think we will stay in today’s range, and while it’s not a hard ceiling, there are several things to keep prices under control in the higher-end areas like Carmel Valley:
1. Buyers have more tools than ever to monitor pricing.
2. Buyers believe that mortgage rates will stay low for 1-2 years.
3. Buyers hope for shadow inventory to appear.
4. Buyers have waited this long, they aren’t going to overpay now.
5. Buyers are more suspicious of realtors than ever.
6. Pardee’s new developments are going to control everything for the next two years.
There are probably a majority of the ‘people’ who have said, “wait a sec this is just too expensive”, but either they stay on the sidelines or adjust their vision, because there is no shortage of Carmel Valley buyers today. I expect CV prices to bounce around today’s ranges for the foreseeable future, as long as rates are in the 3s and 4s.
Hat tip to Kingside for sending this along:
Remember the days when residential real estate gained equity each year? It’s happening again in California, and a year from now homeowners could see as much as a 20 percent increase in the median price of homes across the state, according to Bruce Norris, a Riverside-based real estate analyst and principal of The Norris Group.
“My best guess is that California we will have significant price inflation. Prices could escalate so strongly that we will think we are in 2004 instead of 2013.”
Some may ask how this is possible. But Norris has experience predicting the unpredictable.
A real estate consultant, investor and educator for the past 30 years, Norris publicly predicted the current sub-prime lending and foreclosure crisis in January of 2006, more than a year before the nation’s leading economists and real estate industry analysts would even acknowledge the possibility of a downturn. Norris also correctly forecast both the real estate boom that began in 1997 and the subsequent doubling of home prices.
Norris now says he has identified three reasons why median home prices in California will go up.
For starters, he said, policy decisions have resulted in record low inventory levels.
“In many areas,” Norris said, “there’s one month of inventory. Inside of that one month of inventory are very few REOs and a lot of short sales that may or may not really be available to buy and close anytime soon. The properties that would normally be purchased by owner occupants are being snapped up by billion dollar hedge funds. These hedge funds, unlike the smaller investor types, are keeping all of the properties as rentals. There’s a little inventory for sale by ‘normal sellers with equity,’ but, right on cue they are getting the idea their property just might be worth more than the last sale.”
With the absence of inventory, Norris predicts, prices will escalate.
A second factor paving the way for the rise in median home prices in California is the return of the former homeowner who was foreclosed on in 2008 and 2009.
“The numbers of trustee sales in those years were staggering,” Norris said, adding, “As a percentage of whatever had happened in the past, 2008 and 2009 will go down in history as the California Real Estate Collapse of all time. The numbers differ across the state but the percentages are similar. In San Bernardino, the numbers of foreclosures exceeded the number of sales in 2008 and 2009. Fast forward to 2012 and you now have those same people ready and capable of buying a home again.”
So, how is it these people can buy homes so soon after going through a foreclosure? The answer, Norris says, resides with FHA, which will now make a loan to a buyer who lost their home via foreclosure after three years. “Buyers have realized that their house payment would be less than their rent, and that’s fueling demand and pushing up home prices,” he said.
The third factor setting the stage for a significant increase in median home prices is interest rates. “Interest rates are at all-time lows, and that allows for price increases to take place without significantly increasing mortgage payments,” Norris said, adding that he expects California’s median prices to up by as much as 20 percent during the coming year.
Home sellers located in many Western metro areas are in a good position to benefit from locally strong demand and will likely hold the advantage in real estate negotiations, Zillow reported Wednesday. Interestingly enough, six of the top 10 sellers’ markets listed by Zillow are California-based, one of the hardest hit markets in the housing crisis.
This coincides with a report released Tuesday by Pro Teck listing the top 10 best performing metros with regard to many real estate indicators. Several California metros topped that list as well.
Zillow studied data such as actual sales prices compared to asking prices, number of days on Zillow and the percentage of homes currently listed with a price cut to establish its list of top sellers’ and buyers’ markets.
In the Zillow study, rising home value is not necessarily the main indicator of a sellers’ market. Quick turnover and fewer price cuts were two of the main factors used to determine the list.
Conversely, potential homeowners with the greatest conditions are in the Midwestern and Mid-Atlantic metros such as Chicago, Cleveland and Philadelphia. These metros should expect price cuts exceeding 5% in some areas and listings are expected to remain active for more than 100 days in many cases.
In an ideal buyers’ market, for-sale homes remain on the market longer and prices are reduced often, granting more negotiation power for the buyer.
“Many of the strongest sellers’ markets are in areas that were hardest hit by the housing bust, places like California, Nevada and Arizona, which may seem counter-intuitive,” said Zillow Chief Economist Stan Humphries. “But much of that strength is driven by investor interest, as many distressed and non-distressed homes are purchased and transformed into rentals. This investor activity is contributing to very low inventory levels, which increases demand and helps drive up prices, particularly for less expensive homes in these markets.”
http://www.housingwire.com/news/california-dominates-top-sellers%E2%80%99-markets-list
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