The biggest drivers behind the continued expansion of luxury home sales: Low mortgage rates, rising consumer confidence, cash buyers, and international buyers. International buyers are fueling some purchases, with an estimate of up to 20% of buyers in L.A. being from overseas. Many of them are paying full cash, speeding up closings and eliminating the need for appraisals. This year we are on pace to exceed the the all time high of 697 home sales over $5 million in California set last year in 2012, many of which were all-cash deals. However, with low mortgage rates, some luxury home buyers are financing their home purchases. Jumbo loans are traditionally associated with higher interest rates– about 0.25 percentage points more — than they do for conforming loans, according to the Mortgage Bankers Association. But over the past couple of months, the tables have turned. ”Never in my memory have jumbos been such a bargain,” said Peter Grabel, a loan officer at Luxury Mortgage Corp. For example, some buyers who traditionally would pay cash are instead securing sub 3 percent interest rates and 10-year loan terms. One big reason jumbo rates are so low is because lenders want to attract wealthy clients and hang on to them, said Malcolm Hollensteiner, head of consumer lending for TD Bank. Once clients sign up for a mortgage, the bank can “cross sell them other products, like brokerage services,” he said. As for pricing, it won’t be long before the U.S. sees a $200 million listing — the record now is believed to be $190 million for a property in Greenwich, Conn. — but that many of these ultra-high-end properties are priced that way merely as a suggestion, or to invite only a certain caliber of buyers to the table. Most ultra-high-priced homes end up selling for 50% to 60% of the original list price. We are also seeing an increase in pocket listings, or listings that aren’t publicly put into the multiple-listing service, both as a way to keep a seller’s name confidential and to up the exclusivity factor.
Home price increases will end up at 6.7 percent year-over-year before slowing to roughly 4.3 percent next year, on average, and eventually falling to 3.4 percent by 2018, a panel of more than 100 forecasters concluded. The Home Price Expectations Survey was conducted from Oct. 21, 2013 through Oct. 31, 2013 by Pulsenomics LLC on behalf of Zillow, Inc. The survey of 108 economists, real estate experts and investment and market strategists said appreciation is expected to remain strong through the remainder of this year, but the pace of home value growth is predicted to slow considerably. Based on current expectations for home value appreciation over the next five years, panelists predicted that overall U.S. home values could exceed their May 2007 peak by the first quarter of 2018. “Rising mortgage rates, diminished investor demand and slowly rising inventory are all contributing to a modest cooling off of the housing market, which is both expected and welcome after months of unsustainable, breakneck appreciation,” said Zillow Chief Economist Dr. Stan Humphries. By comparison, the CoreLogic Case-Shiller Indexes, though they reached 10.1 percent year-over-year in the second quarter over 2012, are expected slow to an average of 5.4 percent across all U.S. markets by the end of this year. CoreLogic Case-Shiller projected that price appreciation will decelerate through the second half of 2013 and into the beginning of 2014.
Though most real estate market observers have been predicting that rising home prices would drive investors out of the market for single family homes, that fact is that investors have purchased more homes than they did in all of 2012 or 2011. Investors have purchased more than 370,000 properties so far in 2013, which is already more than in either of the previous two full years according to a new investor insight report released today by RealtyTrac. The Real Estate Investor Purchase and Finance Patterns: 2011 to 2013, looks at a number of investor habits relating to real estate purchases since 2011, including the volume of properties purchased, breakdown of cash versus financed purchases, property situation (distressed, non-distressed, underwater etc.), investor purchases by property value, and number of investor-purchased properties that have since resold. A couple of interesting findings 1) Investors have purchased more than $1 trillion in US real estate since 2011. Fifty-four percent were all-cash; 2) Among all investor purchases during the time period, 57 percent have subsequently been re-sold. The smart money still sees the real estate market as a solid long term investment.
The City of Beverly Hills will turn 100 on January 28, 2014! It is the 31st oldest of Los Angeles County’s 88 cities. The entire community is invited to an exciting year-long celebration comprised of tourism initiatives, regional events and community activities that will pay tribute to Beverly Hills’ past, present and future and promote the city’s brand on a global scale. As Beverly Hills preps to celebrate its 100th birthday, there are some unique promotions in store to kick off the countdown to the city’s centennial. One special event is call Suite 100, the city is working a hospitality promotion with five of its luxury hotel partners to offer specialty themed suites, each of which hearkens to a different era of the city, from the 1940s to the present day. The theme at the Montage Beverly Hills is “Film Noir” from the 1940s. At the Beverly Hills Hotel & Bungalows it’s “The Golden Age Inspired by Marilyn Monroe.” Monroe was a frequent hotel guest in the 1950s. The Beverly Hilton will put on a “Stylish, Sophisticated Sixties: A Re-Imagined Revolution” in its suite. L’Ermitage Beverly Hills is going for “The Era of Studio 54 – Fashion & Art Collide,” a mid-1970s disco, Warhol and Halston look. The Peninsula Beverly Hills’ theme is “The Birth of Modern Glamour,” designed with the looks of recent decades. Guests who stay or groups that reserve the specialty suites will be treated to a comprehensive experience that may include accompanying vintage automobiles for use around the city; vintage periodicals and other special touches in each suite; and personal concierge service that parallels each respective decade. Check out more with pictures: http://goo.gl/bTRkGD
As the economic recovery continues, Americans are again able to invest. Although there are many investment options available, real estate offers several advantages over most of them. First. is the ability to finance a portion of the purchase and leverage the initial investment. The benefit is that you now control an asset valued much higher – unlike stocks, bonds and CDs. Especially now with the historically low interest rates available, a small increase in the value of a leveraged property investment delivers a greater return than an unleveraged investment — approximately 12 percent gross. Investing in real estate also offers very valuable tax benefits, not so with earnings from investments in CDs, bonds and stocks are taxed. The numerous deductions from the profit on mortgage interest, property repairs and depreciation are very advantageous. In addition real estate investors are writing off depreciation of an asset that is typically appreciating providing yearly benefits to a long-term investment. Most importantly, ownership of rental property is an asset generates consistent cash flow. Subsidizing the investment with consistent rental income puts money in the investor’s pocket, covering the mortgage, repairs and additional expenses.
Beverly Hills offers so many distinctive homes designed by noted architects, many tied to Hollywood’s Golden Age. But architectural and cultural heritage has proven no match for the nouveaux riches of Beverly Hills. Some of the older homes lack the style and amenities today’s luxury buyers want — great rooms, entertainment centers, restaurant-quality kitchens and vast bedroom suites. Rooms in even the most opulent older Beverly Hills homes can feel cramped by modern high-end standards. For today’s luxury buyer, remodeling is unappealing. They want to maximize home size, often reducing outdoor space in favor of more bedrooms and more expansive living areas. The tear-down phenomenon is hardly new. Beverly Hills residents have for decades razed houses that earlier generations considered grand to make way for more lavish residences. Many structures associated with celebrities or designed by noted architects were among those toppled by bulldozers, including John Lautner’s Shusett House. The recent demolition of a North Roxbury Drive residence where Gershwin lived, wrote and entertained Hollywood royalty. And aftern the near miss of a modernist Richard Neutra, Beverly Hills finally got serious about preserving its architectural legacy, the city enacted an ordinance early last year, and quickly enacted tax breaks to foster neighborhood preservation. The city is also conducting a citywide survey to identify potentially significant houses.
There is an emerging trend in the luxury real estate market place, it is a kind of coming of age, as in the age is coming down. A new survey by the Luxury Institute finds that wealthy younger buyers are driving the luxury real estate market, and are paving the way in a changing market place. And the bonus for luxury home sellers, they are willing to pay more than similar wealthy buyers age 55 and older. According to the survey of Americans age 21 or older with a minimum gross annual household income of $250,000, 43 percent of younger wealthy consumers are considering the purchase of residential property in the next 12 months, compared to 21 percent of those age 55 and older. On average these younger wealthy consumers spent more than $2.1 million on their most recent purchase of residential property, approximately twice the average amount spent by older and similarly wealthy luxury buyers, which was $1.1 million. These younger luxury buyers are leading a change in desired home amenities, whether they have young families or are single without children, they are looking for homes that fit their active and unique lifestyle. Younger buyers are significantly more likely to want homes with amenities such as a pool, outdoor kitchen, home gym, home theater, wine cellar and four or more garages. Less importance is placed on staff quarters, tennis/sports courts and separate catering kitchens. For majority of luxury buyers, location is the most important factor when considering the purchase of residential property. However, nearly one in four have the freedom to choose a property anywhere. The younger luxury buyer have more freedom to choose a residence that truly fits their lifestyle and will not limit their search based on location.
Existing-home sales increased in August, reaching their highest level in 6 1/2 years. What’s more, the median price shows nine consecutive months of double-digit year-over-year increases, according to the National Association of REALTORS®. Sales are at the highest pace since February 2007, when they hit 5.79 million, and have remained above year-ago levels for the past 26 months. The median time on market for all homes was 43 days in August, little changed from 42 days in July, but is much faster than the 70 days on market in August 2012. Total housing inventory at the end of August increased 0.4 percent to 2.25 million existing homes available for sale, which represents a 4.9-month supply at the current sales pace, down from a 5.0-month supply in July. Unsold inventory is 6.3 percent below a year ago, when there was a 6-month supply. Limited inventory in some areas means multiple bidding remains a factor; 17 percent of all homes sold above the asking price in August. As the equity position of most homeowners continues to improve, some who have been on the sidelines will list their home for sale. Current home owners—whether move-up, move-down, or move-over buyers—accounted for nearly 45 percent of the market share in home sales. Meanwhile, first-time home buyers are still being held back, with a slight drop in their market share from 36 percent to 35.7 percent month over month. The investor share in home purchases dropped to 19.7 percent from 23.1 percent.
Today the famed Beverly Hills landmark, is in the midst of a renaissance. For the first time since the recession, there are almost no vacancies among the roughly 100 storefronts along the three-block retail row. From Dayton Avenue and Wilshire Boulevard to the 400 block, Rodeo Drive today boasts more than 100 world-renowned hotels and boutiques. The Los Angeles Times profiles highlights of Rodeo Drive, widely considered one of the most famous streets in the world. It’s been immortalized in movies, books, song lyrics and on reality TV. Luxury retail real estate brokers say that brands have started to invest in new infrastructure, because luxury stores always have to update their look and keep it fresh. Recent newcomers to the street include Patek Philippe. In October, Dior reopened its 5,000-square-foot store with a design concept borrowed from the brand’s worldwide flagship in Paris. In November, Van Cleef & Arpels reopened its historic boutique. And this spring, Prada redesigned its concept store. Louis Vuitton and Saint Laurent are both embarking on multimillion-dollar renovations of their stores. Coming soon will be Vera Wang and Burberry. Another indicator of the value of a Rodeo Drive address is that luxury brands are starting to buy their stores instead of just leasing them. In May, Chanel bought 408 N. Rodeo in one of the highest per-square-foot sales in Los Angeles County, reportedly paying $117 million for the 13,317-square-foot property. LVMH Moet Hennessy Louis Vuitton bought 319 Rodeo for $85 million, and Hermes bought its building for a reported $75 million.
Luxury real estate agent Gary Gold recently discussed with trade publication Inman News a new feature available on the mobile real estate app he co-founded, DreamCommerce. Dubbed DreamCards, the new tool allows agents to send to their clients “e-postcards,” which are images of a particular home feature accompanied with lines of text.
DreamCards is just the latest innovative product from DreamCommerce to aid in the home shopping process, according to the Inman News report. Gold, who co-founded DreamCommerce with David Ragones, explained the benefits of DreamPro to the publication.
“DreamCards allow agents to send a personalized message with a beautiful listing photo to clients, leads, or their mobile farm in only a few taps on their smartphone or tablet,” Gold said.
This new tool has many intriguing possibilities, but at its core it fosters better and more timely communication between an agent and client. A DreamCard screenshot provided shows an image of a beautiful kitchen with hardwood floors, accompanied with this simple text:“the one?” Now, not only can agents provide pictures to their clients, but also things like analysis and thought-provoking questions.
According to Inman News, a free version of the DreamPro app allows an agent 25 DreamCards a month. The “Social Plus” edition at $15 a month provides agents with a custom referral code to brand the DreamHouse app, as well as 25 DreamCards. For $25 a month, the “Hero” edition provides the branding and 50 DreamCards.
The report also points out there are already thousands of consumers and hundreds of agents that take advantage of the DreamCommerce app.