by Scott Murphy

$57 Million as a sales price for a Hong Kong apartment?

What if I had $57 million to buy a luxury home in the U.S.?

I would seriously have to consider a currently-available 10,000 square foot home right on the beach in Del Mar, just north of La Jolla. The climate couldn’t be more perfect, the views are spectacular, while snow-covered mountains and desert golf are just a couple of hours away. But then again, I am a big fan of (and a Realtor in) San Diego!

by Roberta Murphy

We are seeing luxury scaled down on many fronts, and luxury hotels and timeshare resorts are taking it on the chin as well.

For the first five months of this year, according the the Wall Street Journal, U.S. hotel occupancy has declined 53 percent. This is the lowest drop in occupancy since 1987, when Smith Travel Research began tracking these numbers.

While both luxury and budget hotels are ailing with declining revenues, those hotel investors suffering the most (just like homeowners) are the ones who bought their real estate at the top of the market with loads of debt. Defaults on these hotel loans have spiked, and securitized mortgages (where loans are chopped up and sold to different investors as bonds) are also expected to rise from 4.7 percent to over 8 percent by year’s end, according to Morgan Stanley.

Timeshares are faring not much better. The biggest timeshare operator in this country, Wyndham Worldwide Corp has seen timeshare sales plunge 39 percent from a year ago. Another big loser is Marriott International, whose timeshare business reported a $17 million loss in the first quarter of this year.

And then we have luxury hotel operators like Four Seasons, which manages a number of luxury hotels, and is facing pressure from hotel owners to discount room rates in response to economic pressures. Recently, the owners of the Aviara Four Seasons Resort in Carlsbad, CA (north of San Diego) tried to divorce themselves from Four Seasons, who have a 30-year management contract with Broadreach Capital Partners of Palo Alto, CA. The owners are trying to preserve financial viability, while Four Seasons is trying to protect its non-discounting luxury reputation–and its contract.

Four Seasons, incidentally, was the only luxury hotel not to discount room rates after the 9/11 terrorist attacks. This was broadly seen as a brilliant move. Four Seasons, with its 82 hotels around the world, maintained both its profitability and its luxurious reputation.

These harsh economic times, though, are weighing heavily on the luxury hotel market. Their fixed costs are higher with staffing, valet service and maintenance–while corporate travel has shrunk and leisure travelers are bargain hunting. This has caused many hotel operators to discount room rates and offer bargain travel packages.

This is a market that surely has not only the venerable Four Seasons on guarded watch, but also the Ritz Carlton, the St. Regis and other five-star destinations throughout the world.

by Roberta Murphy

It’s a sad fact of life, but unscrupulous vultures are always ready to pick at the flesh of the most financially distressed–which more frequently these days includes the owners of luxury real estate.

Over on our San Diego real estate blog we report that San Diego County District Attorney Bonnie Dumanis is asking San Diego Realtors to help her track down and prosecute real estate fraudsters operating in our county.

We have written before about the foreclosure and loan modification scams that prey upon distressed San Diego home owners who are struggling to stay in their homes. The DA’s office is aggressively trying to warn homeowners to stay away from these San Diego real estate crooks and their fraudulent offers of mortgage and loan modification assistance–and is asking us, as San Diego Realtors, to report any suspicious activity.

All too often, unwitting and desperate home owners will pay an upfront fee to a person or company who promises to prevent foreclosure–or to modify existing mortgage loan terms. And all too often, people are paying for services they never receive–and might be better off with a do-it-yourself loan modification.

Click to continue reading….

by Roberta Murphy

There’s no doubt that uber-wealthy Russians love luxurious homes–and are willing to pay billions of roubles for well-placed mansions, townhomes and luxurious estates.

In Moscow, where luxury buyers are enriched by petrodollars and enthused by strong consumer confidence, a young and wealthy businessman recently paid 2.5 billion roubles ($99 million) for a Moscow town home near the Kremlin. Setting a new Moscow record, this seven-story apartment boasts 1300 square meters of undisclosed luxury and sits near the Kursk railway station.
Russian luxury home buyers, though, invest without borders.

Donald Trump’s Palm Beach estate, was originally listed at $125 million, but Dmitry Rybolovlev, one of Russia’s wealthiest businessmen, closed on the estate at $95 million. Forbes, by the way, pegs Ryobovlev at #59 with an approximate net worth of $12.8 billion on its list of world billionaires. The fate of Trump’s former mansion? It is reported that Dmitry Rybolovlev intends to tear it down and build another.

Another Russian waterfront buy recently occurred on Britain’s ultra-exclusive Sandbanks Peninsula. There, an unnamed Russian businessman paid almost $9 million for a 5-year-old Sandbanks mansion that he, too, intends to tear down. Replacing the existing home will be an ultra-contemporary glass-fronted home–with a helipad on the beach.

Sandbanks, by the way, is listed as the fourth most expensive place in the world for real estate.

I can’t help but wonder if any of these Russian real estate investors might be interested in some of San Diego’s prime real estate. There is an exquisite Del Mar estate on 5.5 acres pf oceanfront property priced at just $76 million–or 1,952,363,937.376 Russian Roubles.

And of course, if an investor should be interested in this wonderful investment opportunity, or any others for that matter, please feel free to give me a call at either 877-818-8197 or 760-402-9101.

HT:
Moscow super-rich pour millions into luxury homes | Oddly Enough | Reuters

by Roberta Murphy

Insuring luxury homes can be a real challenge, especially when trying to calculate replacement value for things like architectural artifacts, beloved creaking stairs or even elephant hide wallpaper.

Luxury home insurance wasn’t of that much interest to me–until I read of an appraiser who tried to figure out the replacement value of elephant skin wall coverings in a Seattle manse. That appraiser, James King with the Chubb Group, makes it a practice to thoroughly investigate the luxe and unusual features in Chubb’s insured luxury homes to make sure a realistic replacement value can be assessed.

And sometimes that challenge requires more than a little research.

In the case of the elephant hide wall coverings, King was unable to determine replacement value, especially since the wall covering had been installed at the turn of the century, before elephant hunting restrictions were in existence.

His solution? Read the rest of this entry »

by Roberta Murphy

Bradenton Florida Luxury Home

Once upon a time, we whispered about the “F” word creeping into luxury real estate. These days, it is common real estate talk.

The Wall Street Journal quotes Realty Trac reporting that the number of $1-plus million homes in some stage of foreclosure has ballooned to 7,968 between January and August this year. This compares to 4,214 during the same months last year.

Within these numbers, it is interesting to note the relative surge in the $2-plus million home market. This luxury group has grown the fastest: How about 499 in foreclosure process, compared to 201 for the same period last year.

These luxury foreclosures aren’t just the McMansions that proliferated in many upscale suburban communities. These homes are waterfront, behind exclusive gated communities, and in tony towns where these financial embarrassments rarely occur.

The bargains abound. The luxurious Bradenton, FL home pictured above (and listed by Patricia Tan with Prudential Palms Realty), for example, was originally listed at $3.78 million and is now under contract for $1.1 million. There again, and according to DataQuick, more than 64,300 homes priced at $1million or more were sold in 2007–which is more than triple the number for 2002.

In our local San Diego luxury real estate market, we are seeing our own casualties. According to our stats, there are 34 homes in some state of the foreclosure process in exclusive Rancho Santa Fe–with one on Via De Santa Fe valued at over $12 million. In La Jolla real estate, where prices are equally high, but with more condos and a greater population, there are 118 properties in the throes of foreclosure.

What will be the consequences to the highest end of the luxury market? There will be some fallout–and perhaps a more robust luxury home rental market, but most of these owners are well-entrenched and funded–and can afford to wait out this market crisis.

And for luxury home buyers, the market hasn’t looked this good–or offered so many choices– in several decades.

For more, read:

The Finest Foreclosures – WSJ.com

The Luxury of Frugality

Rise in Luxury Home Foreclosures, REO’s and Short Sales?

California Luxury Home Foreclosures

7 Bargaining Secrets for Luxury Home Buyers

Luxury Home Foreclosures More Common

by Roberta Murphy

Ed McMahon may wonder what else in new in defaulted real estate, but yesterday, Standard & Poor’s Ratings Service reported that even prime jumbo loans are starting to buckle.

Over a period of just one month–from June to July, 2008–jumbo loans originated in 2006 saw mortgage delinquencies rise 13.2 percent, while 2007 delinquencies rose 7.3 percent. Overall, mortgage delinquencies in the luxury real estate market are relatively low, with prime jumbos originating in 2006 reporting a serious delinquency rate of just 2.48 percent.

(For a more detailed report, go to: Prime Jumbos Showing Strain: S&P : Housing Wire)

It also appears that originations in the luxury market may be tightening. Thursday evening, Billy Taylor with Villa Sotheby’s International Realty in Del Mar, whispered that Chase Mortgage is pulling out of jumbo loan originations (at least at the broker level).

My prediction? There will be much more discussion about creative and seller financing in the months ahead. If financing is required for the purchase of a luxury home, it may be the seller who provides it.

Finally, stay tuned for Bob Dyson’s radical mortgage rescue program that could stabilize the real estate market very quickly–and that is quickly gaining prominent political support….

by Roberta Murphy

If this is the worst real estate market (for sellers) in recent history, then surely it creates some of the best buying opportunities of a lifetime as well.

We are seeing smart money aggressively buying in our San Diego real estate market, and hear reports of the same elsewhere. The properties are being bought as fix-and-flippers or are being held as longer term rentals.

We receive inquiries about these homes almost daily; but more recently, we are being consulted about strategies for buying luxury homes at bargain prices. These buyers may not have to sell their existing home to buy another, or are open to exchange possibilities.

Below are 7 strategies we use to help our luxury home buyers (and others) get some of the best luxury bargains on the market.

1. Study Market Time: Luxury homes in general may take longer to sell because of pricing, custom features and a more limited pool of buyers. But that doesn’t mean sellers are any less motivated to move on with their lives. At one time, we thought little of $million-plus homes sitting on the market for 90 days or more. These days, we seek buying opportunities if a home has been on the market over 60 days and are seeing some heavy price discounting if days on market goes over 90 days.
2. Check Tax Records and other Sources: Is there more debt on the home than what it is worth? Has a Notice of Default been filed that would indicate a looming foreclosure? If so and if this is a home of interest for our buyer, we submit an offer contingent on the successful negotiation of a short sale (where the lender sells the property for less than what is owed). In this case, either we or professional negotiators deal with the lender(s) to reach the best possible price for our buyer.
3. Did Owners Pay Cash or Have They Owned Their Home for Longer than 10 Years? These sellers may be in a position to sell at a discount or may be motivated to do so due to life transitions or other investment opportunities. They may also be open to owner-financing for all or part of the home mortgage.
4. Are You Open to Remodeling? Homes sold in as-is condition are more likely than others to sell at a substantial discount. Owners, especially when the home has been on the market for some time, are often overwhelmed with the thought of remodeling and updating–and fearful that their decor choices will not suit potential buyers. Especially in the uber luxury home market, older or outdated homes are sometimes sold at land value.
5. Foreclosoure Sales: The f-word (foreclosure) is occurring even in the luxury home market. Highly leveraged homes purchased in the last few years are more frequently ending up on the courthouse steps. Foreclosure purchases, which require cash and carry no disclosures or guarantees, offer both great potential for profit–and dire dangers for the uninformed. Bidding should be non-emotional and it is best to have a professional bidding for you–but only after thorough-as-possible research has been done regarding the home’s condition, its history and resale potential. Cracked slabs, structural defects and boundary line encroachments are unwelcome surprises.
6. Home Exchanges: This is a rather novel strategy for those trying to sell their luxury home in a bloody market. Life transitions encourage luxury homeowners to make moves. Empty-nesters may wish to relocate from their large estate to something equally posh but far less demanding in upkeep. Others may have expanding families that crave acreage, pools, tennis courts or equestrian facilities. In the Southern California market, Owner-Broker Bob Dyson and Villa Sotheby’s International Realty have set up a property exchange platform that allows homeowners to directly exchange properties and ownership. It is a tactic that helps to support neighborhood values and removes many of the pressures involved in having a home on the market for an extended period of time.
7. If the property you want is listed, have your agent check the other real estate agent’s listing history. If that agent tends to have listings on the market for a long time, you may wish to lower your offer. On the other hand, if the agent prices properties aggressively and has short “days on market,” you may consider coming in near to or at list price. You will likely find the listing is already priced at or below market to attract multiple offers.

A combination of patience, perseverance and the ability to move quickly will serve all astute buyers of real estate these days, but the greatest potential of all may lie in the luxury real estate market where replacement value could far exceed the purchase price.

by Roberta Murphy

This is a market that sometimes brings out the creative forces in real estate. And more and more, real estate exchanges are making lots of sense in the luxury real estate market.

Earlier this evening, I had an interesting conversation with a Sotheby’s real estate agent in Northern California.

It seems he is interested in exchanging his exquisite 104 acre property just outside Carmel for a luxury home in Rancho Santa Fe, just outside San Diego. His acreage offers 380 organic citrus trees that supply local restaurants, two greenhouses that produce basil for Whole Foods markets, Zinfandel grape vines that go you-know-where, and a number of fat and field-fed Angus cattle. He also has plans for an exquisite Tuscan villa that might be built for $1.5 million.

He is seeking to move to Southern California, and to Rancho Santa Fe in particular. And knowing that Rancho Santa Fe property owners love privacy, space and quiet, he thought that perhaps an easy and compatible exchange might be accomplished.

The numbers are certainly workable. He owes less than $800,000 on this parcel, in which he has invested nearly $3 million. He is seeking a Rancho Santa Fe home valued at $1.5 to $2.8 million–and may or may not be accomplishing the transaction via a 1031 exchange.

Quite simply, Northern California landowner wishes to relocate to Rancho Santa Fe and figures that some homeowner there would love the opportunity to exchange properties with him.

Makes sense to me.
So, if you have a Rancho Santa Fe home and have dreams of a bucolic life outside Carmel and California’s premier wine country, please let me know and I’ll arrange for a proper introduction. Just give us a call at 877-818-81979 or 760-402-9101.

And if you have an unusual luxury home exchange proposal of any sort, we’d also like to hear from you!