Category Archives: Luxury Housing

Manhattan Apartment Sales Plummet, Worst In Three Decades

The virus pandemic and social unrest have sparked an exodus of city dwellers to rural communities and towns. Remote access for work, and the recession, coupled with high unemployment, will extend this outbound emigration trend for the next several years as people seek cheaper living accommodations ex-metro areas. 

It appears the factors mentioned above have dealt a heavy blow to the Manhattan real estate market, which suggests a correction in apartment prices are ahead.

Manhattan apartment sales plunged 54% in 2Q20 compared with the same period last year, marking the most significant decline in 30-years, according to Miller Samuel and Douglas Elliman. The median sales price fell 18% to $1 million, the largest decline in a decade. According to real estate firm Compass, there were only 1,147 sales in the quarter, the lowest on record, due mostly because of coronavirus lock vdowns barred agents from showing apartments until June 22.

“Manhattan was effectively shut down throughout the second quarter until the final week,” the report said. 

“Agents are going nonstop right now,” said Bess Freedman, CEO of Brown Harris Stevens, told CNBC.

“Sellers can’t be married to pre-pandemic prices,” Freedman said. “Everyone needs to be reasonable and fair about the new environment.”

“There is going to be an incredible supply of rentals,” he said. “We are going to see a lot of negotiating and landlord incentives.”

The latest indicator that the Manhattan real estate market is turning could be the number of signed contracts in June, were down 76%, compared with the same time last year.

Further, an entire floor apartment at the “coveted” One57 building, one of the flagships of billionaire’s, aka bagholder’s row, just sold for $28 million about six years after it was initially purchased for $47.4 million. 

It marks a 41% discount for the luxury apartment in the span of about a half-decade. The plunge in prices would be the most significant discount to date at the building. 

If readers aren’t familiar with the current exodus trends ex-cities – here’s the latest:

Coast to coast, people are fleeing cities: 

Some have even fled to the Caribbean:

To sum up, if you haven’t considered leaving a major city because its unaffordable – now might be the time, due mostly because a correction in housing prices is likely underway. 

Source: ZeroHedge

Why Manhattan’s Skyscrapers Are Empty

Approximately half of the luxury-condo units that have come onto the market in the past five years remain unsold.

In Manhattan, the homeless shelters are full, and the luxury skyscrapers are vacant.

Such is the tale of two cities within America’s largest metro. Even as 80,000 people sleep in New York City’s shelters or on its streets, Manhattan residents have watched skinny condominium skyscrapers rise across the island. These colossal stalagmites initially transformed not only the city’s skyline but also the real-estate market for new homes. From 2011 to 2019, the average price of a newly listed condo in New York soared from $1.15 million to $3.77 million.

But the bust is upon us. Today, nearly half of the Manhattan luxury-condo units that have come onto the market in the past five years are still unsold, according to The New York Times.

What happened? While real estate might seem like the world’s most local industry, these luxury condos weren’t exclusively built for locals. They were also made for foreigners with tens of millions of dollars to spare. Developers bet huge on foreign plutocrats—Russian oligarchs, Chinese moguls, Saudi royalty—looking to buy second (or seventh) homes.

But the Chinese economy slowed, while declining oil prices dampened the demand for pieds-à-terre among Russian and Middle Eastern zillionaires. It didn’t help that the Treasury Department cracked down on attempts to launder money through fancy real estate. Despite pressure from nervous lenders, developers have been reluctant to slash prices too suddenly or dramatically, lest the market suddenly clear and they leave millions on the table.

The confluence of cosmopolitan capital and terrible timing has done the impossible: It’s created a vacancy problem in a city where thousands of people are desperate to find places to live.

From any rational perspective, what New York needs isn’t glistening three-bedroom units, but more simple one- and two-bedroom apartments for New York’s many singlesroommates, and small families. Mayor Bill De Blasio made affordable housing a centerpiece of his administration. But progress here has been stalled by onerous zoning regulations, limited federal subsidies, construction delays, and blocked pro-tenant bills.

In the past decade, New York City real-estate prices have gone from merely obscene to downright macabre. From 2010 to 2019, the average sale price of homes doubled in many Brooklyn neighborhoods, including Prospect Heights and Williamsburg, according to the Times. Buyers there could consider themselves lucky: In Cobble Hill, the typical sales price tripled to $2.5 million in nine years.

This is not normal. And for middle-class families, particularly for the immigrants who give New York City so much of its dynamism, it has made living in Manhattan or gentrified Brooklyn practically impossible. No wonder, then, that the New York City area is losing about 300 residents every day. It adds up to what Michael Greenberg, writing for The New York Review of Books, called a new shameful form of housing discrimination—“bluelining.”

We speak nowadays with contrition of redlining, the mid-twentieth-century practice by banks of starving black neighborhoods of mortgages, home improvement loans, and investment of almost any sort. We may soon look with equal shame on what might come to be known as bluelining: the transfiguration of those same neighborhoods with a deluge of investment aimed at a wealthier class.

New York’s example is extreme—the squeezed middle class, shrink-wrapped into tiny bedrooms, beneath a canopy of empty sky palaces. But Manhattan reflects America’s national housing market, in at least three ways.

First, the typical new American single-family home has become surprisingly luxurious, if not quite so swank as Manhattan’s glassy spires. Newly built houses in the U.S. are among the largest in the world, and their size-per-resident has nearly doubled in the past 50 years. And the bathrooms have multiplied. In the early ’70s, 40 percent of new single-family houses had 1.5 bathrooms or fewer; today, just 4 percent do. The mansions of the ’70s would be the typical new homes of the 2020s.

Second, as the new houses have become more luxurious, homeownership itself has become a luxury. Young adults today are one-third less likely to own a home at this point in their lives than previous generations. Among young black Americans, homeownership has fallen to its lowest rate in more than 60 years.

Third, and most important, the most expensive housing markets, such as San Francisco and Los Angeles, haven’t built nearly enough homes for the middle class. As urban living has become too expensive for workers, many of them have either stayed away from the richest, densest cities or moved to the south and west, where land is cheaper. This is a huge loss, not only for individual workers, but also for these metros, because denser cities offer better matches between companies and workers, and thus are richer and more productive overall. Instead of growing as they grow richer, New York City, Los Angeles, and the Bay Area are all shrinking.

Across the country, the supply of housing hasn’t kept up with population growth. Single-family-home sales are stuck at 1996 levels, even though the United States has added 60 million people—or two Texases—since the mid-’90s. The undersupply of housing has become one of the most important stories in economics in the past decade. It explains why Americans are less likely to movewhy social mobility has declinedwhy regional inequality has increasedwhy entrepreneurship continues to fallwhy wealth inequality has skyrocketed, and why certain neighborhoods have higher poverty and worse health.

In 2010, one might have thought that the defining housing story of the century would be the real-estate bubble that plunged the U.S. economy into a recession. But the past decade has been defined by the juxtaposition of rampant luxury-home building with the cratering of middle-class-home construction. The future might restore a measure of sanity, both to New York’s housing crisis and America’s. But for now, the nation is bluelining itself to death.

Source: by Derek Thompson | The Atlantic

“Tail-End Of A Big Bull Market” – Wine, Diamonds, Classic Cars Are Now Money-Losing Investments For The Ultra-Rich

Luxury assets of the ultra-wealthy, if that were expensive wine, fancy diamonds, and rare antique cars all had a down year as the stock market ramped to new highs, reported The Wall Street Journal.

In the last decade, luxury assets performed exceptionally well as central bankers handed out free money to the elite class to hoard assets of their liking. And naturally, these people, with exceptional taste, bought things that the common man has only seen on television.

Now, these luxury assets are under performing – have been during the past several years – and is a symptom of late-cycle distress.

The froth has gone out of the market. People have realized you can’t just buy stuff and expect the value to go up,” said Andrew Shirley, a partner at Knight Frank and editor of the group’s Wealth Report.

The Journal blames the under performance on the global slowdown and the lack of Asian demand. Chinese buyers account for 33% of global luxury goods sales.

“There is a lot of uncertainty in Chinese markets and the riots in Hong Kong didn’t make it easy for people to come spend money in Hong Kong either,” said Eden Rachminov, chairman of the board at the Fancy Color Research Foundation.

Colored diamonds in 2019 lost about 1% in the first three quarters.

Fine wine was also another losing asset through Nov., lost 3.6%, according to the Liv-ex 1000 index.

And the biggest loser on the year were classic cars, lost 5.6%, according to Historic Automobile Group International’s (HAGI) Top Index.

HAGI founder Dietrich Hatlapa said the classic car market has been cooling following a massive rise in price after the 2008-09 financial crisis. He said classic car prices saw double-digit gains after the recession, rallying 50% Y/Y through 2013. “We are at the tail-end of a big bull market,” Hatlapa warned.

What’s becoming evident is that ‘Not QE’ and other monetary gimmicks deployed by central banks are failing to raise asset prices of some luxury goods in 2019. Perhaps the world is stumbling into a period where tool kits of central banks are becoming less responsive to stimulate asset price inflation, and if that is the case, then everyone will figure out that prices of luxury goods have been hyper inflated over the last decade with nothing but hot air.

Source: ZeroHedge

A Record Number of Homes Closed for $100 Million-Plus During 2019

Six deals topped $100 million in 2019, despite a general slowdown across the U.S. luxury real-estate market. Here is a look at the top-10 home sales

Cartwell sold for $150 million in December – Jim Bartsch

In 2019, a small group of enormous real estate deals, while bearing little relationship to the overall market, had an outsize impact on the national conversation about wealth inequality and the rapidly expanding billionaire class.

A boom in ultrahigh priced deals in Palm Beach this year, including the $111 million sale of an oceanfront estate, raised questions about the number of wealthy New Yorkers fleeing to Florida in response to a 2017 change in federal tax law. A string of $100 million-plus deals completed in Los Angeles put the spotlight on high-end real estate on the West Coast.

Hedge-fund manager Ken Griffin’s roughly $238 million purchase of a New York penthouse, which set a price record for the nation, bolstered the arguments of legislators who support additional property taxes for the super rich.

These megadeals don’t necessarily speak to a broad surge in real estate values. In general, the U.S. luxury real-estate market faced a slowdown in 2019, thanks to oversupply in certain markets, tax changes and a general decline in foreign purchasers.

Read on for a closer look at the top 10 deals of the year, a record six of which topped $100 million, according to research by The Wall Street Journal and appraiser Jonathan Miller. Mr. Miller said he believes the previous record was three $100 million-plus deals, achieved in both 2014 and 2016.

1. 220 Central Park South, New York

Price: Roughly $238 million

Early in 2019, hedge-fund executive Ken Griffin closed on a roughly $238 million apartment. Emily Assiran for The Wall Street Journal

Mr. Griffin’s purchase of the roughly 24,000-square-foot Billionaires’ Row apartment “came to personify the issue of income inequality for many people,” said luxury agent Jason Haber of Warburg Realty of the deal. “Ken Griffin closed right when the legislature began their session. It was like throwing meat to the wolves.”

Soon after, the New York legislature expanded the so-called “mansion tax,” designed to target buyers of properties priced at $2 million or more, and increased property transfer taxes. The deal also helped reignite discussions around a pied-à-terre tax, which would tax multimillion-dollar second homes as a funding source for the city’s beleaguered subway system.

“It served as Exhibit A for why we should look at the possibility,” said Sen. Brad Hoylman, who sponsored the pied-à-terre tax bill.

The purchase was one of a string of record-breaking acquisitions by the billionaire in recent years In 2017, the Citadel founder bought several floors of a Chicago condominium for a record $58.75 million. He also bought a London home for about $122 million, and a piece of land in Florida for $99.1 million (see below).

To some extent, Mr. Griffin’s spending spree has made him a central figure in the debate about wealth inequality in New York. “Anyone who can afford to pay for a $238 million apartment can afford to pay a little more off the top to make the city a better place for everyone,” Sen. Hoylman said. Mr. Griffin has rarely spoken publicly on the issue. At an event this year hosted by Bloomberg News, Mr. Griffin criticized presidential hopeful Sen. Elizabeth Warren, saying he wished she spent more energy on education, rather than attacking “those of us who have been successful.”

The recently completed tower has quickly become New York’s new “it” building. Other buyers include musician Sting and hedge-fund executive Dan Och (see below).

Buyer’s agents: Tal Alexander and Oren Alexander of Douglas Elliman

Seller’s agent: Deborah Kern of the Corcoran Group

A view of Chartwell, which was purchased by Lachlan Murdoch. Jim Bartsch

2. Chartwell, Los Angeles

Price: $150 Million

Lachlan Murdoch, co-chairman of News Corp., which owns Dow Jones & Co., publisher of The Wall Street Journal, paid about $150 million for this Bel-Air estate in December, setting a record for the Los Angeles area, according to people familiar with the deal. Observers said it was the second-priciest sale ever recorded in the country for a single-family home.

Lachlan Murdoch. David Paul Morris/Bloomberg

While the price-tag was huge, the property was the latest in a line of homes to sell for a major discount to their original asking prices, marking the culmination of years of aggressive or arguably aspirational pricing for luxury homes across the country. The roughly 25,000-square-foot mansion came on the market in 2017 for $350 million, making it the most expensive listing in the nation at the time.

Designed by Sumner Spaulding around 1930, the property was owned by onetime Univision Chairman A. Jerrold Perenchio. It came with a Wallace Neff-designed five-bedroom guesthouse, a 75-foot pool, a tennis court and a car showroom with space for 40 vehicles. Mr. Murdoch didn’t respond to requests for comment.

Seller’s agents: Drew Fenton, Jeff Hyland and Gary Gold of Hilton & Hyland; Joyce Rey, Jade Mills and Alexandra Allen of Coldwell Banker Global Luxury; and Drew Gitlin and Susan Gitlin of Berkshire Hathaway HomeServices California Properties.

Buyer’s agent: Drew Fenton of Hilton & Hyland.

Spelling Manor in Holmby Hills sold for nearly $120 million. Jim Bartsch

3. Spelling Manor, Los Angeles

Price: $119.75 million

British Formula One heiress Petra Ecclestone sold Spelling Manor, a sprawling estate built for the late television producer Aaron Spelling, this past summer for $119.75 million, records show. The buyer hailed from Saudi Arabia, according to people familiar with the deal.

Petra Ecclestone. Jeff Spicer/Getty Images

The Holmby Hills property, designed in the style of a French château, is about 56,000 square feet, making it one of the largest private homes in the country. After Ms. Ecclestone bought it from Mr. Spelling’s widow, Candy Spelling, in 2011, she brought in more than 500 workers to do a three-month, multimillion-dollar renovation. The property has a two-lane bowling alley, a wine cellar, a beauty salon, a gym, tanning rooms and a tennis court.

The property is one of several significant Los Angeles area homes to have traded to buyers from the Middle East this year. In May, a Saudi buyer snapped up two neighboring Bel-Air properties for $52 million, The Wall Street Journal reported.

Seller’s agents: Kurt Rappaport and Daniel Dill of Westside Estate Agency; Jade Mills of Coldwell Banker Global Luxury and David Parnes and James Harris of the Agency.

Buyer’s agents: Jeff Hyland and Rick Hilton of Hilton & Hyland.

Read about the next seven featured properties by clicking on the article credit below…

By Katherine Clarke | Mansion Global who republished it from The Wall Street Journal

The Global Mansion Bust Has Begun

Global real estate consultancy firm Knight Frank LLP has warned that the global synchronized decline in growth coupled with an escalating trade war has heavily weighed on luxury home prices in London, New York, and Hong Kong.

According to Knight Frank’s quarterly index of luxury homes across 46 major cities, prices expanded at an anemic 1.4% in 2Q19 YoY, could see further stagnation through 2H19.

Wealthy buyers pulled back on home buying in the quarter thanks to a global slowdown, trade war anxieties, higher taxes by governments, and restrictions on foreign purchases.

Mansion Global said Vancouver was the hottest real estate market on Knight Frank’s list when luxury home prices surged 30% in 2016, has since crashed to the bottom of the list amid increased taxes on foreign buyers. Vancouver luxury home prices plunged 13.6% in 2Q19 YoY.

Financial hubs like Manhattan and London fell last quarter to the bottom of the list as luxury home prices slid 3.7% and 4.9%, respectively.

Hong Kong recorded zero growth in the quarter thanks to a manufacturing slowdown in China, an escalating trade war, and protests across the city since late March.

However, European cities bucked the trend, recorded solid price growth in 2Q19 YoY, though the growth was muted when compared to 2017-18.

Berlin and Frankfurt were the only two cities out of the 46 to record double-digit price growth for luxury homes. Both cities benefited from a so-called catch-up trade because prices are lower compared to other European cities. Moscow is No. 3 on the list, saw luxury home prices jump 9.5% in 2Q19 YoY.

The downturn in luxury real estate worldwide comes as central banks are frantically dropping interest rates. The Federal Reserve cut rates 25bps for the first time since 2008 last month, along with Central banks in New Zealand, India and Thailand have all recently reduced rates.

The main takeaway from central banks easing points to a global downturn in growth, and resorting to sharp monetary policy action is the attempt to thwart a global recession that would ultimately correct luxury home prices.

“Sluggish economic growth explains the wave of interest rate cuts evident in the last three months as policymakers try to stimulate growth,” wrote Knight Frank in the report.

* * *

As for a composite of all global house prices, Refinitiv Datastream shows price trends started to weaken in 2018, and in some cases, completely reversed like in Australia.

House price growth for OECD countries shows the slowdown started in 2016, a similar move to the 2005 decline.

If it’s luxury real estate or less expensive homes, the trend in price has peaked and could reverse hard into the early 2020s.

Central banks are desperately lowering interest rates as the global economy turns down. Likely, the top is in, prepare for a bust cycle.

Source: ZeroHedge

Jeffrey Epstein’s $56 Million Mansion Could Become a Real-Estate Nightmare

(Jeanette Settembre) Jeffrey Epstein lived in what’s reportedly one of the largest private homes in Manhattan, where he allegedly sexually abused under aged girls, an allegation so horrific, real-estate experts say people will go out of their way to avoid walking down the block.

Epstein has pleaded not guilty to the charges.

Epstein’s seven-story, 21,000-square-foot Upper East Side home near Central Park is reportedly valued at $56 million, and if the home ever hits the market again, the stigma from the financier’s alleged sex-trafficking scandal will likely diminish its worth.

“After an event like this occurs, and the public becomes aware of it, all of a sudden the value drops significantly,” real-estate appraiser Orell Anderson, who valued the homes where Nicole Brown Simpson and JonBenet Ramsey were murdered, told MarketWatch.

“When tragedy or crime occurs at a home, it could take years before it ever sells, even if it’s a high profile residence”

One might find what’s inside the mansion disturbing even without knowing the harrowing acts that occurred inside.The home is reportedly adorned with unsettling decor choices, like a female doll hanging from the chandelier, and a self-portrait Epstein reportedly commissioned of himself portrayed in a prison scene behind barbed wire in the middle of a corrections officer and a guard station, according to The New York Times. All of those adornments, of course, would be removed in lieu of any sale.

When tragedy or crime occurs at a home, it could take years before it ever sells, even if it’s a high profile residence. And when it does, the buyer usually gets a discount on it, and the market value could take years to bounce back, if it ever does, Anderson says.

Homes where something as extreme as a murder occurs can often decrease a property’s value by 25% because of physical damages to the house like blood stains, or the lingering smell of dead bodies, Anderson explains. Then there’s the stigma of living in a house where someone was killed, or a tragedy happened.

After O.J. Simpson’s former wife Nicole Brown Simpson and her 26-year-old friend Ron Goldman were found dead outside of her Brentwood home in 1994, Brown Simpson’s family tried to sell it, but no one wanted to buy a home where a double homicide occurred.

The house was on the market for two years before it finally sold for a fraction of what Brown Simpson paid for it. She purchased the home for $625,000 and it sold for $525,000, according to realtor.com. And in 1974 when Ronald DeFeo murdered an entire family in the “Amityville Horror House,” it sold for a $250,000 loss in 2017.

“The property in the short-term would take a significant hit to what its potential would be.”

New York City-based real-estate appraiser Jonathan Miller says even cursed homes see resiliency.

“Whenever there is a tragedy, generally speaking, at least in New York, the property in the short-term would take a significant hit to what its potential would be,” Miller explained.

He said Epstein’s Upper East Side mansion is especially unique because there’s only a handful like them on the block near Central Park. “I find that within a few years that generally fades away and even accelerates when you have a unique property or housing shortage.”

How to salvage and attempt to sell a cursed property

Once the dust settles after a tragedy, there are physical changes that can be made to present the property in a new light.

“It’s best to make the house look different from the pictures of it in the media so that people don’t immediately recognize it.” Anderson says, of changing the facade. “Put in more lights or change the color of the walls so there’s a perception that things have changed.”

That could mean investing in landscapers to add more plants to the front entrance to make it look more inviting, or changing the color of the home to make it appear brand new so perspective buyers don’t associate the property with it’s dark history.

However, real-estate agents are typically obliged to reveal the history of a house, especially if there were serious crimes committed there such as a murder, to a prospective buyer.

To boost the value of Simpson Brown’s home, it underwent a massive renovation and an address change so prospective buyers wouldn’t associate the condo with its past. It took more than a decade to bounce back selling for $1.72 million in 2006, according to realtor.com.

In the DeFeo murder home, granite counter tops, a heated sun room, fireplace and home sprinkler system were added likely to help boost the value in 2016 before it sold a year later.

Homes where tragedies occur can be redeveloped, turned into memorials or destroyed

Anderson says another way to restore a property that’s been plagued by crime or violence is to demolish it and rebuild something completely new, like turning a single-family mansion into an apartment building or office space depending on what zoning and land laws permit.

“If you had the kind of money, you could tear down the home and make it into something different,” Anderson said. In other cases, like an act of terrorism or a mass shooting, sometimes homes or the place where a tragedy occurred are destroyed all together, Anderson noted.

Some buyers hire energy healers to chase away evil spirits and bad vibes

When the DeFeo murder home first sold in 1975 after he was convicted, the buyers reportedly moved out nearly a month after they moved in because they allegedly heard voices telling them to “get out.” It could be worth getting an energy healer or spiritual leader to come in and cleanse the house, Anderson says, to put potential home owners at ease.

“If your market demands it, you could get your local priest or energy healer to come exercise the bad spirits. It might sound ridiculous, but that seems to be calming for people who believe in ghosts, or have superstitions,” Anderson says.

Source: By Jeanette Settembre | Realtor.com

***

The Jeffrey Epstein Rabbit Hole Goes a Lot Deeper Than You’ve Been Told So Far

It seems like the whole Epstein thing was an elaborate professional blackmail operation intended to ensnare the rich and powerful. But who was really behind it, who was really bankrolling Epstein?

We really need to get to the bottom of this for all the right dominos fall.

Dubai Villa Prices Fall to Lowest Point in a Decade

The average villa is now trading for less than it did following the last global financial crisis

Newly constructed villas in Dubai. Chris Jackson / Getty Images

(Mansion Global) Dubai house prices plummeted to their lowest levels in over a decade last quarter, according to new data from U.A.E.-based property firm Cavendish Maxwell.

The average single-family home price sunk 24% over the past year to AED1.82 million (US$495,500), a level not seen in over 11 years despite a global recession and regional economic meltdowns over the past decade, according to data on website Property Monitor.

The average house, referred to locally as a villa, is now trading for less than it did during the darkest days of the global financial crisis and subsequent credit crunch, which hit Dubai the hardest in 2010-11. It’s also lower than at any point since oil prices crashed in 2015, according Property Monitor, which is powered by Cavendish Maxwell.

In June alone, the average home price—including both single-family houses and apartments—fell over 15% compared to a year ago, according to a report from Cavendish Maxwell on Thursday.

While the Dubai economy remains relatively robust, powered by nearly 8 million foreign expats who live and work in the city, nonstop building has created a glut of housing that’s prevented home values from appreciating in more than a decade.

Sprawling master-planned communities dotted with mansions have been hit the hardest.

“The annual decline in house prices was more pronounced in communities such as IMPZ, Arabian Ranches, Emirates Living, Discovery Garden and Dubai Silicon Oasis, where house prices declined by more than 16% on average,” said the firm in its report.

In the exclusive man-made island known as Palm Jumeirah, prices have slipped 14% over the past year. Even thriving Dubai Marina, which overlooks a port of luxury yachts, has seen average home prices slip 13.5% since June 2018, according to the report.

Source: by Beckie Strum | Mansion Global

Hunting For Ranches Like Penthouses Means Perks, Or Forget It

Source: T. Boone Pickens Family Office

(Bloomberg) — Buyers looking for the perfect luxury ranch, that billionaire’s take on American rural life, may have to hold out to get what they want.

Whether it’s sky-high in New York or in the Big Sky country of Montana, high-end properties seem to be hitting a soft patch: they’re harder to sell unless they come with an exclusivity where price matter less. But that means paying a premium for that perfect combination: from mountain views at sunset to proximity to well-stocked towns to wildlife or the cachet of neighbors.

While six of 38 ranches listed for sale at more than $10 million have been marked down in the past 90 days, there’s a limited supply of properties that cover the full range of features, according to Billings, Montana-based broker Hall and Hall.

“When you get all of those things working together, if you really want that, you have to pay up if it comes available,” said Hall and Hall managing director B Elfland, who goes by his first-name initial without a period.

That has some sellers betting that bigger is better. Morton Fleischer, chairman and co-founder of Store Capital Corp., is marketing his Arizona and Montana ranches together for $50 million. One selling point, he said by phone, is the millions poured into the area by GoDaddy Inc.’s billionaire founder Bob Parsons.

Private Jet, Horses

“If I was younger, I wouldn’t sell that ranch,” Fleischer, 82, said of his Scottsdale home. “It’s a good investment for someone.”

“I got out of the pressure cooker and could get on my horses,” he said. “Perhaps someone running a hedge fund who’s in their 40s and wants to live a lifestyle out west and has enough money to have a jet plane to get back and forth could do the same.’’

Nearly doubling the price to attract a buyer may seem counterintuitive. Take West Creek Ranch in Colorado, with no buyer since John Hendricks listed it for $149 million in 2017. Now the Discovery Channel founder is combining the offer with his guest resort and car museum down the road for $279 million, according to Sotheby’s International Realty.

Also on the market in Colorado for $46 million is Henry Kravis’s Westlands Ranch. Kravis has a net worth of $6.2 billion, according to the Bloomberg Billionaires index. Private-equity executive Charlie Gallagher is asking $36 million for his Elk Island Ranch.

Exclusive Market

That’s a far cry from what NFL and Premier League team owner Stan Kroenke paid in 2016 when he bought the W.T. Waggoner Estate Ranch in Texas listed for $725 million, which is bigger than New York city and Los Angeles combined. Kroenke has a net worth of $8 billion, according to the Bloomberg Billionaires index.

In Montana, “In each 2016 and 2017, there were only four sales $10 million and above,’’ said Hall and Hall broker David Johnson. “The next year, there were eight. It wasn’t a double in demand. It was a double in supply.”

Hall and Hall sold 16 ranches for more than $10 million in 2018, compared to six so far in 2019. While that may suggest a slowdown, ranch sales can’t be compared to the frenzy of big cities.

“Our market doesn’t have the dramatic swings that New York and California residential markets have,” said Elfland.

Owning a rural slice of heaven runs deep in the psyche of even the biggest victors of capitalism. Shining examples of the American Dream are the country’s biggest individual landowners, John Malone, who has a net worth of $8.6 billion, according to the Bloomberg Billionaires index, and Ted Turner, founder of CNN.

Life Timing

Buying a ranch can be a matter of timing, of having a job on autopilot and kids out of the house who want to visit.

“The clock is running, so if they’re going to enjoy it, it’s an incentive to pay a premium,” said Johnson.

When the kids stop visiting, it can be sad.

“We sold one last year that had been on the market for 10 years,’’ he said. “The price had come down by two thirds to where the buyer would pick it up.’’

Source: by Hailey Waller | Bloomberg News

Mansion Bust: Hamptons Estate Sells For 46% Discount

Arbor Realty Trust CEO and president Ivan Kaufman just bought a 58-acre estate in the Hamptons for $35 million — about HALF of its $75 million asking price from 2003 and about $14 million less than its most recent asking price, reported the New York Post.

https://www.zerohedge.com/s3/files/inline-images/Arbor-Realty-Trust%20three%20ponds%20home-.jpg?itok=FqP4bLNF

The estate in Bridgehampton, called Three Ponds Farm, features an 18-hole golf course, a large pool, several gardens, a tennis court, and ponds.

https://www.zerohedge.com/s3/files/inline-images/three%20pond%20front%20view.jpg?itok=YzkFqzXb

The estate was first listed in 2003 with an asking price of $75 million. Then in 2007, listed again for $68 million. It was relisted back in December 2018 for $49 million.

https://www.zerohedge.com/s3/files/inline-images/three%20pond%20inside.jpg?itok=aEXjv0Xe

Down the street, the 42-acre Jule Pond estate in Southampton was slashed by $30 million for an asking price around $145 million instead of $175 million.

The developments of the deteriorating Hamptons mansion market comes at a time when luxury real estate across the North East is under structural stress.

Several months ago, we reported about the housing crisis developing between Manhattan, Greenwich, and the Hamptons.

The median sale price of a Hamptons home has fallen to a seven-year low of $860,000, according to our report.

Some of the real estate slowdowns can be connected to President Trump’s federal tax reform, which makes it more expensive to own estates.

Across all price levels, sales in the Hamptons have declined five straight quarters. This has led to an overall decline in the median sale price of homes, down 5.5% in 1Q19 versus the same period a year ago. About 300 homes changed hands in last quarter, was the lowest sales transactions in many years.

The wealth of the Hamptons real-estate market is closely correlated with those of nearby Manhattan, another real estate market that is quickly cooling.

Source: ZeroHedge

Developers Are Pulling Out All The Stops Amid Los Angeles’ Mega-Mansion Glut

Builders and brokers are throwing blowout bashes and testing an array of marketing stunts amid the area’s spec home bubble

(WSJ) Heavy duty vehicles line both sides of many of the winding two-way streets in the Hollywood Hills, making them treacherous single-lane thoroughfares. Construction workers wave stop signs as trucks laden with glass and steel back slowly out of driveways. Empty parcels of land all over Los Angeles’s poshest neighborhoods are being transformed into lavish mansions with price tags in the tens, or even hundreds, of millions.

“Every time I drive up there for any reason, if I return without getting my car dinged I breathe a sigh of relief,” says Andy Butler, a real-estate marketing consultant.

Real-estate experts estimate that there are about 50 ultra high-end spec houses under construction in the area, from Beverly Hills to Bel-Air and Brentwood.

The unprecedented wave of development has its roots in the heady days of 2014 and 2015, when foreign buyers poured into Los Angeles and luxury markets across the country logged record sales. A couple of local megawatt deals—including the $70 million sale of a Beverly Hills compound to billionaire Minecraft creator Markus Persson in 2014—inspired the construction of bigger and pricier homes, most of which were built as contemporary cubes. Some were built by inexperienced developers; many had price tags north of $20 million.

Now, there are simply too many, and not enough buyers to go around. “It’s created its own monster,” says Stephen Shapiro of Westside Estate Agency. “We have an enormous oversupply of these white boxes. There’s years of inventory out there.”

This Bel-Air home shaped like an airplane propeller is asking $56 million. A rendering of the home. Matthew Momberger

A review of the Los Angeles multiple listings service shows close to 100 homes on the market asking over $20 million in Los Angeles County, at least 35 of which could be classified as spec homes, and more are under construction. And those are just the listed ones: Appraiser Jonathan Miller says more than a third of homes in that price category are never entered in the MLS. Some of the city’s most expensive are notably absent.

The surplus mirrors a similar situation in New York, where high-end developers rushed to build pricey condos amid a market upswing, and are now faced with enormous competition for buyers.

But unlike New York, smaller, private lenders and wealthy individuals have provided much of the financing for the Los Angeles spec homes.

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Don Hankey, a California businessman known as the king of subprime car loans, says one of his companies has provided close to $300 million on high-end homes in the Los Angeles market, including on spec homes. Public records show Hankey Capital provided about $82.5 million in financing to “The One,” an almost-built megamansion by Los Angeles developer Nile Niami, who plans to list it for $500 million.

That asking price is more than twice the record paid for a home in the U.S., a record set earlier this year by hedge funder Ken Griffin’s purchase of a nearly $240 million penthouse in New York. The record price for a Los Angeles area home was set by the $110 million sale of a Malibu mansion in 2018.

“You have to be concerned,” Mr. Hankey says of the oversupply. “We’ve cut back. We’re not as aggressive in the financing.”

Other lenders on pricey spec homes include Axos Bank, formerly Bank of Internet, which financed a massive $180 million monolith built by plastic surgeon and newbie developer Raj Kanodia.

The debt load for developers can be substantial. “If I’m living in my house and I put it on the market for sale, I’m still living in my house,” Mr. Shapiro says. “These are empty houses, and the developer is spending a lot every month to keep them.”

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Andy Warhol’s 1974, two-toned, Rolls-Royce Shadow can be included in the deal for a new Trousdale spec home that’s branded around the artist. Photo: Darren Asay

In this environment, and amid signs that prices are falling, developers and their agents are going to extraordinary lengths to differentiate their listings from the pack. They are throwing themed bashes in lieu of traditional open houses, thinking up gimmicky new amenities and hiring marketing experts to reimagine homes as individual brands with their own names, logos and stories. Some developers are relisting plots of land, hoping to get their money out without sinking more money into construction.

“People come to us because they want to stand out,” says Alexander Ali, whose marketing and public relations firm the Society Group is finding a growing business in creating brands for megamansions. “There are so many new homes coming to the market every day.”

Mr. Ali’s latest exercise: Turning a roughly 7,600-square-foot contemporary home in Trousdale into “WARHOL 90210,” a property branded around artist Andy Warhol. Mr. Ali and the developer, Wystein Opportunity Fund, joined with a local gallery to display Warhol prints in the home. At a Warhol-themed disco to be held on site, a Warhol look-alike will be filmed striding through the party; the resulting video will be blasted out on social media. (The house has no connection to Mr. Warhol.)

Amid a surplus of luxury spec homes, developers and their agents are going to extraordinary lengths to differentiate their listings from the pack, like throwing themed bashes in lieu of traditional open houses. Photo: Joshua Bobrove

David Parnes, Mauricio Umansky and James Harris of The Agency, which threw the party. Photo: Joshua Bobrove

Mr. Ali convinced the agent that Mr. Warhol’s onetime car—a 1974, two-toned, Rolls-Royce Shadow—and the Warhol prints featured in the home should be included in the deal. “It defines the house as a collector’s dream,” Mr. Ali says. The whole package seeks $17.75 million. The house can be sold separately for $15.625 million.

In February, Mr. Niami threw an elaborate party inspired by Dutch artist Hieronymus Bosch’s painting “The Garden of Earthly Delights” in a home he is listing for $39.995 million. Its three levels were organized into heaven, earth and hell, and models in colorful tulle dresses swam in the property’s glass bottomed pool, said Mr. Ali, who organized the party.

There were actors posing as Adam and Eve while hosting a virtual reality game that allowed guests to enter a rendition of the Bosch painting. People drank whiskey infused with the body of a dead cobra, and dancing women dressed in leather, whips and chains. A camel stood at the entrance to greet guests.

Another performer floated on the surface of the pool in a transparent bubble. Photo: Joshua Bobrove

In Bel-Air, real-estate brokerage firm the Agency recently threw a “Great Gatsby” themed event to launch a $35.5 million spec house. A female performer in a bedazzled costume hung upside down from a trapeze to pour champagne for guests, while another floated on the pool in a transparent bubble.

Mr. Ali says developers will pay anywhere from $20,000 to hundreds of thousands to throw such events.

In addition to the parties, developers are always on the hunt for creative new amenities. “It’s about the wow factor,” says spec home developer Ramtin Ray Nosrati, whose under-construction mansion in Brentwood includes a secret room for growing and smoking marijuana.

The ventilated room, accessed by hitting a button hidden inside a living room bookcase, will have tinted windows that darken for privacy. The house, slated to ask between $30 million and $40 million, will also come with a budget for an employee to supervise growing and harvesting. Mr. Nosrati compared the amenity to “having your own vineyard.”

Despite all this, price cuts are the order of the day. Bruce Makowsky, a handbag designer-turned-developer who sold the Minecraft property, lowered the price of his latest project, a lavish Bel-Air house with a candy room and a helipad, to $150 million, down from its original $250 million asking price. Mr. Niami slashed the price of a sprawling 20,500-square-foot house known as Opus to $59.995 million, down from $100 million.

Developer Ario Fakheri has chopped the asking price for his Hollywood Hills home with a roughly 300-gallon indoor shark tank to $26.995 million from $35 million.

Sales are still happening: Approximately 11 deals have closed for more than $20 million in Los Angeles so far this year, and a Saudi buyer recently paid $45 million for a spec home built by diamond manufacturer Rafael Zakaria. But buyers know they have the upper hand. “People are making lowball offers,” says Mr. Shapiro of Westside Estate Agency. “They’re not being shy.”

Doug Barnes, the founder of Eyemart Express, sold a contemporary home in Beverly Hills for $34.65 million in April, or nearly 40% off its original $55 million asking price, records show. British restaurateur and Soho House co-owner Richard Caring is listing a home he bought in Beverly Hills for $29.995 million; he paid $33 million for it in 2016, records show.

As for “The One,” the $500 million property was originally slated to come on the market in 2017 but has yet to be listed. The developer blamed construction delays.

Corrections & Amplifications: Stephen Shapiro of Westside Estate Agency said buyers know they have the upper hand in negotiations to purchase high-end spec homes. An earlier version of this article incorrectly stated that sellers have the upper hand. (May 30, 2019)

Appeared in the May 31, 2019, print edition as ‘The Spec Home Bubble.’

Source: by Katherine Clarke | The Wall Street Journal via @kathieClarkeNYC

World’s Wealthy Packing Up And Moving As Tensions And Taxes Take Toll

Rich people are picking up sticks and getting out of dodge, according to Johannesburg-based research firm New World Wealth, which notes that around 108,000 millionaires migrated across borders in 2018 – a 14% increase over 2017 and more than double the level in 2013. 

The top destinations? Australia, the United States and Canada, reports Bloomberg. Around 3,000 of the millionaires left the UK last year – with Brexit and taxes cited as possible motivations.

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Present conditions such as crime, lack of business opportunities or religious tensions are key factors, according to the report – which can also serve as key future indicators according to Andrew Amoils, New World Wealth’s head of research. 

“It can be a sign of bad things to come as high-net-worth individuals are often the first people to leave — they have the means to leave unlike middle-class citizens,” says Amoils. 

Top destinations

According to New World’s report, Australia tops most “wish lists” for immigrants due to its perceived safety (deadly bugs and animals aside, we assume). There is also no inheritance tax down under, and the country has strong business ties to Japan, China and South Korea. Moreover, Australia “also stands out for its sustained growth, having escaped the financial crisis largely unscathed and avoided recessions for the past 27 years,” according to Bloomberg

The second most popular country was the United States – and in particular the cities of Los Angeles, New York, Miami and the San Francisco Bay as preferred options. 

Fleeing China and India

Due to China’s strict regulations on capital outflows in recent years, many of the country’s wealthy are subject to hefty taxes. In response, assets are shifting as rich Asians move to more developed countries.

The outflow of high-net worth individuals from China and India isn’t particularly concerning from an economic standpoint as far more new millionaires are being created there than are leaving, New World Wealth said.

“Once the standard of living in these countries improves, we expect several wealthy people to move back,” Amoils said. –Bloomberg

Turkey, meanwhile, lost 4,000 millionaires last year – the third straight year of losses, while around 7,000 Russian millionaires have left the country amid crippling sanctions related to the annexation of Crimea. 

Source: ZeroHedge

How A Hijacked Listing For One Of Los Angeles’ Most Expensive Homes Led To A $60MM Lawsuit Against Zillow

() It’s hard to overstate the opulence showcased in developer Bruce Makowsky’s $150-million spec house, dubbed “Billionaire.” Perched above Bel Air, the four-story mansion offers a world of pure imagination within its walls.

A Bel-Air mansion built on speculation is at the center of a legal dispute after a Zillow listing for the $150-million home was hijacked by an unknown user. (Berlyn Photography)

Jockeying for attention across 38,000 square feet are 12 bedrooms, 21 bathrooms, three kitchens, 130 artworks, a 40-seat movie theater, a $30-million fleet of exotic cars, two wine cellars stocked with Champagne, a four-lane bowling alley and a candy room filled with towering cylinders of sweets.

Image is everything when seeking nine figures for a single estate. What, then, happens when that image is allegedly tainted? That’s what a lawsuit filed by the self-assured, suede-jacket-wearing Makowsky against real estate company Zillow aims to find out.

Earlier this year, Zillow falsely showed that the mega-mansion sold for tens of millions less than its asking price. Makowsky sued for $60 million in damages, citing permanent harm to the property’s perception.

On April 19, Zillow filed to dismiss the suit, chiefly citing a section of the Communications Decency Act that protects web operators from being responsible for information published by its users. The hearing is set for June 24.

The sham began in February, when an unknown user with a Chinese IP address and fake phone number side-stepped Zillow’s security measures and toyed with the sale prices displayed on the mansion’s listing.

Zillow displays pages for roughly 110 million homes in the U.S., and it allows owners to go in and change information about their home when necessary. Usually, that means noting a recent remodel or added square footage that may affect a home’s value, but the feature also opens the door for false information.

On Feb. 4, Zillow showed that Makowsky’s home — which is on the market for $150 million — sold for $110 million. It never did. Over the course of the next week, the real estate site falsely reported sale prices of $90.54 million and $94.3 million, as well as a phantom open house that never took place.

Soon after, Makowsky’s attorney Ronald Richards pointed out the falsities to Zillow’s legal team in an email. After some back and forth, included in the lawsuit, Kim Nielson, senior lead counsel for Zillow Group, responded with this:

“Any home on our website can be claimed by the homeowner. There are a series of questions that must be answered, but if someone attempts to claim it enough times, they will know the questions asked (and be able to figure out what information they need to verify their identity).”

She added that not all claims are manually reviewed, which allowed the user to manipulate the listing details without proving their identity.

Later that month, a limited liability company owned by Makowsky filed the lawsuit seeking $60 million in damages. It claims that Zillow “admittedly published false information” and destroyed the property’s perception as an elite listing worth more than $100 million.

Makowsky himself has axed the price twice since bringing the spec house to market for $250 million two years ago. He most recently trimmed the tag to $150 million in January, saying that he was just trying to be realistic.

Makowsky made his fortune selling handbags on QVC before shifting to high-end real estate about eight years ago as the head of BAM Luxury Development Group. (Cindy Ord / Getty Images)

Taking aim at Zillow’s security process, the lawsuit alleges that Zillow has no safeguards in place to stop trolls or criminals from claiming a property and posting false information.

A spokeswoman for Zillow declined to comment on the pending litigation but stressed that it goes to great lengths to display current and accurate data on its website, which is largely sourced from public records.

The complaint also stresses Zillow’s market power. The website leads the real estate industry with an estimated 36 million unique monthly visitors, and Makowsky said multiple colleagues called to congratulate him on a sale that never happened.

But of those millions of monthly visitors to Zillow, few are searching for homes priced in the nine figures other than for aspirational reasons. Fewer have the actual means to afford it.

Only a handful of local L.A. residents, and a small market outside of that, have the ability to buy homes listed for north of $100 million. As of 2017, there were 680 billionaires in the U.S, according to the research firm Wealth-X, and about 2,750 worldwide.

Jerry Jolton, an agent with Coldwell Banker Residential Brokerage, said three things need to come together to sell a home in the $100-million arena: luck, timing and the right client.

“We’re dealing with a very exclusive group of people who’ve attained such wealth,” he said.

Oftentimes, developers eye international wealth when floating a nine-digit listing. However, Jolton said foreign buyers account for only around 21% of L.A.-area homes sales over $20 million.

Beyond visitors to online listing services, Makowsky faces another challenge in his pursuit of a high-dollar deal: comparable sales in the tony Westside area.

Michael Sahakian, also with Coldwell Banker, sold the property that now holds Makowsky’s mansion back in the ’90s. While noting the estate’s opulence, he said its placement in East Gate Bel Air — one of the city’s most exclusive and pricey pockets — will make selling it a challenge.

Most homes there sell for around $2,000 to $3,000 per square foot. For context, Makowsky’s estate is on the market for $3,947 per square foot.

Still, because an acre of East Gate goes for around $20 million, it’s rare for a home larger than 30,000 square feet to go up for sale.

Makowsky, in his early 60s, made his fortune selling handbags on QVC before shifting to high-end real estate about eight years ago as the head of BAM Luxury Development Group.

His development brand is largely a reflection of his own extravagant interests and tastes; many of the lavish furnishings, finishes and other accouterments incorporated into his projects are sourced from his travels around the world. Custom furnishings produced by high-end brands such as Fendi, Bentley and Louis Vuitton often play an integral role in his homes.

Among his notable projects was a testosterone-infused showplace in Beverly Hills that featured a $200,000 sculpture of a giant blue hand grenade and a replica of James Dean’s motorcycle. Originally listed at $85 million, the 23,000-square-foot house sold in 2014 to Minecraft creator Markus Persson for $70 million.

Source:

The Manhattan Housing Market Is On Its Worst Cold Streak In 30 Years

A confluence of factors ranging from stubborn sellers refusing to budge on their asks, the Trump tax plan’s SALT cap, and a glut of luxury apartments prompted sales of Manhattan real estate to drop again in the fourth quarter, according to reports published by a trio of residential brokers. By one broker’s count, Q1 marked the sixth straight quarterly drop in sales volume, the worst streak in at least 30 years.

Per the FT, sales tumbled by 11%, according to broker Stribling & Associates, by 5%, according to Corcoran, and by 2.7% for co-ops and condominium apartments, according to Douglas Elliman and real estate appraisal firm Miller Samuel.

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While the average sales price for new developments climbed a staggering 89.4% to $7.6 million, that figure was exaggerated by a single purchase: Ken Griffin’s purchase of a $240 million penthouse at 220 Central Park South, which, according to some, was the most expensive home ever sold in America. But depending on the report, the median sales price ranged from 2% lower to 3.2% higher. And although the entry level market in Manhattan – that is, apartments priced at $1 million and below – had held up for most of the past year, it has recently started to suffer.

“It’s like a layer cake,” Jonathan Miller, CEO of Miller Samuel, told CNBC. “When you have softening at the top, it starts to melt into the next layer and the next layer after that, because those buyers further down have to compete on price.”

According to one broker, sellers with unrealistic expectations are the biggest barrier to sales, because they’re refusing to adjust for the fact that listings have been piling up and sitting on the market for longer periods, giving buyers more room to negotiate, and more options. Inventory has climbed 9% over the past nine months, and there’s a glut in new developments that’s only going to get worse.

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And of course, New York City isn’t helping the market by passing an a one-time “mansion tax” on all apartments selling for $1 million or more – which is a large chunk of apartments sold in the borough. But it could have been worse: As one broker put it, the pied-e-terre tax that was briefly considered would have been a “market stopper.”

“The pied-à-terre tax would have been a market stopper, [the mansion tax] is a market dampener,” said Ms Liebman. “I don’t think New York City is acting very friendly right now to the wealthy buyers,” she said, adding that many are opting to buy in Florida and other states with lower taxes than New York.

But although higher taxes are expected to drive more would-be buyers toward rentals, the number of new leases in Manhattan was also down 3% in Q1. Meanwhile, leases climbed a staggering 38% year-over-year in Brooklyn.

As brokers in New York City and other high end markets like Greenwich, Conn. struggle with slowing sales, we imagine brokers in mid-tier markets are watching with a wary eye to see if the weakness spreads.

Source: ZeroHedge

‘Too Big To Sell’ – Boomers Trapped In McMansions As Retirement Looms

More wealthy baby boomers are finding themselves trapped in homes that are too big to sell. They want to downsize but can’t get what they paid.

This was guaranteed to happen, and did. Baby boomers and retirees built large, elaborate dream homes only to find that few people want to buy them.

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Please consider a Growing Problem in Real Estate: Too Many Too Big Houses.

Large, high-end homes across the Sunbelt are sitting on the market, enduring deep price cuts to sell.

That is a far different picture than 15 years ago, when retirees were rushing to build elaborate, five or six-bedroom houses in warm climates, fueled in part by the easy credit of the real estate boom. Many baby boomers poured millions into these spacious homes, planning to live out their golden years in houses with all the bells and whistles.

Now, many boomers are discovering that these large, high-maintenance houses no longer fit their needs as they grow older, but younger people aren’t buying them.

Tastes—and access to credit—have shifted dramatically since the early 2000s. These days, buyers of all ages eschew the large, ornate houses built in those years in favor of smaller, more-modern looking alternatives, and prefer walkable areas to living miles from retail.

The problem is especially acute in areas with large clusters of retirees. In North Carolina’s Buncombe County, which draws retirees with its mild climate and Blue Ridge Mountain scenery, there are 34 homes priced over $2 million on the market, but only 16 sold in that price range in the past year, said Marilyn Wright, an agent at Premier Sotheby’s International Realty in Asheville.

The area around Scottsdale, Ariz., also popular with wealthy retirees, had 349 homes on the market at or above $3 million as of February 1—an all-time high, according to a Walt Danley Realty report. Homes built before 2012 are selling at steep discounts—sometimes almost 50%, and many owners end up selling for less than they paid to build their homes, said Walt Danley’s Dub Dellis.

Kiawah Island, a South Carolina beach community, currently has around 225 houses for sale, which amounts to a three- or four-year supply. Of those, the larger and more expensive homes are the hardest to sell, especially if they haven’t been renovated recently, according to local real-estate agent Pam Harrington.

The problem is expected to worsen in the 2020s, as more baby boomers across the country advance into their 70s and 80s, the age group where people typically exit homeownership due to poor health or death, said Dowell Myers, co-author of a 2018 Fannie Mae report, “The Coming Exodus of Older Homeowners.” Boomers currently own 32 million homes and account for two out of five homeowners in the country.

Not Just the South

It’s not just big houses across the Sunbelt. It’s big houses everywhere. If anything, I suspect it’s worse in the north. There is an exodus of people in high tax states like Illinois who want the hell out.

Already big homes were hard to sell. Now these progressive states are raising taxes.

Triple Whammy

  1. Millennials trapped in debt and cannot afford them
  2. Millennials wouldn’t buy them anyway because tastes have changed.
  3. Taxes are driving people away from states like Illinois

Good luck with that.

For the plight of Illinoisans, please consider Illinois’ Demographic Collapse: Get Out As Soon As You Can.

Authored by Mike Shedlock via MishTalk,
Source: ZeroHedge

The Man Behind Billionaires’ Row Battles to Sell the World’s Tallest Condo

(The Wall Street Journal) Gary Barnett was sitting in his Manhattan office one morning in the fall when his old-fashioned flip phone started to buzz. On the line was a real-estate agent who was marketing the New York developer’s latest condo project, a soaring 1,550-foot tall building known as Central Park Tower. With a total projected sellout of more than $4 billion, the skyscraper is the country’s priciest-ever condominium project and, when complete, will be the tallest residential building in the world.

The agent had bad news. Mr. Barnett had…

Gary Barnett was sitting in his Manhattan office one morning in the fall when his old-fashioned flip phone started to buzz. On the line was a real-estate agent who was marketing the New York developer’s latest condo project, a soaring 1,550-foot tall building known as Central Park Tower. With a total projected sellout of more than $4 billion, the skyscraper is the country’s priciest-ever condominium project and, when complete, will be the tallest residential building in the world.

The agent had bad news. Mr. Barnett had agreed to reduce a condo’s asking price, but now the client refused to sign a non-disclosure agreement concealing the details of the deal. Mr. Barnett’s response: Turn him away. “If we’re going to give someone a special deal, we don’t want them saying it all over the market,” he said.

This is a harsh new reality for Mr. Barnett, who has made a fortune fulfilling the real-estate dreams of the world’s elite. The Extell Development Co. founder kicked off the U.S. condo boom with One57, the first of the supertall towers that line the 57th Street corridor now known as Billionaire’s Row. The building’s penthouse sold for $100.5 million in 2014 to tech mogul Michael Dell, the record high for New York City.

His success opened the door for other high-end towers across the city, permanently altering the Manhattan skyline. “The frenzy around One57 gave everyone the idea that this was a market that was ripe to be harvested,” said real-estate appraiser Jonathan Miller.

Central Park Tower is by some measures more audacious than anything that’s preceded it. The supertall skyscraper will feature panoramic views of the city and offer amenities like indoor and outdoor swimming pools, a 1,000-foot-high private club and a basketball court. Of the building’s 179 units, no fewer than 18 are priced above $60 million.

Gary Barnett kicked off the U.S. condo boom with One57. Central Park Tower, shown in a rendering, is the company’s latest project on Manhattan’s Billionaire’s Row.

Mr. Barnett is marketing this super-luxury tower in a challenging climate: Manhattan home sales plunged by 14% in 2018, the steepest drop the industry has seen since the financial crisis in 2009, according to a report by brokerage Douglas Elliman Real Estate. Today, developers are slashing prices amid an oversupply of new luxury condos.

Some people wonder if Mr. Barnett will become a victim of the condo explosion he helped create. The great Manhattan condo boom “started with One57,” said Mr. Miller, “and it may end with Central Park Tower.”

Earlier this week, Mr. Barnett announced that he had hired Sush Torgalkar, formerly the chief operating officer of Westbrook Partners, as CEO to assist in managing the company’s growth. Mr. Barnett will stay on as the company’s chairman.

A self-described “poor boy from the Lower East Side,” Mr. Barnett grew up as Gershon Swiatycki, the son of a Talmudic scholar. His entry into the world of luxury goods came in 1980s, when he met his first wife Evelyn Muller, whose father owned a diamond business. Mr. Barnett traded precious stones in Belgium for over a decade before starting to invest in U.S. real estate.

Arriving at the sales office in a dark suit with black sneakers and a bold, flowered tie that he said is “probably 20 years old,” the 63-year-old developer is an unlikely purveyor of luxury homes. An observant Jew who largely eschews the flashy trappings of the industry, Mr. Barnett lived in Queens until moving recently with his wife and children to the heavily Orthodox suburb of Monsey, N.Y., about an hour’s drive north of the city. (He keeps a one-bedroom unit at One57 to make more time for work.)

Mr. Barnett’s refusal to give up the antiquated flip phone is a source of indulgent eye-rolling from colleagues. He often avoids computers, said a person who has worked with him; instead, his assistant prints out his emails and leaves them on his desk, where he annotates them in what one employee describes as “serial-killer scrawl” for staff to decipher.

He’s “a total nerd,” real-estate agent Nikki Field said affectionately. “He’s not a New York developer personality in any way.”

Other Manhattan developers thought Mr. Barnett was crazy when he started building One57 in 2010, the depths of the real-estate downturn. And after no major U.S. lenders would back him, he turned to the Middle East to obtain financing from two of Abu Dhabi’s wealthiest investment funds.

His gamble paid off handsomely. As One57 started sales, U.S. economic growth snapped back. As one of the few new luxury condo buildings on the market, One57 attracted billionaires from Russia, China and the Middle East. The condominium is the first ever New York City building to break the $100 million threshold for a single condo.

Central Park Tower faces a far more crowded field of competitors—including One57, where Extell still has units to sell. Approximately 3,763 new Manhattan condo units are in the pipeline for 2019, followed by an additional 4,539 in 2020, new development marketing firm Corcoran Sunshine said late last year. By contrast, in 2011 when One57 started sales, only 277 Manhattan new units launched.

Today, the builders of pricey mega-towers “are going to find themselves in a lot of trouble,” said Andrew Gerringer of the Marketing Directors, a development-marketing firm. “Those are just going to be really difficult to sell.”

But Mr. Barnett is pulling out all the stops. In a newly opened sales office at Central Park Tower, potential buyers sip Champagne and Johnnie Walker Black Label amid a onyx-clad walls and Lalique crystal chandelier. In a dimly lighted room with 14-foot ceilings, strains of Gershwin’s “Rhapsody in Blue” fill the air as New York City landmarks are projected on the walls—Yankee Stadium, the Statue of Liberty, the Empire State Building. “Is there any place that has symbolized individual success and collective ambition as boldly as New York?” booms the voiceover, describing Central Park Tower as “1,550 feet of steel, ambition and aspiration anchored to 40,000 square feet of Manhattan schist…a shimmering beacon of class, optimism and chutzpah.”

Central Park Tower has already overcome some hurdles. When real-estate company Vornado Realty Trust started planning a competing condo two blocks north, Mr. Barnett stalled the project by taking control of a parking garage on Vornado’s property in addition to other property and air rights it owned on the block. Then Mr. Barnett refused to let Vornado tear down the parking garage to make way for its tower. The dispute was eventually resolved in 2013 when Vornado agreed to pay Extell $194 million for development rights on the block. As part of the settlement, both developers agreed to move their towers slightly so they both could have Central Park views.

Lining up financing for Central Park Tower was also a challenge, since banks have pulled back from financing ultra-luxury condos amid worries of oversupply. Mr. Barnett cobbled together debt from a public offering on the Israeli bond market and tapped the EB-5 program, which grants green cards to foreigners who invest in the U.S. He also brought on SMI USA, the U.S. subsidiary of the real estate investment firm Shanghai Municipal Investment, as a co-developer. Ultimately, Mr. Barnett began construction on Central Park Tower using Extell’s own funds before securing the money to finish it, an unusual move on such a large project. He had built more than 10 stories before J.P. Morgan Chase & Co. agreed to provide a $900 million construction loan. Now he must sell $500 million in apartments at Central Park Tower by December 2020 and pay down $300 million of his loan to J.P. Morgan Chase by the following year, according to information disclosed to Israeli bond investors, who have money in the project. If he fails to meet those deadlines, the bank can increase his interest payments.

Extell has many units to sell in addition to Central Park Tower, including One Manhattan Square on the Lower East Side, which has roughly 800 units.

Of the 179 units in Central Park Tower, no fewer than 18 are priced above $60 million.Photo: Dorothy Hong for The Wall Street Journal

In an email to brokers last month, Extell advertised major incentives at its projects, saying it would pay three to five years of common charges on any Extell condo purchased before the end of 2018—at Central Park Tower, that could save the buyer of a full-floor apartment about $120,000 per year. That incentive wasn’t renewed for 2019, although Extell is still paying a 50% commission to brokers and says it will roll out new incentives soon. With buyers “saying they’ll wait a little bit and see if prices come down more,” Mr. Barnett explained, “we want to give them an incentive to act.”

He declined to say how many units he’s sold at Central Park Tower, noting only that traffic had been “decent” and that he isn’t concerned about missing financing deadlines. “We’re certainly going through a dip in the market, but we’re priced for that dip,” Mr. Barnett said confidently. In the current market, he added, “you’ve got to be a little more flexible on price.”

Extell is also leveraging the roster of billionaires it accumulated during One57’s glory days. But the strategy could backfire, especially as sellers who bought condos there a couple of years ago are suffering losses. In one instance, Canadian billionaire Lawrence Stroll sold a One57 unit for $54 million, over $1 million less than what he paid in 2014. One57 has even seen a foreclosure, a rarity in New York’s high-end real estate. In 2017, an apartment that had been owned by shell companies linked to a Nigerian businessman sold in a foreclosure auction for $36 million, far less than the $50.9 million purchase price in 2014.

But these challenges seem to be part of the allure for Mr. Barnett, who said in comparison to his former business, he relishes the complexity of New York City real-estate deals. “These buildings are amazing buildings—they’re complicated, they’re fine-tuned,” he said. “Diamonds are a much simpler business.”

‘Billionaire’s Row’ Boom

Completed in 2015, One57 helped turn nondescript 57th Street into ‘Billionaire’s Row.’ Photo: Dorothy Hong for The Wall Street Journal

Since the emergence of ‘Billionaire’s Row’ in Manhattan, home values in the area have skyrocketed.

An analysis of sales data looked at transactions between 2010 to 2018 of homes from 57th to 59th streets between Park Avenue and Broadway. During that time, the median sale prices leapt 64.3%, from $1,261,406 in 2010 to $2,072,500 eight years later, according to Streeteasy.com. By comparison, the median home sale price across Manhattan rose 25.7%, from $835,000 to $1.05 million, during that same period.

Source: by Katherine Clarke and Candace Taylor | The Wall Street Journal

Home Builder Toll Brothers Shocks With 13% Plunge In Orders As California Falls A Staggering 39%

Toll Brothers announced its fourth quarter results on Tuesday, unleashing a fresh flood of concerns about the state of the housing market after it disclosed its first drop in orders since 2014. Orders were down 13% from the year prior, missing the analyst estimate of a 5% increase in dramatic fashion.

The company focuses much of its business on the California high-end home segment, which – as a result of the housing bubble in most west coast cities and rising rates, is facing an “affordability crisis” coupled with a sharp drop in overseas demand. According to the company, orders for the state were down an astounding 39%.

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The company blamed rising rates for the drop off in buyer demand, as well as sinking stock prices. What is odd is that stock prices haven’t really “sunk” – unless the company was referring to its own stock…

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... with the CEO blaming “the effect on buyer sentiment of well-publicized reports of a housing slowdown” for the plunge in orders. You see, it’s not the housing market that is slowing: it is perceptions about the market slowing, that is hitting the company.

That said, “perceptions” are correct: as we noted last week, new home sales crashed in October, suffering the biggest plunge since 2011.

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Even so, the atrocious quarter didn’t deter all analysts, who promptly defended the stock. Drew Reading, Bloomberg Intelligence analyst stated that “there are many positive factors underpinning the economy that we believe are supportive of the housing sector longer-term, and our affluent markets particularly.”

Tolls dismal results follows signs that we have been discussing for much of the past year, which have confirmed that the luxury housing market is cooling off across the country.

Recently, we profiled a mansion in Chicago that was taken off the market after being listed for $50 million and only being assessed for $19.4 million. United Automobile Insurance Chairman and CEO Richard Parrillo constructed the 25,000 sq ft Lincoln Park mansion a decade ago, after buying the property in 2005 for $12.5 million from the Infant Welfare Society.

After two years on the market, Parrillo and his wife held firm at $50 million, a record for the region, their original listing agent told the Chicago Tribune. The agent said the couple plowed more than $65 million into the estate, including land cost.

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$50 million Lincoln Park mansion — Chicagoland’s priciest listing — taken off the market

Cook County Assessor’s Office reports shows the mansion’s $50 million asking price was hugely overinflated versus its most recent estimated market value, which stood some 60% lower, at $19.4 million. The report notes the 2018 property value is significantly higher from the assessor’s $14 million estimated market value for the mansion in 2017, due to a quick burst in high-end home sales in the last several years that had since cooled.

Source: ZeroHedge

Luxury Home Prices In Singapore Soar 13% As Vancouver Prices Crash 11%

Singapore has now overtaken Hong Kong as the top city for luxury home price gains in Q3.

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Luxury home prices in Singapore were up 13% in the third quarter from the year prior, according to Knight Frank LLP’s Prime Global Cities Index. The rising prices were partly the result of limited supply of higher end properties.

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Hong Kong instead fell to 14th place, with just a 5.5% year-over-year gain during the third quarter.

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And the rise in Singapore does little to offer a picture of what the luxury property market looks like globally. Worldwide, luxury properties rose by just 2.7% on average across the 43 cities that make up the index – this is the weakest performance in annual terms in almost 6 years.

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Cities like Edinburgh and Madrid found themselves in the top five, while London wound up moving into negative territory, watching prices fall 2.9% as a result of the continuing uncertainty around Brexit. Cities like Paris and Berlin posted steady gains of 5.6% and 5.4%, respectively.

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Also among the decliners was Dubai, where prices fell 3.8% resulting in the middle eastern city being the fifth worst on the list. Stockholm, Istanbul and Taipei all registered 6.3% year-over-year declines, tying them all for second worst place.

Finally, pulling up the rear is Vancouver, where we have spent time documenting a collapsing real estate bubble over the last couple of months. Vancouver saw its luxury home prices down 11% as more affluent pockets of the city, like West Vancouver, saw a pronounced slowdown in sales.

At the beginning of October, we asked readers what happens when prices rise so high that a chasm forms between bids and asks in Vancouver? The market grinds to a halt.

That’s what happened in September, when according to the Real Estate Board of Vancouver (REBGV), residential property sales tumbled by 17.3% from August 2018, and a whopping 43.5% from one year ago. In fact, a total of only 1,595 transactions took place as both buyers and sellers continue to sit on their hands amid confusion whether the recent torrid price gains will continue or whether the housing bubble has burst.

Sales of detached properties in July was just 508, a decrease of 40.4% from the 852 recorded in September 2017, and the 812 apartments sold was a 44% drop compared to the 1,451 sales in September 2017.

And no, it’s not seasonal: last month’s sales were a whopping 36.1% below the 10-year September sales average.

Source: ZeroHedge

US Treasury Secretary Mnuchin Lists Park Ave. Apartment For $33 Million, Three Times What He Paid For It

No sooner did we report that the housing “recovery” over the last 10 years has skipped many “underwater” communities in the United States, than we found confirmation of the opposite: Treasury Secretary Steve Mnuchin is selling his Park Avenue apartment in Manhattan for three times the price that his aunt paid for it 18 years ago. He has listed the apartment for $32.5 million. His Aunt is listed as the broker on the sale.

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The sale is happening at the same time that residents of numerous commuter towns across the United States have seen the values of their houses collapse to less than half of what they were in 2006, prior to the housing crisis.

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Mnuchin recently listed the 6500 square-foot, 12 room apartment that he bought from his aunt in 2000. It was purchased then for just $10.5 million. It had been in his family since the 1960s and, when he turns around to list the property this time, he stands to net $22 million more than what he paid for it, if his asking price is met.

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The apartment is being listed by Warburg Realty and is located inside of 740 Park Ave., inside the historic Rosario Candela building. Other famous former tenants of this building include the Rockefellers and the Kochs. Currently, Stephen Schwarzman, the CEO of Blackstone Group, lives there. The building was developed by Jacqueline Kennedy Onassis’ grandfather.

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Other than that, it’s just your average ordinary run of the mill apartment on Park Avenue: five bedrooms, a wall wood paneled library, a wet bar, a formal dining room, a private elevator, 11 foot ceilings, marble floors and a sweeping spiraling staircase that still has its original banister.

The first floor of the apartment has six bathrooms and an 800 square-foot living room.

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Upstairs, the apartment has a master suite, walk-in cupboards, study, two more bathrooms and three extra bedrooms. The apartment spans two levels in the building on both the eighth and the ninth floor and it also has a large kitchen with a “breakfast nook”.

While that all seems extremely glamorous, Mnuchin hasn’t even used this apartment as his main residence, reportedly. Mnuchin was living in California before his appointment to the Trump administration, but has since bought a $12.6 million apartment in Washington DC.

We’re glad to hear that Mnuchin was able to ride out the housing crisis successfully. We were worried about him for a moment.

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Source: ZeroHedge

$1Billion Price Cut: Luxury real estate gets slashed

  • The high-end real-estate market has seen steep price cuts in recent months as foreign buyers dry up andnew tax laws kick in.
  • The Ziff family estate in Manalapan Florida cut its price in May by $27 million, from $165 million to $138 million.
  • Even the Oracle of Omaha, Warren Buffett, has had to lower his asking price on his beach home in Laguna Beach.

The most expensive real-estate in America just became a little less expensive — with $1 billion in price cuts among America’s top listings over the past few months, according to a CNBC analysis.

The high-end real-estate market has seen steep price cuts in recent months as foreign buyers dry up, new tax laws bite the wealthiest states and sellers realize the market peak of 2014-2015 isn’t coming back anytime soon, luxury brokers say.

According to RedFin, the real-estate brokerage and research firm, fully 12 percent of homes listed for $10 million or more saw a price drop in 2018 — double the levels of 2016 and 2015. Just over 500 listings in the U.S. had a combined price cut of $1 billion in the second quarter, according to RedFin.

“Prices were growing too fast for what buyers were willing to pay,” said Taylor Marr, a senior economist at RedFin.

Some of the price cuts have reached tens of millions of dollars, according to the listing. The Ziff family estate in Manalapan Florida cut its price in May by $27 million, from $165 million to $138 million. That follows a previous price cut, from $195 million last year — so it’s price has dropped by $57 million over the past year.

A 10-bedroom mansion on Miami Beach’s posh Star Island cut its price by $17 million in May, from $65 million to $48 million. A giant apartment at New York’s Sherry Netherland had its price cut by $18 million, falling from $86 million to $68 million.

The cuts follow a spate of even bigger cuts earlier this year. The $250 million mansion in Bel Air California known as “The Billionaire” became America’s most expensive listing when it came onto the market for $250 million in 2017. In April, the price was cut by a massive $62 million, to $188 million.

Brokers representing the house said that unique homes like “The Billionaire” – which comes with a $30 million car collection, a giant outdoor TV that retracts from behind the pool, and elevators lined with crocodile skin – said the home is just finding its true market price.

“There is no comp for a house like this,” said Shawn Elliott, one of the brokers for “The Billionaire.” So the new price reflects the price offered by a recent potential buyer.

A spec home in Beverly Hills, called Opus, was listed in August of 2017 for $100 million, but the price was cut to $85 million a month later. Now the home, which once had a gold theme, has been re-styled in black in hopes of finding a buyer.

The late Johnny Carson’s estate in Malibu, Ca. saw its price drop by $16 million, to $65 million from $81 million. The house is being sold by fashion magnate and film producer Sidney Kimmel.

Even homes that see big price cuts are selling for less than their discounted prices. A 20,000 square-foot mansion in the Hamptons, once owned by fashion mogul Vince Camuto, was first listed in 2008 for $100 million. Its price got chopped to $72 million, and it sold this spring for around $50 million – half of its original listing price.

Even the Oracle of Omaha, Warren Buffett, has had to lower his asking price on his beach home in Laguna Beach. The home was listed in 2017 for $11 million, but he has slashed the price to $7.9 million. He’s still likely to make a big profit – he bought the home in the early 1970s for $150,000.

The reasons for the price drops are many. In some cases, the prices for the homes were fantasies. Sellers had irrational expectations or they were using the sky-high prices to attract attention to their properties. The luxury real-estate market has fallen since its peak in 2014 and 2015, and many sellers are finally adjusting to a different market.

Supply of homes at the high end is also high, especially for newer condos and spec homes in New York, Los Angeles and major metro areas.

“There could be an over-supply of these high-end homes,” Marr said.

The new federal tax law, which limits deductions of state and local taxes, is also putting pressure on real-estate in high-tax states. And foreign buyers, who were driving some of the highest-priced sales in 2014 and 2015, have pulled back. A stronger dollar has also made U.S. real-estate more expensive.

It’s unclear whether the price cuts signal an upcoming crash in the luxury market. Prices could simply adjust without a severe correction. But the size of the cuts suggest that many luxury listings have yet to find their sale prices.

“Price cuts can be a great leading indicator and give a forward-looking view,” Marr said. “But it’s too early to tell where it’s headed.”

Source: by Robert Frank | CNBC

Father of Paris Hilton to Sell Historic 16th Century Roman Mansion for Bitcoin

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Rick Hilton, who is the father of Paris Hilton and chairman of Hilton & Hyland, is all set to sell a 16th-century Roman mansion for cryptocurrencies. The auction for the property will be held on June 28, and it will make history as the first ever property to be auctioned on blockchain.

The 11-bedroom house is, reportedly, worth upwards of $35 million. The sale will go online on Propy.com, which is a global property store with decentralized title registry.

Realtors Love Cryptocurrencies and Blockchains

In 2017, at least 20 homes were sold for cryptocurrencies globally. This year, the bar could be set much higher.

Hilton said: “The auction shows real estate’s growing trust in blockchain and provides crypto investors an opportunity to diversify and solidify their portfolio with a trophy asset.”

The priciest home ever sold using cryptocurrencies was a seven-bedroom Miami estate. It was sold for 455 Bitcoins or approximately $6 million. The Roman mansion could easily break this record and set a record high.

A Listing Beyond Compare

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The Palazzetto, which is a grand mansion designed and built by Michelangelo’s collaborator Giacomo Della Porta, is an Italian landmark. Della Porta was also involved in the building of St. Peter’s Dome, which is another famous landmark in Rome, Italy.

The mansion is composed of two independent but connected luxury units. The property boasts of multiple entrances, an in-house theater, a secret garden, a wellness spa, and a gym.

The rooftop offers 360-degree views of the city and bird’s eye view of the neighborhood along with the Altar of the Fatherland. It has 11 bedrooms, 15 and a half bathrooms, three kitchens and multiple living and dining rooms, complete with four parking spots.

Source: by Viraj shah | Blokt

Manhattan Home Sales Tumble Most Since 2009 as Buyers Walk

Home sales in Manhattan plunged by the most since the recession as buyers at all price levels drove hard bargains and were in no rush to close deals.

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  • Haggling gets more aggressive for listings at all price points
  • ‘People are very anxious about overpaying,’ brokerage CEO says

Sales of all condos and co-ops fell 25 percent in the first quarter from a year earlier to 2,180, according to a report Tuesday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. It was the biggest annual decline since the second quarter of 2009, when Manhattan’s property market froze in the wake of Lehman Brothers Holdings Inc.’s bankruptcy filing and the global financial crisis that followed.

The drop in sales spanned from the highest reaches of the luxury market to workaday studios and one-bedrooms. Buyers, who have noticed that home prices are no longer climbing as sharply as they have been, are realizing they can afford to be picky. Rising borrowing costs and new federal limits on tax deductions for mortgage interest and state and local levies also are making homeownership more expensive, giving shoppers even more reasons to push back on a listing’s price — or walk away.

While just a few years ago, bidding wars were the norm, “there’s nothing out there today that points to prices going up, and in many buyers’ minds, they point to being flat,” said Pamela Liebman, chief executive officer of brokerage Corcoran Group. “They’re now aggressive in the opposite way: putting in very low offers and seeing what concessions they can get from the sellers.”

Corcoran Group released its own Manhattan market report Tuesday, showing an 11 percent decrease in completed purchases and a 10 percent drop in sales that are pending.

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For sellers, to reach a deal in the first quarter was to accept a lower offer. Fifty-two percent of all sales that closed in the period were for less than the last asking price, according to Miller Samuel and Douglas Elliman. Buyers agreed to pay the asking price in 38 percent of deals, but often that figure had already been reduced. Combined, the share of deals without a premium was the biggest since the end of 2012.

“Even with New York real estate prices, you do hit a point in which resistance sets in,” said Frederick Peters, CEO of brokerage Warburg Realty. “People are very anxious about overpaying.”

Peters said that these days, he gets dozens of emails a day announcing price reductions for listings. And buyers are haggling over all deals, no matter how small. In a recent sale of a two-bedroom home handled by his firm, a buyer who agreed to pay $1.5 million — after the seller cut the asking price — suddenly demanded an extra $100,000 discount before signing the contract. They agreed to meet halfway, Peters said.

Buyers also are finding value in co-ops, which in Manhattan tend to be priced lower than condos. Resale co-ops were the only category to have an increase in sales in the quarter, rising 2 percent to 1,486 deals, according to Corcoran Group. Sales of previously owned condos, on the other hand, fell 12 percent as their owners clung to prices near their record highs, the brokerage said.

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The median price of all sales that closed in the quarter was $1.095 million, down 5.2 percent from a year earlier, brokerage Town Residential said in its own report. Three-bedroom apartments saw the biggest drop, with a decline of 7 percent to a median of $3.82 million, the firm said.

Prices fell the most in the lower Manhattan neighborhoods of Battery Park City and the Financial District, where the median slid 15 percent from a year earlier to $1.21 million, according to Corcoran Group. On the Upper West Side, the median dropped 8 percent to $1.1 million.

Neither new developments nor resales were spared from buyer apathy. Purchases of newly constructed condos, which continue to proliferate on the market, plummeted 54 percent in the quarter to 259, Miller Samuel and Douglas Elliman said. Sales of previously owned apartments dropped 18 percent to 1,921.

The plunge in transactions is actually a good thing, in that it may serve as a wake-up call for more sellers to scale back their price expectations, said Steven James, Douglas Elliman’s CEO for the New York City region.

“It sends the sellers a signal that you have to get more reasonable if you want my buy,” James said. “It’s like buyers said, ‘I’ve told you all along, but you wouldn’t listen! Now I have your attention, so let’s talk.”

Video Link

Source: By Oshrat Carmiel | Bloomberg

 

 

 

Most Expensive Condo In The (leaning, sinking) Millennium Tower Just Sold For $4.66 Million

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The most expensive condo in the leaning, sinking Millennium Tower has just closed escrow at a selling price that is $1 million less than what it had been asking.

Originally priced at $5.99 million when it hit the market in March 2017, Unit 401 was then re-priced, then taken off the market, only to be re-listed at $4.99 million and finally sold for $4.66 million, SocketSite reports.

Two adjacent units on the fourth floor of the eleven-story mid-rise component of San Francisco’s leaning Millennium Tower development (a.k.a. the City Residences) were legally merged back in 2013 to create a single four-bedroom unit #401 which measures 3,814 square feet and sold for $5.3 million in May of 2014 … Keep in mind that the seller was offering financing “for qualified applicants” and Sterling Bank was offering loans with at least 50 percent down, according to the listing.

The Millennium Tower was a massive real estate success when it finally closed its new sales in 2013, raking in $750 million in revenue from properties. A penthouse initially sold for as much at $9.8 million and the average price tag was $1.8 million.

But the building was discovered to be both leaning and sinking two years ago. It has sunk 17 inches and leaned 14 inches to the northwest, sparking a rash of lawsuits and a flight of residents who claim they’ve sold their investments at a loss.

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The unit isn’t the first in the troubled tower to see a major dip in value during resale — in mid-December, the two-bedroom, three-bathroom unit #48B sold for a 30 percent loss, bringing in $2.99 million. It had previously sold for $4.25 million in November 2013.

“The seller took about a 30 percent loss over a period where the market appreciated rapidly,” Patrick Carlisle, chief market analyst at brokerage Paragon, who wasn’t involved in the deal, told the Business Times at the time. “That’s got to be pretty painful.”

By Riley McDermid | San Francisco Times

“Granite Islands And Backsplashes”: Even Singlewide Trailers Are No Longer “Affordable”

 

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Since the early 1900s, millions of Americans have relied on trailers as a source of no-frills, affordable housing.  In fact, roughly 22 million Americans live in trailer parks today, but the industry is hardly the stable source of affordable housing that it used to be…a lesson that 73-year-old Judy Goff of Naples, Florida recently discovered the hard way after Hurricane Irma ripped through her park and destroyed her home, along with roughly 1.8 million others.

As Bloomberg points out, when Goff went to a local LeeCorp dealer lot to replace her $46,000, 1,200 square foot trailer with something of similar size and value, what she found instead was “manufactured homes” stuffed with high-end upgrades like granite counter-tops and vaulted ceilings that rendered them too expensive for her $23,000 per year of income.

Last month, Judy Goff, a 73-year-old hardware store clerk whose double-wide in Naples, Fla., was blown to bits, pulled into a LeeCorp Homes Inc. sales lot and wandered through models with kitchen islands and vaulted ceilings. In the salesman’s office, she got the total price, including a carport, taxes, and removal of her destroyed trailer: $140,000. “I don’t have that kind of money,” said Goff as she stood amid the wreckage of her old home, whose walls and ceiling were stripped away, leaving her leather furniture and a lifetime of possessions to bake in the sun. “That was all I had.”

Goff—who just wants to replace the wrecked 1,200-square-foot trailer that she bought 17 years ago for $46,000, including the cost of land—says she feels boxed in. Her mobile-home community won’t allow single-wide homes or older used models as replacements. And every home must have a carport. She’s willing to give up such upgrades as the higher-end countertops, but that probably won’t be enough. Between her Social Security check and income from her job at Ace Hardware Corp., she earns only about $23,000 a year. “I just want a home that’s equal to what I had,” she says. “My home was a beauty.”

“I get that higher-end countertops and kitchen islands are where the better margins are, but that’s also going to put homes out of reach for a lot of buyers,” says Doug Ryan, director of affordable homeownership at the Washington nonprofit Prosperity Now. “The storm is revealing a whole lot of problems in the low-cost housing market.”

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Meanwhile, as we note frequently, while the cost of manufactured homes has surged, the pay for the bottom fifth of American wage earners has been somewhat stagnant for nearly two decades now. Even after a modest uptick recently, the bottom 20% of households have seen their income fall 9% since 2000, in real terms.

But, as low-income households have found it increasingly difficult to rebuild after devastating hurricanes, the surge in manufacturing home pricing has been a boon for billionaire Warren Buffett who made a big financial bet on the largest manufactured housing builder, Clayton Homes, back in 2003.

The industry, led by Warren Buffett’s Clayton Homes Inc., is peddling such pricey interior-designer touches as breakfast bars and his-and-her bathroom sinks. These extras, plus manufacturers’ increased costs for labor and materials, have pushed average prices for new double-wides up more than 20 percent in five years, putting them out of reach for many of the newly homeless.

Phil Lee, the 74-year-old founder of LeeCorp, has been riding a wave of retiring baby boomers who want affordable luxury. Driving a reporter in his black BMW SUV through Bayside Estates in Fort Myers Beach, where many of the fanciest homes he sells are installed, Lee points out units with pitched roofs that look almost indistinguishable from conventional homes, facing canals with boats tied outside. Their owners, former dentists, doctors, executives, and others, spent upwards of $150,000 to buy aging units just to clear the way for something more luxurious. On a palm-lined street flanked by ranks of 1970s-era trailers, Lee sees profit. “There’s no end to replacing these homes,” he says. “You get a hurricane in there and it really accelerates things.”

Terms such as “mobile home” or “trailer” are now verboten in an industry striving to break free of its downscale origins. Buffett’s Clayton Homes, which produces almost half of all new manufactured housing in the U.S. and competes with such companies as Cavco Industries Inc. and Champion Home Builders Inc., still builds lower-priced units, but there’s barely a sign of them on its website, which is mostly devoted to high-price models. The 2,000-square-foot Bordeaux features a separate tub and shower, a computer station, and a mud room, with prices starting at $121,000 and ranging as high as $238,000, not including delivery and installation costs. Clayton declined to comment.

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Of course, while mobile homes are becoming increasingly cost-prohibitive for low-income families in Florida and Texas, Silicon Valley’s future tech billionaires can’t seem to get enough of them.

Source: ZeroHedge

Pabst Mansion in Illinois Gets Another Price Cut

Sold in 1999 for $6.95 million the 14,000-square-foot home is now on the market for $3.9 million

It isn’t often that a historic estate with 21st-century features, finishes and amenities is available at a 20th century price, and yet that’s exactly what is on offer at the Pabst Mansion on Sheridan Road in Glencoe, Illinois.

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Sited on 2.2 acres, the 14,000-square-foot house was built in 1936 by architect Willian Pereira.

On the market for two years, the price was just reduced to $3.9 million, nearly $3 million less than what it sold for in 1999 at $6.95 million, according to the Cook County Recorder of Deeds. The current owner, who bought the home in 2014, originally listed it for $6.3 million in June 2015. In May 2016 the asking price was lowered to $4.95 million and since then, has reduced the price several times before this latest drop.

Crain’s Chicago Business first reported the price reduction, noting how the house’s sale price has decreased from the 1999 price tag, in each of the mansion’s subsequent sales. It sold for $5.2 million in 2009 and $4.8 million in 2014, when it was bought by the current owner, an insurance executive, according to the public records.

Sited on 2.2 acres, the 14,000-square-foot house was built in 1936 by architect Willian Pereira, who became famous in later years for his work in California, including the Los Angeles International Airport’s space-age control tower and the Transamerica pyramid in San Francisco. The house is known as the Pabst Mansion because of its first owner, Harris Perlstein, who ran Milwaukee’s Pabst Brewing Co. after the merger with his company Premier Malt Products.

On the inside, the house’s details and amenities are extensive. There is a large oval dining room, a paneled library, a bar and entertainment room, a game room, an exercise room, and a party-sized screening room, according to the listing agent. Situated at the end of a long gated driveway, the grounds include a pool with water slide, a half basketball court and a hedge shaped like a maze.

“The new price is an extraordinary value,” said Coldwell Banker listing agent Wendy Friedlich.

| Mansion Global

Another Huge Foreclose Hits NYC Billionaire Row

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Meet The Money-Laundering, Nigerian Oil Magnate Behind New York’s $50MM Condo Foreclosure

Yet another luxury condo at Manhattan’s One57 tower, a member of “Billionaire’s Row,” a group of high-end towers clustered along the southern edge of Central Park, had gone into foreclosure – the second in the span of a month.  The 6,240-square-foot, full-floor penthouse in question, One57’s Apartment 79, sold for $50.9 million in December 2014, making it the eighth-priciest in the building and likely the largest residential foreclosure in Manhattan’s history.

According to Bloomberg, the owner of the apartment attempted to conceal his/her identity by using a shell company (you know how those kooky billionaires can be) but was able to obtain an ‘unusually large’ mortgage with an even more unusual term: one-year.

In September 2015, the company took out a $35.3 million mortgage from lender Banque Havilland SA, based in Luxembourg. The full payment of the loan was due one year later, according to court documents filed in connection with the foreclosure.

The borrower failed to repay, and now Banque Havilland is forcing a sale to recoup the funds, plus interest.

Of course, it was only a matter of time until the mystery man behind Manhattan’s most recent luxury real estate epic fail was exposed.  As such, meet Nigerian oil magnate, Kola Aluko.

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As it turns out, the world renowned, Nigerian-born, billionaire playboy is about $25,000 behind on his property taxes.  But, that is probably the least of his worries as the New York Post points out that he currently wanted by authorities in both Nigeria and Europe for defrauding the Nigerian government out of oil sale profits.

But Aluko has bigger problem, it seems. The 47-year-old tycoon is under investigation in Nigeria and in Europe for alleged money-laundering crimes.

A Nigerian court, according to various reports, tried to freeze Aluko’s assets, including his One57 unit, as part of the alleged scheme to defraud the government of oil sale profits.

Meanwhile, it seems that the only reason Aluko isn’t already in prison is because the Nigerian courts can’t seem to find him to serve papers.  Apparently he’s been hiding out on this 213-foot, $100 million yacht, the Galactica Star, for over a year.

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Over the past year, the boat has been spotted making port calls in Cancun, Mexico and Turkey.

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Of course, if you’re going to be an international playboy then you need to have rich and famous friends and, as it turns out, rappers Jay-Z and P. Diddy seemed to have fulfilled that role for Aluko.  Back in 2012 the rap duo apparently hosted Aluko’s birthday party in Beverly Hills.  Then, just a few years later in 2015, Jay-Z and wife Beyonce rented Aluko’s mega-yacht for the bargain basement price of just $900,000 per week to sail around the Mediterranean.

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Well, presumably it was fun while it lasted.

Source: ZeroHedge

 

Wild Swings in New Home Sales: Median Price Down, Average Price Up

New home sales shot up 6.1% in February aided by 39% jump in the mid-west but a 21.4% decline in the Northeast.

Sales came in just a bit below the top Econoday estimate.

New home sales shot 6.1 percent higher in February to a 592,000 annualized rate that easily beats the Econoday consensus for 565,000 and is near the top estimate of 600,000. Sales appeared to have gotten a boost from builder concessions as the median price fell a monthly 3.9 percent to $296,200 for a year-on-year rate that’s suddenly in the negative column at minus 4.9 percent.

Strength is centered in the Midwest where the sales rate surged 21,000 to 89,000 and easily surpassing 11,000 gains for the both the West, at 157,000, and the South at 313,000. Sales in the Northeast fell sharply in yesterday’s existing home sales report and are down 9,000 to a very low 33,000 annualized rate in today’s report.

Supply of new homes did rise slightly in the month, up 4,000 to 266,000 currently on the market, but relative to sales supply fell to 5.4 months from 5.6 months. Supply has been thin all cycle for new homes and was at 5.5 months in February last year.

Most of the news is good in this report underscored by the average price which, reflecting high-end properties, jumped 9.9 percent in the month for a yearly 11.7 percent gain at $390,400 and a new record. Today’s report helps offset weakness in existing home sales and keeps the housing sector on a moderately climbing slope.

New Home Sales Jump Second Month

Mortgage News Daily reports New Home Sales Build on January Strength.

New home sales posted a much better February than did existing home sales and, in fact, better than most analysts had expected.

It was the second consecutive month of strength for the indicator which had see-sawed between positive and negative results in the waning months of 2016.

On a non-seasonally adjusted basis, there were 49,000 new homes sold in February compared to 41,000 in January. Thirty-six-thousand of the homes sold were in the $200,000 to 299,000 price tier.

The median price of a new home sold in February was 296,200 compared to $311,300 a year earlier. The average price was $390,400 compared to $349,400.

There were strong geographic differences in the rate of sales. In the Northeast, sales were down 21.4 percent for the month while remaining 13.8 percent higher than the previous February. In contrast, the Midwest posted a 30.9 percent month-over-month improvement and the annual change was 50.8 percent.

Sales in the South rose 3.6 percent from January and 7.9 percent from February 2016 and sales in the West were up 7.5 percent and 6.8 percent from the two earlier periods.

At the end of February, there were an estimated 261,000 homes available for sale on a non-seasonally adjusted basis. This is an estimated 5.4-month supply at the current rate of sale. Sixty-three-thousand of the available homes are completed, construction had not started on 51,000.

Median vs Average Sale

It’s interesting to see the median price dropping with the average price soaring. It’s a tale of two economies and who is and isn’t gaining.

That said, these swings are so wild, I smell revisions.

For now, this should boost GDP estimates.

By Mike Shedlock | mishtalk.com

This is What the Most Expensive House in the United States Looks Like

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In Bel Air, California, ultra-luxury home developer Bruce Makowsky has unveiled his most ambitious project yet, 924 Bel Air Road. Listed at US$250 million it is the most expensive home ever listed in the United States.

To attract the clientele Makowsky is targeting, he is selling more than just a home he is selling a lifestyle. Whoever buys 924 Bel Air not only gets the home, but a full-time, 7-person staff for 2 years, a US$30 million car collection and all of the artwork, wine, furnishings and extras you can imagine.

Below you will find a gallery of this insane property along with a video tour and a list of some of the most unbelievable highlights and inclusions. For more information visit 924belair.com.

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– List price: US$250 million (previous US record $195 million mansion in Manalapan, Florida)
– 38,000 sq. ft. over 4 floors with 2 commercial elevators lined in alligator skin and handcrafted, polished steel staircase
– 12 bedrooms, 21 bathrooms, 3 kitchens, 6 bars, massage and spa room, fitness center, bowling alley
– 2 wine and champagne cellars, 85 ft Infinity pool, 40-person home theatre, 18×12 ft retractable outdoor tv screen
– Includes $US 30 million car collection, all artworks, wine and champagne collection, helicopter, boat
– Comes with 7 pre-paid, full-time staff including chef, chauffeur and masseuse for two years.

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In an interview with CNBC, Makowsky likens the home more to a mega yacht than a house, stating:

Megayachts have gone from 150 feet to 300 feet or more and they can cost up to $500 million,” he said. “People spend two weeks a year on a yacht, but they live in a house. I wanted this to be the ultimate megayacht, but on land.” [source]

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According to CNBC, the “auto gallery” features some of the rarest, fastest and most expensive cars in the world and come with the home. The collection includes a one-of-a-kind Pagani Huayra ($2 million+); the famous “Von Krieger” 1936 Mercedes 540 K Special Roadster($15 million+); and 10 of the rarest and fastest motorcycles ever built.

The most expensive home ever sold globally is believed to be a US$221 million penthouse in London, England. Globally, there are homes listed for more than US$300 million but none in the U.S. tops Makowsky’s US$250 million listing. [source]

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Source: Twisted Sifter

Glut in Luxury Apartments: Boom Set to Fizzle in 2017

Real estate is has been one of the economic bright spots in the US for several years.

But rising interest rates and a glut of luxury apartments portends a slowdown in 2017.

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The Wall Street Journal reports Luxury Apartment Boom Looks Set to Fizzle in 2017

Landlords of upscale properties across the U.S. are bracing for rough conditions in 2017 that will likely force them to slash rents and offer deep concessions as a glut of supply brings a seven-year luxury-apartment boom to an end.

The turnaround follows a more-than-26% jump in U.S. apartment rents since early 2010, far outstripping inflation and income growth. But in 2016, rents rose a modest 3.8%, a significant drop from the recent high of 5.6% year-to-year growth in the third quarter of 2015, according to a report to be released Tuesday by MPF Research, a division of RealPage Inc. that tracks the U.S. apartment market.

Developers in New York are already offering up to three months of free rent on some projects. In Los Angeles, some landlords are offering six months of free parking, and some in Houston are waiving security deposits. Meanwhile, MPF Vice President Jay Parsons said he expects little or no rent growth in urban rental markets this year.

“This will be a very challenged leasing environment almost everywhere,” Mr. Parsons said.

More than 50,000 new units were rented by tenants in the fourth quarter in the U.S., six times the number in the year-earlier period. But that demand was overwhelmed by the 88,000 new units that were completed in the quarter, the most since the mid-1980s, according to MPF.

That gap looks set to widen in 2017. More than 378,000 new apartments are expected to be completed across the country this year, almost 35% more than the 20-year average, according to real estate tracker Axiometrics Inc.

The New York area alone will be flooded with nearly 30,000 new apartments in 2017, double the historical average, according to Axiometrics. Roughly 85% are luxury units.

Dallas is expected to see nearly 25,000 new apartments delivered, compared with the long-term average of roughly 9,000 new apartments a year, according to Axiometrics. Los Angeles is expected to get roughly 13,000 new apartments, nearly double the historical average.

Nashville could see some 8,500 new apartments, more than triple the typical 2,400 apartments completed annually.

John Tirrill, managing partner at SWH Partners, an Atlanta developer that has several projects under way in the Nashville area, is leasing a new five-story property with a fitness center, yoga and barre studio and swimming pool. He has lowered rents from $2.25 a square foot to $2.10 a square foot—a $150 discount on a 1,000-square-foot apartment—and is offering one to two months of free rent.

Banks are pulling back on lending, which could help slow the pace of construction starting in late 2018.

“We’re just being really selective,” said John Cannon, a senior vice president at Pinnacle Financial Partners, a Nashville-based financial-services company that has increased its focus on multifamily lending in the last couple of years. “Multifamily has a large number of units on the ground that they really have to demonstrate some absorption.”

2017 Real Estate Synopsis

  1. New home sales and existing home sales are already slowing because of mortgage rates.
  2. A huge supply of apartments will come online in 2017.
  3. Banks are tightening lending standards for apartments.
  4. Mall space is hugely overbuilt.

by Mike “Mish” Shedlock

Luxury Housing Markets In The Hamptons, Aspen And Miami Are All Crashing

One month ago, ZeroHedge said that “it is not looking good for the US housing market”, when in the latest red flag for the US luxury real estate market, they reported that sales in the Hamptons plunged by half and home prices fell sharply in the second quarter in the ultra-wealthy enclave, New York’s favorite weekend haunt for the 1%-ers.

Reuters blamed this on “stock market jitters earlier in the year” which  damped the appetite to buy, however one can also blame the halt of offshore money laundering, a slowing global economy, the collapse of the petrodollar, and the drastic drop in Wall Street bonuses. In short: a sudden loss of confidence that a greater fool may emerge just around the corner, which in turn has frozen buyer interest.

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A beachfront residence is seen in East Hampton, New York, March 16, 2016.

We concluded this is just the beginning, and sure enough, several weeks later a similar collapse in the luxury housing segment was reported in a different part of the country. As the Denver Post reported recently, high-end sales that fuel Aspen’s $2 billion-a-year real estate market are evaporating, pushing Pitkin County’s sales volume down more than 42 percent to $546.45 million for the first half of the year from $939.91 million in the same period of 2015.

The collapse in transactions means that Aspen’s high-end real estate market “one of the most robust in the country, with dozens of options for buyers ready to spend more than $10 million” finds itself in its first-ever sustained nosedive, despite “dense summer crowds, soaring sales tax revenues and high lodging occupancy.”

Like in the Hamptons, the question everyone is asking is “why”? There are many answers:

Ask a dozen market watchers why, and you’ll get a dozen answers. Uncertainty around the presidential election. Fear of Trump. Fear of Clinton. Growing trade imbalances with China. Brexit. Roller-coaster oil prices. Zika. Wobbling economies in South America. The list goes on.

“People are worried about all kinds of stuff these days,” says longtime Aspen broker Bob Ritchie. “I’ve never seen anything like this before.”

The speed of the collapse has been stunning. Until just last year, the local market was beyond robust, with Pitkin County real estate sales hitting $2 billion in 2015, a 33% annual increase driven largely by sales of homes in Aspen, where prices average $7.7 million.

This year, however, “a slowdown in January turned into a free fall.” Sales volume in Pitkin County is down 42%, according to data compiled by Land Title Guarantee Co.

Almost all of that decline is coming from Aspen, where the market is frozen. Sales in the Aspen-Snowmass market in the first half of the year were the bleakest since the first half of 2009, and inventory soared to levels not seen since the recession.

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High-end sales that fuel Aspen’s $2 billion-a-year real estate market  are evaporating

The statistics are stunning: single-family home sales in Aspen are down 62% in dollar volume through the first-half of the year. Sales of homes priced at $10 million or more — almost always paid for in cash — are down 60%. Last year, super-high-end transactions accounted for nearly a third of sales volume in Pitkin County.

“The high-end buyer has disappeared,” said Tim Estin, an Aspen broker whose Estin Report analyzes the Aspen-Snowmass real estate market.

“Aspen has never experienced such a sudden and precipitous drop in real estate sales,” according to the post.

Worse, it’s not just the collapse in the number of transaction: even more disconcerting for brokers who have always trumpeted Aspen as a safe and lucrative place to park a huge pile of money: Prices are dropping.

In the first half of this year, the average price per square foot of Aspen homes dropped 22 percent to $1,095 from $1,338 in 2015. Recent Aspen sales also closed at more than 15 percent below listing price, a rare discount.

Some brokers suspect that the frenzied sales and pricing pace of 2015 was not sustainable. The present decline is a correction, they say. “I think a lot of people thought we would go to the next level in 2016. Take the next step up and that step got resistance from buyers,” said longtime Aspen broker Joshua Saslove, who just put an Aspen home for more than $10 million under contract. If it closes, it will be just the fourth sale above $10 million in Aspen this year, compared with more than a dozen by this point last year.

“I think a lot of developers thought they would push their, say, $5 million properties to $6 million this year, but no one is buying,” Saslove said. “I don’t see that nonchalance or cavalier attitude any more.”

To be sure, Saslove is hoping that a rebound is coming; that however, may be overly optimistic and first far more pain is in store especially if one considers what is taking place in yet another formerly red-hot housing market, where suddenly things are just as bad, because as Mansion Global reports

Luxury condo sales in Miami have crashed 44%.

According to the latest report by the Miami Association of Realtors, the local luxury housing market is just as bad, if not worse, than the Hamptons and Aspen.

The latest figures out of Miami this week showed residential sales are down almost 21% from the same time last year. But as bad as this double-digit decline may seem, it pales in comparison to what’s happening at the high end of the market.

A closer look at transactions for properties of $1 million or more in July shows just 73 single-family home sales, representing an annual decline of 31.8%, according to a new report by the Miami Association of Realtors. In the case of condos in the same price range, the number of closed sales fell by an even wider margin: 44.4%, to 45 transactions.

The Miami housing market, and its luxury segment in particular, has been softening for the past year with high-end condos sitting on the market for twice as long as they did a year ago and sellers offering bigger discounts amid an increased supply.

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Number of closed sales for Miami condos priced over $1 million fell by 44%

In July, townhouses and condos of $1 million or more waited, on average, 162 days for a buyer, a 1.9% increase over a year ago and the longest time of any other price range, according to the report.

As in the previous two markets, the locals want something to blame, in this case the strong dollar, which has significantly increased the value of properties in other currencies, has been blamed, and perhaps rightfully so as sales to foreigners—an important client base, since international buyers  acquire more homes in Florida than in any other state, according to the National Association of Realtors – have tumbled.

Real estate appraiser and data expert Jonathan Miller said that Miami is behaving like most of the rest of the U.S. housing market, which is in fairly good shape overall “but soft at the top.”

As noted here over the years, In the case of Miami, like in other most other coastal markets such as New York and Los Angeles, the housing boom was heavily boosted by foreign buyers, who used US luxury real estate as their new form of anonymous “offshore bank accounts” courtesy of the NAR’s exemption from Anti-Money Laundering Provisions. However, after the recent drops in commodity prices and the spike in the USD, they have scaled back their purchases.

“The international component is not as intense,” Mr. Miller said.

Depsite the slowdown deals are still being done, with cash the preferred form of payment of foreign buyers in the U.S., – some 43% of all sales in Miami in July were closed in cash, however down from 48.1% the same month last year, according to the latest figures.

Other potential buyers are also stepping back: cash sales for townhouses and condominiums, an indicator of investor activity, hit their lowest level in a year last month: 633 transactions, representing a 30.4% year-over-year decline, according to the report.

As for the forecast for the coming months, sales activity doesn’t look likely to surge. There were 1,272 pending sales of townhouses and condos in Miami in July, which means 25.4% fewer transactions waiting to close than in the same month in 2015 and the lowest number so far this year. Meanwhile, as a result of a building boom, luxury condo inventory is up 47.8% from last year, with 2,482 units worth $1 million or more waiting to change hands; this means that sellers of high-end condos will continue to face stiff competition, prompting even fewer transactions and/or lower prices.

So far, the collapse at the luxury end has failed to transmit to the broader market, less impacted by lack of foreign demand, however as we documented two weeks ago, it is only a matter of time before the overall US housing market suffers as well. The only question is whether the NAR and the US Census Bureau, who tabulate the “goal-seeked”, seasonally adjusted data, will admit it before or after the presidential elections. The likely answer: it depends on who the next president is.

Source: ZeroHedge

Leak Reveals Secret Tax Crackdown On Foreign-Money Real Estate Deals In Vancouver

Confidential briefing for CRA auditors outlines strategy to tackle suspected tax cheats who do not report global income or who ‘flip’ homes – but reveals that last year, there was only one successful audit of global income for all of British Columbia

A backhoe destroys a C$6 million mansion in Vancouver’s Shaughnessy neighbourhood this year. The destruction of the well-kept home prompted community outrage and was cited in a briefing for Canadian tax auditors looking into Vancouver real estate transactions. Photo: Twitter / @DeborahAMG

A secret strategy briefing for Canada Revenue Agency auditors has revealed plans to crack down on real estate tax cheats in Vancouver, with 50 auditors being assigned to investigate purchases funded by unreported foreign income.

Presentation notes for the seminar, delivered to auditors on June 2 and leaked to the South China Morning Post, show that only one successful audit of worldwide income was conducted in British Columbia in the past year, in spite of Vancouver’s reputation as a hotspot for immigrant “astronaut families” whose breadwinners often work in mainland China and Hong Kong.

The plans, which come amid a furore over the role of Chinese money in Vancouver’s runaway housing market, were provided by a Canada Revenue Agency employee who attended the June 2 briefing. The briefing is identified as a “protected B” confidential document on the cover.

The cover for a confidential CRA briefing for auditors. Photo: SCMP Pictures

But the employee feared the sweep would prove inadequate. “Sure, they’ve upped the numbers because it’s hitting the papers,” they said. But on average, they estimated, each redeployed income auditor would only be able to conduct 10 to 12 audits per year – about 500 or 600 in total. “This is nothing,” compared to the likely scale of the cheating, they said.

Confidential briefing notes for CRA auditors reveal how the Canadian tax agency is targeting unreported global income and other issues related to real estate sales in the Vancouver region. Photo: SCMP Pictures

That estimate is in keeping with the briefing text which says the crackdown will “review the top 500 highest risk files within our region”.

The briefing lists four areas being targeted for audit under the CRA’s “real estate projects”, launched in response to “significant media attention”: unreported worldwide income, property “flipping”, under-reporting of capital gains from home sales, and under-reporting of Goods and Services Tax (GST) on sales of new homes.

‘High-end homes, minimal income’

The time-consuming global income audits will tackle “individuals living in high-valued areas in BC who are reporting minimal income not supporting their lifestyle”, as well as those who buy “high-end homes with minimal income being reported.”

The supposed case of a C$5.8 million home bought by someone who claimed a tax break intended for the poor is cited in the CRA briefing. Photo: SCMP Pictures

The presentation includes a photo of a luxury home supposedly bought for C$5.8million whose owner claimed the “working income tax benefit” for low earners. It also lists the tuition fees of Vancouver private schools.

 

Confidential briefing notes for CRA auditors show that 50 income tax auditors are being redeployed to tackle real estate cheats in BC. Photo: SCMP Pictures

Property flippers who swiftly resell homes for profit will meanwhile be audited to see if their properties truly qualify for exemption from capital gains tax, granted to people selling their principal residence.

The briefing describes various excuses given by owners who moved out of newly purchased homes, including a negative feng shui report, the “bad omen” of tripping over a crack in the sidewalk, and a painter dying in the home.

It cites the highly publicized case of a well-kept 20-year-old, C$6million mansion that was simply torn down after being bought, prompting community outrage.

Yes, we are getting a response now, but the government has known about this issue for a few years. They held back

CRA employee

The briefing does not say the owners of this home, or the $5.8 million home, are tax cheats and nor does the SCMP suggest so.

The CRA employee said the briefing, which was streamed online, was delivered by CRA’s Pacific region business intelligence director, Mal Gill.

The CRA briefing lists various excuses given by people who moved out of new homes, apparently claimed as principal residences. Photo: SCMP Pictures

Gill declined to discuss the briefing. “I cannot confirm anything to you,” he said, referring the SCMP to a CRA communications manager.

The case of a well-kept C$6million Vancouver home that was simply demolished after purchase is cited in leaked notes for Canadian tax auditors. Photo: SCMP Pictures

A spokeswoman said: “The CRA cannot comment or release information related to risk assessment or non-compliance strategies.”

However, she said real estate transactions in Toronto have been the subject of greater scrutiny, for some years. “More recently, the CRA has been actively monitoring and auditing real estate transactions in British Columbia,” she said.

“For the year ending March 31, 2016, the CRA completed 2,203 files [in BC and Ontario] related to real estate,” she said.

In addition to the 50 redeployed income auditors, the leaked briefing says CRA is assigning 20 GST auditors and 15 other staff to the real estate project in BC.

The CRA source said they leaked the material because, “like many people, I’m pretty disgusted by what’s happening here [in the Vancouver real estate market], and a lack of enforcement has been a part of the problem. Yes, we are getting a response now, but the government has known about this issue for a few years. They held back.”

The CRA briefing reveals that there was just one successful audit conducted on unreported global income in BC last fiscal year. Photo: SCMP Pictures

The employee said they were surprised to discover that only one successful audit of global income had been conducted in BC in the year to March 31. “That’s the ludicrousness of this. I was shocked when I saw this, and they only got C$27,000 in tax revenue out of it,” they said.

Asked whether this might show a widespread problem with undeclared worldwide income did not exist in BC, the source said: “No, what it shows is that inadequate people and resources have been put to the task. These [tax cheats] are highly sophisticated individuals, with good representation from their lawyers and accountants, and we are sending out our least experienced people to catch them. That’s the problem.”

Source cites CRA’s ‘racism fear’

Census data from 2011 has previously shown that 25,000 households in the City of Vancouver spent more on their housing costs than their entire declared income, with these representing 9.5 per cent of all households.

But far from being impoverished, such households were concentrated in some of the city’s most expensive neighborhoods, where homes sell for multi-million-dollar prices.

The source suggested CRA bureaucrats previously feared being labelled racist if they targeted low-income declarers buying real estate “because the vast majority of these cases, involving high real estate values, involve mainland Chinese”.

The crackdown was not intended for public knowledge, and instead was to satisfy “people from high up” in the CRA and government who wanted to know “what are you guys doing about this…there’s stuff hitting the papers every day”, the source said. Yet the briefing says the crackdown “will not address the major concerns about affordability of real estate”.

“The vast majority of these [undeclared global income] cases, involving high real estate values, involve mainland Chinese”

CRA employee

The source said there had previously been little done to check whether taxpayers were secretly living and working abroad while supporting a family in Vancouver. “There’s virtually no liaising done with immigration. The common auditor would never check when people are actually coming and going, to check whether they might be going back to China or wherever to work. You can be lied to, to your face: ‘Oh no, I live here [in Canada] full-time’.”

The leaked documents show that in in addition to the single audit on global income in the last fiscal year, CRA in BC conducted 93 successful audits on property flips, 20 on capital gains tax and 225 on under-reported GST. The audits yielded C$14.4 million in new tax, of which C$10million was GST. There was C$1.3 million in fines.

As of April 29, there were 40 audits of global income under way, 205 related to flipping, 34 related to capital gains and 428 related to GST.

The average Vancouver house price now sits around C$1.75million for the metropolitan region, while the Real Estate Board of Greater Vancouver’s “benchmark” price for all residential properties is C$889,100, a 30 per cent increase over the past year. However, incomes remain among the lowest in Canada, making Vancouver one of the world’s most un-affordable cities .

http://www.scmp.com/news/world/united-states-canada/article/1989586/leak-reveals-secret-tax-crackdown-foreign-money-real

The Hongcouver blog is devoted to the hybrid culture of its namesake cities: Hong Kong and Vancouver. All story ideas and comments are welcome. Connect with me by email ian.young@scmp.com or on Twitter, @ianjamesyoung70

USA Today Reports Existing Home Sales Hit 9-Year High In June

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Bolstered by first-time home buyers, existing-home sales rose for the fourth straight month in June, reaching a nine-year high.

Sales of existing single-family homes, townhomes, condominiums and co-ops increased 1.1% to a seasonally adjusted annual rate of 5.57 million, up from May’s downwardly revised 5.51 million, the National Association of Realtors said Thursday. The June pace was the strongest since 2007.

First-time buyers made up 33% of those transactions, the biggest share in four years. That eased concerns that a shortage of affordable houses has been pushing entry-level buyers out of the market.

The median existing-home price also reached a new high as it surged 4.8% to $247,700 from a year ago, above the former peak of $238,900 in May.

June’s sales exceeded the highest forecast of economists polled by Bloomberg, 5.56 million.

Healthy job gains, record-high stock prices and near-record low mortgage rates stoked June’s positive showings, said Lawrence Yun, chief economist at the National Association of Realtors.

“The modest bump in June sales to first-time buyers can be attributed to mortgage rates near all-time lows and perhaps a hopeful indication that more affordable, lower-priced homes are beginning to make their way onto the market,” he said. “The odds of closing on a home are definitely higher right now for first-time buyers living in metro areas with tamer price growth and greater entry-level supply — particularly areas in the Midwest and parts of the South.”

The Midwest has the lowest median existing-home price among all regions, $199,900, followed by the South, at $217,400. The median price in the West climbed 7.2% from a year ago to $350,800.

Total available existing homes for sale dipped 0.9% to 2.12 million, now 5.8% below a year ago.

“Seasonally adjusted, the month’s supply of homes in June 2016 was the lowest since June 2005, indicating that inventory problems still plague home buyers,” said Ralph McLaughlin, Trulia’s chief economist.

by Athena Cao | USA Today

31 Year Old Hedge Funder Trashes $20 Million Hamptons Mansion In Wild Midget-Tossing Party, Is Fired

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In another reminder why most of the population is increasingly furious at the “elites”, over the holiday weekend a 31-year-old portfolio manager for Moore Capital, Brett Barna, threw a wild “Wolf of Wall Street”-style Hamptons party, complete with Champagne, scores of bikini-clad women and costumed gun-toting midgets, and in the process trashed a $20 million mansion.

According to Page Six, Barna, “a portfolio manager at Louis Bacon’s Moore Capital Management, hosted the all-day “#Sprayathon” pool party on Sunday, where 1,000 people doused themselves in bubbly as rapper Ace Hood performed.”

Making things more complicated is that Barna is not the owner of the 9-bedroom, 8 acre Hamptons mansion which “comes with tennis court, gym, outdoor pool & jacuzzi” where he celebrated US Independence Day in decadent style, and instead rented it from “Tommy” for $29,000 on AirBNB, a fee he is now disputing.

And now Tommy is angry: “the furious owner of the 14-bedroom estate in Bridgehampton plans to sue Barna, 31, for $1 million, saying the Wall Street hot shot had claimed the party would be a fundraiser for an animal charity for a mere 50 guests.”

The owner, who asked to not be named, told Page Six that , “Brett came to me dropping Louis Bacon’s name and saying he was a big deal with the Robin Hood Foundation. He said there would be 50 people at the event and it was for animal rescue. But the only animals there were the people, a thousand of them. They drowned themselves in Champagne, they had midgets they threw in the pool, they broke into the house, trashed the furniture, art was stolen, we found used condoms. So many people were there that the concrete around the pool crumbled and fell into the water. It was like ‘Jersey Shore’ meets a frat party. We are preparing a massive lawsuit . . . We’re waiting to serve him.”

“Brett was last seen on Sunday chugging Champagne with two midgets.”

Wild social media posts show party goers dousing themselves in booze and dancing wildly.

The videos and photos below, capturing the festivities, will surely be Exhibit A-X in the upcoming lawsuit.

Party video link

https://nyppagesix.files.wordpress.com/2016/07/dsc_5677.jpg?quality=90&strip=all&w=1033

https://nyppagesix.files.wordpress.com/2016/07/unnamed.jpg?quality=90&strip=all&w=920

https://nyppagesix.files.wordpress.com/2016/07/img_4286.jpg?quality=90&strip=all&w=920

Party pictures link

According to the publication, this is an annual bacchanal: Last year #Sprayathon revelers started a brush fire at a Hamptons manse owned by “Hercules” actor Kevin Sorbo.

Page Six adds that a rep for the embarrassed hedge fund didn’t comment, but a source said Moore raised $100,000 for Last Chance Animal Rescue, and they hired cleaners and left the house in good condition.

As CNBC adds this morning, Moore Capital said it has fired Barna. “Mr. [Brett] Barna’s personal judgment was inconsistent with the firm’s values,” the company told CNBC in a statement.

“He is no longer employed by Moore Capital Management.”

Source: ZeroHedge

As International Billionaires Get Nervous, Sales In L.A.’s Ultra-Luxury Housing Market Slow

http://www.trbimg.com/img-55d77a52/turbine/la-fi-hotprop-steve-wynn-house-20150821-photos-008/750/750x422
Billionaire Steve Wynn finally found a buyer for his Bel-Air home when he dropped the asking price to $15.95 million, or $300,000 less than what he bought it for in 2014. (Redfin)

A cooling market for the most expensive homes is costing hotel and casino magnate Steve Wynn some money.

Two years ago, Wynn paid $16.25 million for an 11,000-square-foot mansion perched on nearly an acre above the Bel-Air Country Club. Less than a year later, he sought to unload the home with a paneled library and staff bedroom for $20 million.

No luck. Then he tried $17.45 million. No luck again.

In May, Wynn dropped his price to $15.95 million, $300,000 less than what he paid for the property in 2014. The home went into escrow “very close” to that price last month, said Coldwell Banker agent Mary Swanson, who confirmed Wynn would be taking a loss.

It’s not just Wynn who isn’t getting as much money as he hoped.

Even before Britain’s vote last week to leave the European Union jolted investors worldwide, there were reports of a slowdown in the ultra-luxury housing market.

In Los Angeles, agents were seeing more price cuts. Condo sales on New York’s Billionaires’ Row were slowing. Luxury developers shelved projects in Miami. And prices at the tip-top end of the London market were on their way down.

Blame it on the global economy, which has displayed weakness in the past year, choking off the spigot of international millionaires and billionaires seeking a pied-à-terre, or two, in glamorous locales.

So far, in Los Angeles, Wynn’s experience aside, the effect has been minimal, given the nature of Southern California ultra-luxury development – which largely consists of one dramatic hillside estate at a time, rather than a condo tower with multiple units.

But a spate of new construction is on the horizon. By one estimate, there are about 30 new hillside homes priced above $30 million that could hit the market in the next year and a half.

The so-called Brexit vote may not help matters.  It has sown economic uncertainty on a global scale and caused the dollar to strengthen against major currencies – potentially leading international buyers to trim their purchases in the United States.

“The price of real estate here in California and the U.S. has gotten more expensive,” said Jordan Levine, an economist with the California Assn. of Realtors.

In Manhattan, the slowdown has taken a sharp toll. The number of previously owned homes that sold in the first quarter for $10 million or more fell 40% from a year earlier to 15, according to appraisal firm Miller Samuel.

One builder, Extell Development Co., trimmed $162 million in projected revenue from its One57 condo-and-hotel project, a 1,000-foot tower on Manhattan’s 57th Street originally slated to bring in $2.73 billion, according to a March regulatory filing.

It features more than 90 units, with several reportedly selling for more than $40 million and one bought by an investment group for about $90 million.

“More has been constructed in New York,” said Stephen Kotler, chief revenue officer of real estate brokerage Douglas Elliman. “You have some sellers [in Los Angeles] getting more realistic, but in New York you are seeing more.”

In Los Angeles County, by comparison, $10-million plus sales ticked up by one to 17 in the first quarter compared with a year earlier, according to the California Assn. of Realtors, whose data largely covers resale transactions.

But over a longer timeline, it appears the market has begun to stall. The number of sales of $10 million or more in L.A. County has dipped in three of the last five quarters for which data is available, even as inventory has steadily grown, according to the Realtors group.

And, brokers say, the slowdown is more pronounced the higher the price.

As of mid-June, nine homes in the county had sold this year for $20 million or more, compared with 18 during the same period last year, according to Loren Goldman a vice president with First American Title Co.

Michael Nourmand, president of L.A. luxury brokerage Nourmand & Associates Realtors, said the slowdown will probably bleed into the rest of the market eventually, but that’s not likely to happen “any time soon.”

Like elsewhere, local agents put much of the blame on a pullback by international buyers who had flooded Los Angeles in recent years. Turmoil in their economies, along with a strong dollar, have many from Russia, the Middle East and China second-guessing a purchase here.

“It used to be, if they like it they buy it, or more like, if they like it they buy two,” said Cindy Ambuehl, director of residential estates for the Agency. “Now they are keeping their hands in their pockets and they are waiting.”

Nourmand has seen that first-hand.

A client from the Middle East recently hoped to pull the trigger on a nearly $40-million estate in Bel Air – one set behind gates with a driveway that took “one to two minutes” to walk from street to front door.

But the buyer got cold feet in February and backed out, Nourmand said, explaining that her family’s businesses had taken a beating along with the price of oil, which plunged last year.

“You have a shrinking buyer pool for the really expensive stuff,” he said.

http://www.trbimg.com/img-56940497/turbine/la-fi-hotprop-playboy-mansion-for-sale-2016011-002/750/750x422Daren Metropoulos plans to reconnect the Playboy Mansion, above, to his estate next door, creating a 7.3-acre compound. (Jim Bartsch)

Unlike other brokers, Adam Rosenfeld, founding partner of brokerage Mercer Vine, said he thinks the market is still strong and pointed to some recent mega-deals that went into escrow, including the Playboy Mansion, which is being purchased by the son of a billionaire food magnate for $105 million – a record for L.A. County.

(Though that’s half the asking price of $200 million, agents who know the market say they didn’t expect the mansion to sell for that astronomical, headline-grabbing figure.)

But even Rosenfeld said it was unclear how well the upcoming flood of high-end homes will sell.

“There are only so many buyers that can afford a $30-million plus house,” he said. “The [developers] that do them the best probably will make a killing. Guys who don’t … some of those people might lose their shirts.”

Levine, of the Realtors association, said that one dynamic has yet to play out – whether the strong dollar deters international investors from entering the U.S. real estate market, or as their own home country currencies weaken, they come to increasingly view it as a haven.

“It’s not necessarily clear which one of those two is going to win out,” he said.

by Andrew Khouri | Los Angeles Times

McMansions Are Back And They’re Bigger Than Ever

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There was a small ray of hope just after the Lehman collapse that one of the most lamentable characteristics of US society – the relentless urge to build massive McMansions (funding questions aside) – was fading. Alas, as the Census Bureau confirmed this week, that normalization in the innate American desire for bigger, bigger, bigger not only did not go away but is now back with a bang.

According to just released data, both the median and average size of a new single-family home built in 2015 hit new all time highs of 2,467 and 2,687 square feet, respectively.

And while it is known that in absolute number terms the total number of new home sales is still a fraction of what it was before the crisis, the one strata of new home sales which appears to not only not have been impacted but is openly flourishing once more, are the same McMansions which cater to the New Normal uber wealthy (which incidentally are the same as the Old Normal uber wealthy, only wealthier) and which for many symbolize America’s unbridled greed for mega housing no matter the cost.

Not surprisingly, as size has increased so has price: as we reported recently, the median price for sold new single-family homes just hit record a high of $321,100.

The data broken down by region reveals something unexpected: after nearly two decades of supremacy for the Northeast in having the largest new homes, for the past couple of years the region where the largest homes are built is the South.

While historically in the past the need for bigger housing could be explained away with the increase in the size of the US household, this is no longer the case, and as we showed last week, household formation in the US has cratered. In fact, for the first time In 130 years, more young adults live with parents than with partners

…so the only logical explanation for this latest push to build ever bigger houses is a simple one: size matters.

Furthermore it turns out it is not only size that matters but amenities. As the chart below shows, virtually all newly-built houses have A/Cs, increasingly more have 3 or more car garages, 3 or more bathrooms, and for the first time, there were more 4-bedroom than 3-bedroom new houses built.

In conclusion it is clear that the desire for McMansions has not gone away, at least not among those who can afford them. For everyone else who can’t afford a mega home or any home for that matter: good luck renting Blackstone’s McApartment, whose price incidentally has soared by 8% in the past year.

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For those curious for more, here is a snapshot of the typical characteristics of all 2015 new housing courtesy of the Census Bureau:

Of the 648,000 single-family homes completed in 2015:

  • 600,000 had air-conditioning.
  • 66,000 had two bedrooms or less and 282,000 had four bedrooms or more.
  • 25,000 had one and one-half bathrooms or less, whereas 246,000 homes had three or more bathrooms.
  • 122,000 had fiber cement as the principal exterior wall material.
  • 183,000 had a patio and a porch and 14,000 had a patio and a deck.
  • 137,000 had an open foyer.

The median size of a completed single-family house was 2,467 square feet.

Of the 320,000 multifamily units completed in 2015:

  • 3,000 were age-restricted.
  • 146,000 were in buildings with 50 units or more.
  • 148,000 had two or more bathrooms.
  • 35,000 had three or more bedrooms.

The median size of multifamily units built for rent was 1,057 square feet, while the median of those built for sale was 1,408 square feet.

* * *

Of the 14,000 multifamily buildings completed in 2015:

  • 7,000 had one or two floors.
  • 12,000 were constructed using wood framing.
  • 6,000 had a heat pump for the heating system.

* * *

Of the 501,000 single-family homes sold in 2015:

  • 453,000 were detached homes, 49,000 were attached homes.
  • 327,000 had a 2-car garage and 131,000 had a garage for 3 cars or more.
  • 200,000 had one story, 278,000 had two stories, and 24,000 had three stories or more.
  • 348,000 were paid for using conventional financing and 42,000 were VA-guaranteed.

The median sales price of new single-family homes sold was $296,400 in 2015, compared with the average sales price of $360,600.

The median size of a new single-family home sold was 2,520 square feet.

The type of foundation was a full or partial basement for 80% percent of the new single-family homes sold in the Midwest compared with 8% in the South.

109,000 contractor-built single-family homes were started in 2015.

source: ZeroHedge

Sales of New Homes Fall on Slump in West

https://s16-us2.ixquick.com/cgi-bin/serveimage?url=http%3A%2F%2Fassets.site-static.com%2FuserFiles%2F309%2Fimage%2FHousing_Market.JPG&sp=7c4a15640519e1a0f951ca3407211459Purchases of new homes unexpectedly declined in March for a third month, reflecting the weakest pace of demand in the West since July 2014.

Total sales decreased 1.5% to a 511,000 annualized pace, a Commerce Department report showed Monday. The median forecast in a Bloomberg survey was for a gain to 520,000. In Western states, demand slumped 23.6%.

Purchases rose in two regions last month, indicating uneven demand at the start of the busiest time of the year for builders and real estate agents. While new construction has been showing limited upside, cheap borrowing costs and solid hiring will help ensure residential real estate continues to expand.

“Housing is certainly not booming,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, N.Y., said before the report. “Some people may be shut out of the market because lending standards are still tight. There may still be some reluctance to buy versus rent.”

Even so, “through the volatility, the trend is still more up than down, and we expect modest growth in sales,” he said.

Economists’ estimates for new-home sales ranged from 488,000 to 540,000. February purchases were revised to 519,000 from 512,000. The monthly data are generally volatile, one reason economists prefer to look at longer term trends.

The report said there was 90% confidence the change in sales last month ranged from a 13.5% drop to a 16.5% increase.

Sales in the West declined to a 107,000 annualized rate in March after surging 21.7% the previous month to 140,000. In the South, purchases climbed 5% to a 314,000 pace in March, the strongest in 13 months. Sales in the Midwest advanced 18.5%, the first gain in three months, and were unchanged in the Northeast.

The median sales price decreased 1.8% from March 2015 to $288,000.

There were 246,000 new houses on the market at the end of March, the most since September 2009. The supply of homes at the current sales rate rose to 5.8 months, the highest since September, from 5.6 months in the prior period.

From a year earlier, purchases increased 5.8% on an unadjusted basis.

New-home sales, which account for less than 10% of the residential market, are tabulated when contracts get signed. They are generally considered a timelier barometer of the residential market than purchases of previously owned dwellings, which are calculated when a contract closes, typically a month or two later.

Borrowing costs are hovering close to a three-year low, helping to bring house purchases within the reach of more Americans. The average rate for a 30-year fixed mortgage was 3.59% last week, down from 3.97% at the start of the year, according to data from Freddie Mac.

The job market is another source of support. Monthly payrolls growth averaged 234,000 in the past year, and the unemployment rate of 5% is near an eight-year low. Still, year-over-year wage gains have been stuck in a 2% to 2.5% range since the economic expansion began in mid-2009.

The market for previously owned homes improved last month, climbing 5.1% to a 5.33 million annualized rate, the National Association of Realtors reported April 20. Prices rose as inventories remained tight.

Even so, the market is getting little boost from first-time buyers, who accounted for 30% of all existing-home purchases, a historically low share, according to the group.

Recent data on home building has been less encouraging, although those figures are volatile month to month. New-home construction slumped in March, reflecting a broad-based retreat, a Commerce Department report showed last week. Home starts fell 8.8% to the weakest annual pace since October. Permits, a proxy for future construction, also unexpectedly dropped.

Source: National Mortgage News

HSBC Curbs Mortgage Options to Chinese Nationals Buying U.S. Real Estate

https://i0.wp.com/libertyblitzkrieg.com/wp-content/uploads/2016/01/Screen-Shot-2016-01-28-at-9.08.53-AM-768x770.jpgTwo days ago, I published a post explaining how the super high end real estate bubble had popped, and how signs of this reality have emerged across America. Here’s an excerpt from that post, The Luxury Housing Bubble Pops – Overseas Investors Struggle to Sell Overpriced Mansions:

The six-bedroom mansion in the shadow of Southern California’s Sierra Madre Mountains has lime trees and a swimming pool, tennis courts and a sauna — the kind of place that would have sold quickly just a year ago, according to real estate agent Kanney Zhang.

Not now.

Zhang is shopping it for a discounted $3.68 million, but nobody’s biting. Her clients, a couple from China, are getting anxious. They’re the kind of well-heeled international investors who fueled a four-year luxury real estate boom that helped pull America out of its worst housing slump since the 1930s. Now the couple is reeling from the selloff in the Chinese stock market and looking to raise cash to shore up finances.

In the Los Angeles suburb of Arcadia, where Zhang is struggling to sell the six-bedroom home, dozens of aging ranch houses were demolished to make way for 38 mansions built with Chinese buyers in mind. They have manicured lawns and wok kitchens and are priced as high as $12 million. Many of them sit empty because the prices are out of the range of most domestic buyers, said Re/Max broker Rudy Kusuma, who blames a crackdown by the Chinese on large sums leaving the country.

Well, I have some more bad news for mansion-flipping Chinese nationals.

From Reuters:

Europe’s biggest lender HSBC will no longer provide mortgages to some Chinese nationals who buy real estate in the United States, a policy change that comes as Beijing is battling to stem a swelling crowd of citizens trying to get money out of China.

An HSBC spokesman in New York told Reuters on Wednesday that the new policy went into effect last week, roughly a month after China suspended Standard Chartered and DBS Group Holdings Ltd from conducting some foreign exchange business and as authorities try to limit capital outflows.

Realtors of luxury property in cities like New York, Los Angeles, and Vancouver, said more than 80 percent of wealthy Chinese buyers have ties to China.

Luxury homes news website Mansion Global, which first reported the HSBC policy change, said it would affect Chinese nationals holding temporary visitor ‘B’ visas if the majority of their income and assets are maintained in China.

Meanwhile…

HSBC’s pivot away from lending to some Chinese nationals abroad comes as other international banks clamor to lend more to wealthy Chinese.

The Royal Bank of Canada scrapped its C$1.25 million cap on mortgages to borrowers with no local credit history last year in a bid to tap into surging demand for financing from wealthy immigrant buyers.

For the Wealthiest, a Private Tax System That Saves Them Billions

Buying Power

For the Wealthiest, a Private Tax System That Saves Them Billions

Daniel S. Loeb, shown with his wife, Margaret, runs the $17 billion Third Point hedge fund. Mr. Loeb, who has owned a home in East Hampton, has contributed to Jeb Bush’s super PAC and given $1 million to the American Unity Super PAC, which supports gay rights.

By NOAM SCHEIBER and PATRICIA COHEN for The New York Times, December 29, 2015

WASHINGTON — The hedge fund magnates Daniel S. Loeb, Louis Moore Bacon and Steven A. Cohen have much in common. They have managed billions of dollars in capital, earning vast fortunes. They have invested large sums in art — and millions more in political candidates.
Moreover, each has exploited an esoteric tax loophole that saved them millions in taxes. The trick? Route the money to Bermuda and back.

With inequality at its highest levels in nearly a century and public debate rising over whether the government should respond to it through higher taxes on the wealthy, the very richest Americans have financed a sophisticated and astonishingly effective apparatus for shielding their fortunes. Some call it the “income defense industry,” consisting of a high-priced phalanx of lawyers, estate planners, lobbyists and anti-tax activists who exploit and defend a dizzying array of tax maneuvers, virtually none of them available to taxpayers of more modest means.

In recent years, this apparatus has become one of the most powerful avenues of influence for wealthy Americans of all political stripes, including Mr. Loeb and Mr. Cohen, who give heavily to Republicans, and the liberal billionaire George Soros, who has called for higher levies on the rich while at the same time using tax loopholes to bolster his own fortune.

All are among a small group providing much of the early cash for the 2016 presidential campaign.
Operating largely out of public view — in tax court, through arcane legislative provisions and in private negotiations with the Internal Revenue Service — the wealthy have used their influence to steadily whittle away at the government’s ability to tax them. The effect has been to create a kind of private tax system, catering to only several thousand Americans.

The impact on their own fortunes has been stark. Two decades ago, when Bill Clinton was elected president, the 400 highest-earning taxpayers in America paid nearly 27 percent of their income in federal taxes, according to I.R.S. data. By 2012, when President Obama was re-elected, that figure had fallen to less than 17 percent, which is just slightly more than the typical family making $100,000 annually, when payroll taxes are included for both groups.

The ultra-wealthy “literally pay millions of dollars for these services,” said Jeffrey A. Winters, a political scientist at Northwestern University who studies economic elites, “and save in the tens or hundreds of millions in taxes.”

Some of the biggest current tax battles are being waged by some of the most generous supporters of 2016 candidates. They include the families of the hedge fund investors Robert Mercer, who gives to Republicans, and James Simons, who gives to Democrats; as well as the options trader Jeffrey Yass, a libertarian-leaning donor to Republicans.

Mr. Yass’s firm is litigating what the agency deemed to be tens of millions of dollars in underpaid taxes. Renaissance Technologies, the hedge fund Mr. Simons founded and which Mr. Mercer helps run, is currently under review by the I.R.S. over a loophole that saved their fund an estimated $6.8 billion in taxes over roughly a decade, according to a Senate investigation. Some of these same families have also contributed hundreds of thousands of dollars to conservative groups that have attacked virtually any effort to raises taxes on the wealthy.

In the heat of the presidential race, the influence of wealthy donors is being tested. At stake is the Obama administration’s 2013 tax increase on high earners — the first substantial increase in two decades — and an I.R.S. initiative to ensure that, in effect, the higher rates stick by cracking down on tax avoidance by the wealthy.

While Democrats like Bernie Sanders and Hillary Clinton have pledged to raise taxes on these voters, virtually every Republican has advanced policies that would vastly reduce their tax bills, sometimes to as little as 10 percent of their income.

At the same time, most Republican candidates favor eliminating the inheritance tax, a move that would allow the new rich, and the old, to bequeath their fortunes intact, solidifying the wealth gap far into the future. And several have proposed a substantial reduction — or even elimination — in the already deeply discounted tax rates on investment gains, a foundation of the most lucrative tax strategies.

“There’s this notion that the wealthy use their money to buy politicians; more accurately, it’s that they can buy policy, and specifically, tax policy,” said Jared Bernstein, a senior fellow at the left-leaning Center on Budget and Policy Priorities who served as chief economic adviser to Vice President Joseph R. Biden Jr. “That’s why these egregious loopholes exist, and why it’s so hard to close them.”

The Family Office

Each of the top 400 earners took home, on average, about $336 million in 2012, the latest year for which data is available. If the bulk of that money had been paid out as salary or wages, as it is for the typical American, the tax obligations of those wealthy taxpayers could have more than doubled.

Instead, much of their income came from convoluted partnerships and high-end investment funds. Other earnings accrued in opaque family trusts and foreign shell corporations, beyond the reach of the tax authorities.

The well-paid technicians who devise these arrangements toil away at white-shoe law firms and elite investment banks, as well as a variety of obscure boutiques. But at the fulcrum of the strategizing over how to minimize taxes are so-called family offices, the customized wealth management departments of Americans with hundreds of millions or billions of dollars in assets.
Family offices have existed since the late 19th century, when the Rockefellers pioneered the institution, and gained popularity in the 1980s. But they have proliferated rapidly over the last decade, as the ranks of the super-rich, and the size of their fortunes, swelled to record proportions.
“We have so much wealth being created, significant wealth, that it creates a need for the family office structure now,” said Sree Arimilli, an industry recruiting consultant.

Family offices, many of which are dedicated to managing and protecting the wealth of a single family, oversee everything from investment strategy to philanthropy. But tax planning is a core function. While the specific techniques these advisers employ to minimize taxes can be mind-numbingly complex, they generally follow a few simple principles, like converting one type of income into another type that’s taxed at a lower rate.

Mr. Loeb, for example, has invested in a Bermuda-based reinsurer — an insurer to insurance companies — that turns around and invests the money in his hedge fund. That maneuver transforms his profits from short-term bets in the market, which the government taxes at roughly 40 percent, into long-term profits, known as capital gains, which are taxed at roughly half that rate. It has had the added advantage of letting Mr. Loeb defer taxes on this income indefinitely, allowing his wealth to compound and grow more quickly.

The Bermuda insurer Mr. Loeb helped set up went public in 2013 and is active in the insurance business, not merely a tax dodge. Mr. Cohen and Mr. Bacon abandoned similar insurance-based strategies in recent years. “Our investment in Max Re was not a tax-driven scheme, but rather a sound investment response to investor interest in a more dynamically managed portfolio akin to Warren Buffett’s Berkshire Hathaway,” said Mr. Bacon, who leads Moore Capital Management. “Hedge funds were a minority of the investment portfolio, and Moore Capital’s products a much smaller subset of this alternative portfolio.” Mr. Loeb and Mr. Cohen declined to comment.

Louis Moore Bacon, shown with his wife, Gabrielle, is the founder of a highly successful hedge fund and a leading contributor to Jeb Bush’s super PAC. Among his homes is one on Robins Island, off Long Island. Bloomberg News, via Getty Images

Organizing one’s business as a partnership can be lucrative in its own right. Some of the partnerships from which the wealthy derive their income are allowed to sell shares to the public, making it easy to cash out a chunk of the business while retaining control. But unlike publicly traded corporations, they pay no corporate income tax; the partners pay taxes as individuals. And the income taxes are often reduced by large deductions, such as for depreciation.

For large private partnerships, meanwhile, the I.R.S. often struggles “to determine whether a tax shelter exists, an abusive tax transaction is being used,” according to a recent report by the Government Accountability Office. The agency is not allowed to collect underpaid taxes directly from these partnerships, even those with several hundred partners. Instead, it must collect from each individual partner, requiring the agency to commit significant time and manpower.

The wealthy can also avail themselves of a range of esoteric and customized tax deductions that go far beyond writing off a home office or dinner with a client. One aggressive strategy is to place income in a type of charitable trust, generating a deduction that offsets the income tax. The trust then purchases what’s known as a private placement life insurance policy, which invests the money on a tax-free basis, frequently in a number of hedge funds. The person’s heirs can inherit, also tax-free, whatever money is left after the trust pays out a percentage each year to charity, often a considerable sum.

Many of these maneuvers are well established, and wealthy taxpayers say they are well within their rights to exploit them. Others exist in a legal gray area, its boundaries defined by the willingness of taxpayers to defend their strategies against the I.R.S. Almost all are outside the price range of the average taxpayer.

Among tax lawyers and accountants, “the best and brightest get a high from figuring out how to do tricky little deals,” said Karen L. Hawkins, who until recently headed the I.R.S. office that oversees tax practitioners. “Frankly, it is almost beyond the intellectual and resource capacity of the Internal Revenue Service to catch.”

The combination of cost and complexity has had a profound effect, tax experts said. Whatever tax rates Congress sets, the actual rates paid by the ultra-wealthy tend to fall over time as they exploit their numerous advantages.

From Mr. Obama’s inauguration through the end of 2012, federal income tax rates on individuals did not change (excluding payroll taxes). But the highest-earning one-thousandth of Americans went from paying an average of 20.9 percent to 17.6 percent. By contrast, the top 1 percent, excluding the very wealthy, went from paying just under 24 percent on average to just over that level.

“We do have two different tax systems, one for normal wage-earners and another for those who can afford sophisticated tax advice,” said Victor Fleischer, a law professor at the University of San Diego who studies the intersection of tax policy and inequality. “At the very top of the income distribution, the effective rate of tax goes down, contrary to the principles of a progressive income tax system.”

A Very Quiet Defense

Having helped foster an alternative tax system, wealthy Americans have been aggressive in defending it.

Trade groups representing the Bermuda-based insurance company Mr. Loeb helped set up, for example, have spent the last several months pleading with the I.R.S. that its proposed rules tightening the hedge fund insurance loophole are too onerous.

The major industry group representing private equity funds spends hundreds of thousands of dollars each year lobbying on such issues as “carried interest,” the granddaddy of Wall Street tax loopholes, which makes it possible for fund managers to pay the capital gains rate rather than the higher standard tax rate on a substantial share of their income for running the fund.

The budget deal that Congress approved in October allows the I.R.S. to collect underpaid taxes from large partnerships at the firm level for the first time — which is far easier for the agency — thanks to a provision that lawmakers slipped into the deal at the last minute, before many lobbyists could mobilize. But the new rules are relatively weak — firms can still choose to have partners pay the taxes — and don’t take effect until 2018, giving the wealthy plenty of time to weaken them further.

Shortly after the provision passed, the Managed Funds Association, an industry group that represents prominent hedge funds like D. E. Shaw, Renaissance Technologies, Tiger Management and Third Point, began meeting with members of Congress to discuss a wish list of adjustments. The founders of these funds have all donated at least $500,000 to 2016 presidential candidates. During the Obama presidency, the association itself has risen to become one of the most powerful trade groups in Washington, spending over $4 million a year on lobbying.

And while the lobbying clout of the wealthy is most often deployed through industry trade associations and lawyers, some rich families have locked arms to advance their interests more directly.

The inheritance tax has been a primary target. In the early 1990s, a California family office executive named Patricia Soldano began lobbying on behalf of wealthy families to repeal the tax, which would not only save them money, but also make it easier to preserve their business empires from one generation to the next. The idea struck many hardened operatives as unrealistic at the time, given that the tax affected only the wealthiest Americans. But Ms. Soldano’s efforts — funded in part by the Mars and Koch families — laid the groundwork for a one-year elimination in 2010.
The tax has been restored, but currently applies only to couples leaving roughly $11 million or more to their heirs, up from those leaving more than $1.2 million when Ms. Soldano started her campaign. It affected fewer than 5,200 families last year.

“If anyone would have told me we’d be where we are today, I would never have guessed it,” Ms. Soldano said in an interview.

Some of the most profound victories are barely known outside the insular world of the wealthy and their financial managers.

In 2009, Congress set out to require that investment partnerships like hedge funds register with the Securities and Exchange Commission, partly so that regulators would have a better grasp on the risks they posed to the financial system.

The early legislative language would have required single-family offices to register as well, exposing the highly secretive institutions to scrutiny that their clients were eager to avoid. Some of the I.R.S.’s cases against the wealthy originate with tips from the S.E.C., which is often better positioned to spot tax evasion.

By the summer of 2009, several family office executives had formed a lobbying group called the Private Investor Coalition to push back against the proposal. The coalition won an exemption in the 2010 Dodd-Frank financial reform bill, then spent much of the next year persuading the S.E.C. to largely adopt its preferred definition of “family office.”

So expansive was the resulting loophole that Mr. Soros’s $24.5 billion hedge fund took advantage of it, converting to a family office after returning capital to its remaining outside investors. The hedge fund manager Stanley Druckenmiller, a former business partner of Mr. Soros, took the same step.

The Soros family, which generally supports Democrats, has committed at least $1 million to the 2016 presidential campaign; Mr. Druckenmiller, who favors Republicans, has put slightly more than $300,000 behind three different G.O.P. presidential candidates.

A slide presentation from the Private Investor Coalition’s 2013 annual meeting credited the success to multiple meetings with members of the Senate Banking Committee, the House Financial Services Committee, congressional staff and S.E.C. staff. “All with a low profile,” the document noted. “We got most of what we wanted AND a few extras we didn’t request.”

A Hobbled Monitor

After all the loopholes and all the lobbying, what remains of the government’s ability to collect taxes from the wealthy runs up against one final hurdle: the crisis facing the I.R.S.
President Obama has made fighting tax evasion by the rich a priority. In 2010, he signed legislation making it easier to identify Americans who squirreled away assets in Swiss bank accounts and Cayman Islands shelters.

His I.R.S. convened a Global High Wealth Industry Group, known colloquially as “the wealth squad,” to scrutinize the returns of Americans with incomes of at least $10 million a year.
But while these measures have helped the government retrieve billions, the agency’s efforts have flagged in the face of scandal, political pressure and budget cuts. Between 2010, the year before Republicans took control of the House of Representatives, and 2014, the I.R.S. budget dropped by almost $2 billion in real terms, or nearly 15 percent. That has forced it to shed about 5,000 high-level enforcement positions out of about 23,000, according to the agency.

Audit rates for the $10 million-plus club spiked in the first few years of the Global High Wealth program, but have plummeted since then.

Steven A. Cohen, shown with his wife, Alexandra, is the founder of SAC Capital and owns a home in East Hampton. He is a prominent art collector and has focused his political contributions on a super PAC for Gov. Chris Christie.

The political challenge for the agency became especially acute in 2013, after the agency acknowledged singling out conservative nonprofits in a review of political activity by tax-exempt groups. (Senior officials left the agency as a result of the controversy.)

Several former I.R.S. officials, including Marcus Owens, who once headed the agency’s Exempt Organizations division, said the controversy badly damaged the agency’s willingness to investigate other taxpayers, even outside the exempt division.

“I.R.S. enforcement is either absent or diminished” in certain areas, he said. Mr. Owens added that his former department — which provides some oversight of money used by charities and nonprofits — has been decimated.

Groups like FreedomWorks and Americans for Tax Reform, which are financed partly by the foundations of wealthy families and large businesses, have called for impeaching the I.R.S. commissioner. They are bolstered by deep-pocketed advocacy groups like the Club for Growth, which has aided primary challenges against Republicans who have voted in favor of higher taxes.
In 2014, the Club for Growth Action fund raised more than $9 million and spent much of it helping candidates critical of the I.R.S. Roughly 60 percent of the money raised by the fund came from just 12 donors, including Mr. Mercer, who has given the group $2 million in the last five years. Mr. Mercer and his immediate family have also donated more than $11 million to several super PACs supporting Senator Ted Cruz of Texas, an outspoken I.R.S. critic and a presidential candidate.
Another prominent donor is Mr. Yass, who helps run a trading firm called the Susquehanna International Group. He donated $100,000 to the Club for Growth Action fund in September. Mr. Yass serves on the board of the libertarian Cato Institute and, like Mr. Mercer, appears to subscribe to limited-government views that partly motivate his political spending.

But he may also have more than a passing interest in creating a political environment that undermines the I.R.S. Susquehanna is currently challenging a proposed I.R.S. determination that an affiliate of the firm effectively repatriated more than $375 million in income from subsidiaries located in Ireland and the Cayman Islands in 2007, creating a large tax liability. (The affiliate brought the money back to the United States in later years and paid dividend taxes on it; the I.R.S. asserts that it should have paid the ordinary income tax rate, at a cost of tens of millions of dollars more.)

In June, Mr. Yass donated more than $2 million to three super PACs aligned with Senator Rand Paul of Kentucky, who has called for taxing all income at a flat rate of 14.5 percent. That change in itself would save wealthy supporters like Mr. Yass millions of dollars.
Mr. Paul, also a presidential candididate, has suggested going even further, calling the I.R.S. a “rogue agency” and circulating a petition in 2013 calling for the tax equivalent of regime change. “Be it now therefore resolved,” the petition reads, “that we, the undersigned, demand the immediate abolishment of the Internal Revenue Service.”

But even if that campaign is a long shot, the richest taxpayers will continue to enjoy advantages over everyone else.

For the ultra-wealthy, “our tax code is like a leaky barrel,” said J. Todd Metcalf, the Democrats’ chief tax counsel on the Senate Finance Committee. ”Unless you plug every hole or get a new barrel, it’s going to leak out.”

The Making of the Most Expensive Mansion in History

On a hilltop in Bel Air, a 100,000-square-foot giga-mansion is under construction, for no one in particular. The asking price—$500 million—would shatter records, but, as ridiculous as it sounds, in L.A.’s unbridled real-estate bubble, this house could be billed as a bargain.

My mansion really is worth $500M, claims the man behind most expensive home ever built which boasts five swimming pools, a casino and a VIP nightclub

  • The Bel Air home, which will be finished in 2017, is close to those of celebrities such as Jennifer Aniston and Elon Musk
  • The property has panoramic views of the LA basin and Pacific Ocean and will cover more than 100,000 square feet
  • The price works out to about $5,000 per square foot, which the property’s developer Nile Niami says is a good price for what the buyer is getting
  • The home will have five swimming pools, a casino, a nightclub and a lounge with jellyfish tanks replacing the walls and ceilings
  • Niami, behind films including action-thriller The Patriot, hopes to double the world-record for the most expensive home ever sold

A mega-mansion in Bel Air has been listed for a whopping $500million – but the extravagant home is worth its value, the real-estate developer claims.

Sitting on a hilltop with views of the San Gabriel Mountains, LA basin, Beverly Hills and the Pacific Ocean, the home will have five swimming pools, a casino, a nightclub with VIP access, a lounge with jellyfish tanks replacing the walls and ceilings, and many other amenities.

The home, which will be finished in 2017 and boasts neighbors including Jennifer Aniston and Elon Musk, will be more than 100,000 square feet – twice the size of the White House.

A home being built in the Bel Air neighborhood of Los Angeles, California, by real-estate developer Nile Niami is being listed for $500million. Above is a depiction of what it will look like when finished.

A home being built in the Bel Air neighborhood of Los Angeles, California, by real-estate developer Nile Niami is being listed for $500million. Above is a depiction of what it will look like when finished

The 100,000-square-foot home, which is still being built (pictured) is close to several celebrities' houses 

The 100,000-square-foot home, which is still being built (pictured) is close to several celebrities’ houses.

The 100,000-square-foot home, which is still being built (pictured) is close to several celebrities’ houses 

The price works out to about $5,000 per square foot, which Hollywood producer-turned-developer 47-year-old Nile Niami notes is less than half of what some billionaires pay for Manhattan penthouses.

Niami, pictured in 2013, said the property will be worth the cost

Niami, pictured in 2013, said the property will be worth the cost.

‘We have a very specific client in mind,’ Niami told Details magazine. ‘Someone who already has a $100million yacht and seven houses all over the world, in London and Dubai and whatever.

‘To be able to say that the biggest, most expensive house in the world is here, that will really be good for LA.’

Niami, behind films including action-thriller The Patriot, hopes to double the world-record for the most expensive home ever sold with the $500million asking price.

He grew unpopular with neighbors last fall, when he sliced off the top of a hill to create panoramic vistas on his four-acre lot.

For weeks, dump trucks filled the neighborhood’s narrow streets as they removed about 40,000 cubic yards of dirt from the property.

Drew Fenton, the real-estate broker listing the property, said that the home is important to Los Angeles.

‘It is by far the most important estate project in Los Angeles over the last 25 years and will raise the bar for all other estates built in the city,’ he told Details.

The home will have several features that most residential properties don’t, including a two-story waterfall, temperature-controlled room for storing fresh flowers, a cigar lounge and an indoor-outdoor dance floor. 

It also will have a 30-car garage, 40-seat screening room and a 6,000-square-foot master suite.  

Sitting on a hilltop with views of the San Gabriel Mountains, LA basin, Beverly Hills and the Pacific Ocean, the home will have five swimming pools, a casino, a nightclub with VIP access, a lounge with jellyfish tanks replacing the walls and ceilings, and many other amenities.

Sitting on a hilltop with views of the San Gabriel Mountains, LA basin, Beverly Hills and the Pacific Ocean, the home will have five swimming pools, a casino, a nightclub with VIP access, a lounge with jellyfish tanks replacing the walls and ceilings, and many other amenities

The price works out to about $5,000 per square foot, which Hollywood producer-turned-developer Niami notes is less than half of what some billionaires pay for Manhattan penthouses.

The price works out to about $5,000 per square foot, which Hollywood producer-turned-developer Niami notes is less than half of what some billionaires pay for Manhattan penthouses.

But when inside the master suite, ‘it doesn’t look that big, because everything else is so big’, Niami said.

It will have three smaller homes, four swimming pools including a 180ft long infinity pool and a 20,000-square-foot artificial lawn to comply with California’s drought-induced water restrictions.

A glass-walled, high-ceiling library will take part of the first floor, but Niami said not to expect to find books in the room.

‘Nobody really reads books,’ he said. ‘So I’m just going to fill the shelves with white books, for looks.’

Niami sells his homes fully furnished and decorated to the buyers’ tastes.

The property’s chief architect, Paul McClean, told Details that listing prices are not often the reality. 

Drew Fenton, the real-estate broker listing the property, said that the home is important to Los Angeles in that it will ‘raise the bar for all other estates built in the city.’

Drew Fenton, the real-estate broker listing the property, said that the home is important to Los Angeles in that it will ‘raise the bar for all other estates built in the city’

‘The numbers right now are crazy, no matter how you look at them,’ he said. ‘But for most people who buy these kinds of houses, it’s not a decision that they calculate based on price per square foot.

‘It’s more about the emotional draw. With Nile, we’re trying to sell a lifestyle, a sense of how people imagine they would live.’

Niami said he does not know who sold him the Bel Air plot – the secret transaction took place through a bank trust where the owner remained anonymous.

The real-estate developer declined to say how much he paid for the property, which originally included a decrepit home that has since been torn down.

As for who he’d like to live in his soon-to-be mega-mansion: ‘It doesn’t make a difference as long as they pay the money.

The home will have several features that most residential properties don’t, including a two-story waterfall, temperature-controlled room for storing fresh flowers, a cigar lounge and an indoor-outdoor dance floor. This image gives an idea of what it will look like when finished.

The home will have several features that most residential properties don’t, including a two-story waterfall, temperature-controlled room for storing fresh flowers, a cigar lounge and an indoor-outdoor dance floor. This image gives an idea of what it will look like when finished.

Read more: http://www.dailymail.co.uk/news/article-3318573/Nile-Niami-claims-Bel-Air-meganmansion-really-worth-500million.html#ixzz3racjlltZ

Ultra Wealthy Buying Homes Globally for Investment Diversification, Gain Citizenship

Ultra Wealthy Buying Homes Globally for Investment Diversification, Gain Citizenship

by Michael Gerrity in the World Property Journal

According to a study by Wealth-X and the Sotheby’s International Realty, a growing number of ultra-high net worth (UHNW) individuals view homes as ‘opportunity gateways’, driving buying decisions that are based on potential opportunities from owning these luxury residential properties.

UHNW-Real-Estate-Index-(Q2,-2015).png

The UHNW Luxury Real Estate Report: Homes As Opportunity Gateways reveals two trends that are fueling the rise in the number of ultra wealthy individuals who are buying luxury homes:
 
1) International home-buying by UHNW individuals (defined as those with at least US$30 million in assets) from emerging nations seeking a safe investment diversification.
 
2) Home-buying as part of a program to gain citizenship or residency status in foreign nations.
 
The report provides insight into the UHNW residential real estate opportunities in Sydney and Vancouver for buyers seeking safe investment diversification; and Malta, the Bahamas and Sao Paulo, which may appeal to ultra wealthy buyers who are seeking citizenship or residency through property investment.

Key report findings include:
 

  • 12% of second homes purchased by UHNW individuals in emerging countries (those who reside in BRICS nations) are located outside their country of residence.
  • Recent market fluctuations in emerging nations are leading a new generation of UHNW investors to consider investing in luxury residential real estate in Western markets.
  • Chinese UHNW individuals make up the third largest share of foreign UHNW homeowners in the United States, behind only Canada and the United Kingdom.
  • Twenty nations in Europe and the Americas now offer citizenship or residency programs to individuals willing to invest in domestic residential real estate.
  • Many residential real estate markets with such programs – including Sao Paulo, Malta, and the Bahamas – offer good long-term investment opportunities.

The UHNW Residential Real Estate index, tracked by Wealth-X, rose to 115.2 in Q2 2015, an 8.3% rise year-on-year, and the sixth consecutive quarter in which the index has risen. The continued rise in the index reflects the confidence of UHNW individuals to invest in luxury residential real estate.
 
The index takes into account the full range of luxury residential properties that are owned by the world’s wealthiest individuals. Wealth-X data shows there are 211,275 UHNW individuals globally, who collectively hold nearly $3 trillion in real estate assets, equal to 10% of their net worth.

Wealth-X President David Friedman commented, “Wealth-X is pleased to partner with the Sotheby’s International Realty brand for this third luxury real estate report for 2015. This new joint study explores the trends and home-buying motivations of a distinct group of ultra wealthy individuals in the emerging markets. As their wealth grows, so will their investment fueled by various motivations, be it to diversify their portfolio or to gain citizenship or residency in a foreign country.”
 
According to Philip White, president and chief executive officer, Sotheby’s International Realty Affiliates LLC, this joint report was designed to provide an understanding of the trends driving buying decisions of ultra-high net worth individuals around the world. “The research reveals trends that go beyond traditional motivations and help guide real estate investments that contribute to long-term wealth,” he said.  “It underscores the important role real estate plays in a larger strategy to build a valuable asset portfolio.”

UHNW-second-citizenship-origin-countries.png

Why China Is on an L.A. Spending Spree: “It’s Just Monopoly Money to Them”

by Seth Abramovitch in The Hollywood Reporter

“$20,000 on drinks is a plain night on the town,” says one local restaurateur, as big-time Chinese money pours into Los Angeles, consuming everything from wine to diamonds to watches to cars to prime real estate (in one case, 25,000 square feet for a teenage college student).

A version of this story first appeared in the Oct. 9 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

The ultra-wealthy Chinese tend to get what they want, and right now most of them want one thing: to get out. More than 60 percent of China’s most affluent citizens have already left the country or are planning to leave it, according to the Los Angeles Times. And L.A. — a politically stable and always-comfortable metropolis where catering to the rich is a way of life — is among their most coveted destinations. The numbers don’t lie: In 2014, a full 20 percent of the city’s $8 billion in real estate sales was purchased by Chinese buyers. Showing no signs of slowing down, this injection of Chinese capital and influence can be felt at every level of L.A.’s culture of consumption.

Thanks to big import and consumption taxes introduced in recent years by President Xi Jinping, most wealthy Chinese consider the cost of homes and luxury goods in L.A. to be something of a bargain. “They’ll buy high-end watches in threes and fours,” says Korosh Soltani, owner of Rodeo Drive jewelry store David Orgell, of his Chinese clientele, who’ll typically drop $200,000 on gifts in a single shopping spree. (Soltani has so many Chinese customers, he asks companies like Corum and Baume & Mercier to send him watches bearing the Mandarin logos they are more familiar with.)

Brand names are essential: Hermes tableware, Lalique crystal and yellow-gold jewelry from Carrera y Carrera — gold is the most popular gift among Chinese — are consistent hot sellers. Spending can easily soar much higher if shopping for a special occasion: “We just had a Chinese family come in looking for the finest, most vivid canary yellow diamond you can have. Fortunately I had one,” says Beverly Hills jeweler Martin Katz of a recent engagement ring purchase. “It was a seven-figure-priced stone in the six-carat range.”

While money is frequently no object, the Chinese still like to negotiate and won’t close a deal without getting “big discounts … it’s in the culture,” Soltanti says. They also expect a little something extra: “We ask our brands to give us pens or hats that will keep them happy. They’re very appreciative of it.”

The Beverly Center, meanwhile, has taken active steps toward luring China’s big spenders: The high-end shopping mall — which houses Louis Vuitton, Prada and Fendi boutiques — provides a Chinese version of its website and brochures, staffs Mandarin-speaking concierges, accepts China UnionPay credit cards and promotes itself on Sina Weibo, China’s answer to Twitter.

“They arrive with this endless stream of money without working or earning it. It’s just Monopoly money to them,” says Gotham Dream Cars’ Rob Ferretti of Chinese customers who come to him in search of an exotic ride. They lease cars like the $397,000 Maybach 57S for $2,200 a day. Color-wise, “They love these light blues,” Ferretti says. They’re even particular about the car’s VIN number: They like when it has as many eights in it as possible.

“Eight in Chinese rhymes with the word for prosperity. It’s extremely significant,” explains architect Anthony Poon of Beverly Hills-based Poon Design Inc. The Chinese fixation on the number can verge on the obsessive: One client, whose husband is a major film director, wanted Poon to design her an 8,888-square-foot home, while another Chinese developer working on a luxury community in Pacific Palisades insists that it have eight estates.

“They understand vertical living very well, and they love new construction, so condos are very much in their wheelhouse,” says Beverly Hills realtor (and Real Housewives of Beverly Hills star) Mauricio Umansky of his Chinese clients, most of whom are relocating from densely packed urban centers like Shanghai to the comparative expansiveness of Arcadia, an L.A. suburb and Chinese-wealth magnet. If their kids are attending UCLA, parents will think nothing of spending $1 million to $3 million or more on a Westwood pied-a-terre instead of putting their children up in dorms. “The wealth and lack of reference point can be staggering,” marvels Poon, before sharing an anecdote about the family who purchased a 25,000-square-foot home in the Hollywood Hills for their teenage son. On the ultra-high-end market — mansions that cost $50 million and above — Umansky estimates that about 25 percent of sales are made to Chinese, a figure he says is climbing due to ongoing “political and financial uncertainty in China.”

When it comes to design, feng shui — the ancient philosophy of living in harmony with your surroundings — is a top priority among Chinese buyers, with architects scrambling to accommodate its highly specific criteria. According to Poon, a contained foyer is preferable to an open-plan entryway (it helps retain life force, or chi); floor plans must be simple, with no awkward or cramped spaces; furniture should be placed away from doors and be round, not rectangular; sloping backyards are a no-no (again, to avoid chi loss); and, says Umansky, “you don’t want the staircase facing the front door because it’s the money and fortune flowing out.”

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Dining, too, comes with its own set of Chinese rules. For a taste of home, Chinese emigres gravitate to authentic dumpling houses like Din Tai Fung — either the original in Arcadia or either of two trendier outposts in Costa Mesa and Glendale. (The latter location, nestled in Rick Caruso’s Americana at Brand, serves the much-coveted black-truffle soup dumplings, a Hong Kong delicacy.) Restaurateur Peter Garland, owner of Porta Via on Canon Drive, notes that uber-wealthy Chinese diners spend freely on high-end wines — especially chardonnay and California cabernet. That extends to any restaurant boasting a stellar wine list, as Beverly Hills mainstays like Cut or Mastro’s regularly draw a deep-pocketed Chinese clientele who’ll think nothing at dropping four-figures on rare vintages and for whom “$20,000 on drinks in one night is a plain night on the town,” says Poon.

Forget Mega Yachts — this mobile private island just upped the ante on billionaire toys

By Dennis Green in Business Insider

 

KOKOMO AILAND by MIGALOO PRIVATE SUBMERSIBLE YACHTSMigaloo SubmariesPart yacht, part private island, Kokomo Ailand is a new model for luxury on the high seas.

Yacht design has gotten pretty extravagant in recent years, but nothing compares to Kokomo Ailand.

More mobile island than yacht, Kokomo is a floating, semi-submersed vessel with a level of luxury that rivals a four-star resort. According to renderings, the “private floating habitat” features multiple decks and amenities, a sky-high penthouse suite, and a beach club.

The company behind it, Migaloo Private Submarines, hasn’t received any orders yet, but it claims Kokomo can be built to specification immediately with existing technology. According to a representative, “the price depends strongly on the client’s wishes.”

Keep scrolling to see the renderings for this insane new billionaire toy.

 

 

 

Part massive yacht, part private island, Kokomo Ailand has all the trappings of a luxury resort.

Part massive yacht, part private island, Kokomo Ailand has all the trappings of a luxury resort.

Migaloo Submaries

 

The owner’s penthouse sits 260 feet above sea level with two elevators, a glass-bottomed Jacuzzi, a private beach club, and ocean views.

The owner's penthouse sits 260 feet above sea level with two elevators, a glass-bottomed Jacuzzi, a private beach club, and ocean views.

Migaloo Submaries

 

Eight engines allow the mammoth platform to chug along at speeds up to 8 knots, or about 9 mph.

Eight engines allow the mammoth platform to chug along at speeds up to 8 knots, or about 9 mph.

Migaloo Submaries

 
 

One of the most exotic features is the jungle deck.

One of the most exotic features is the jungle deck.

Migaloo Submaries

 

It includes palm trees, vertical gardens, and waterfalls.

It includes palm trees, vertical gardens, and waterfalls.

Migaloo Submaries

 

There’s also a spa deck with a gym, a massage parlor, and beauty salons.

There's also a spa deck with a gym, a massage parlor, and beauty salons.

Migaloo Submaries

 
 

The garden deck is reserved for outdoor dining and lounging.

The garden deck is reserved for outdoor dining and lounging.

Migaloo Submaries

 

The real draw is the beach deck, replete with multiple pools, barbecue areas, underwater dining, a shark-feeding station, and an outdoor cinema.

The real draw is the beach deck, replete with multiple pools, barbecue areas, underwater dining, a shark-feeding station, and an outdoor cinema.

Migaloo Submaries

 

Designed with infinity pools and private balconies, the VIP and guest deck is under the beach deck.

Designed with infinity pools and private balconies, the VIP and guest deck is under the beach deck.

Migaloo Submaries

 

A helipad allows easy entry and exit to the island.

A helipad allows easy entry and exit to the island.

Migaloo Submaries

“She Sheds” Are the New Man Caves

Except they’re way, way better

First, there were actual caves. Then came man caves. So what’s the next hot thing in gender-specific sanctuaries? Meet the “she shed,” a backyard haven for busy women seeking a quiet reprieve from the world.

We’ve rounded up some of our favorites, from the humble aluminum-sided storage shed to the tricked-out den retreat.

Get inspired, then get away from everyone.

She Sheds Are the New Man Caves

First, define the purpose of your She Shed

Whether it’s for reading, crafting or indulging a fave hobby, like gardening.

She Sheds Are the New Man Caves

Or simply make it about chilling out

No dirt allowed in this elegant hideaway.

She Sheds Are the New Man Caves

Make it fancy

Ever say, “This is why we can’t have nice things”? Solution: Put all your nice things in your own private place (hello, crystal chandelier collection).

She Sheds Are the New Man Caves

Sometimes, a gal just needs a moment to herself

And a 45-minute nap in a padlocked hut finished with coordinating throw pillows.

She Sheds Are the New Man Caves

Serenity Now

Bedeck your bungalow with ivy and practically disappear into nature.

She Sheds Are the New Man Caves

Tree House chic

Just add lights, a daybed and a glass of wine.

She Sheds Are the New Man Caves

A Fresh Coat of Paint Goes a Long Way

The secret to transforming any shed into a personal reprieve.

She Sheds Are the New Man Caves

As Does a Trip to the Salvage Yard

This guy is made from recycled glass doors and windows.

She Sheds Are the New Man Caves

Hang a hammock for a lazy day

Um, is that an outdoor shower?

She Sheds Are the New Man Caves

What makes you feel relaxed?

For some, it’s about blurring the line between indoor and outdoor space…

She Sheds Are the New Man Caves

And for others…

It’s about creating a glorified bunker that says, “leave me be.”

She Sheds Are the New Man Caves

Keep it contemporary

With minimalist accessories and clean, modern lines.

She Sheds Are the New Man Caves

Or really own your theme

Like this quirky Zen den fit for a yoga goddess.

She Sheds Are the New Man Caves

And for that rare time you’re feeling neighborly

Throw open the door, add bar stools and a few bottles. The backyard pub is open for business.

The Art of Capital Flight

Contemporary art and apartments in major cities such as New York, London and Vancouver has become the two most important stores of wealth internationally. Forget gold as an inflation hedge; buy paintings.

by Kenneth Rogoff in Project Syndicate

CAMBRIDGE – What impact will China’s slowdown have on the red-hot contemporary art market? That might not seem like an obvious question, until one considers that, for emerging-market investors, art has become a critical tool for facilitating capital flight and hiding wealth. These investors have become a major factor in the art market’s spectacular price bubble of the last several years. So, with emerging market economies from Russia to Brazil mired in recession, will the bubble burst?

Just five months ago, Larry Fink, Chairman and CEO of BlackRock, the world’s largest asset manager, told an audience in Singapore that contemporary art has become one of the two most important stores of wealth internationally, along with apartments in major cities such as New York, London, and Vancouver. Forget gold as an inflation hedge; buy paintings.

 

What made Fink’s elevation of art to investment-grade status so surprising is that no one of his stature had been brave enough to say it before. I am certainly not celebrating the trend. I tend to agree with the philosopher Peter Singer that the obscene sums being spent on premier pieces of modern art are disquieting.

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The Women of Algiers, 1955 by Pablo Picasso

We can all agree that these sums are staggering. In May, Pablo Picasso’s “Women of Algiers” sold for $179 million at a Christie’s auction in New York, up from $32 million in 1997. Okay, it’s a Picasso. Yet it is not even the highest sale price paid this year. A Swiss collector reportedly paid close to $300 million in a private sale for Paul Gauguin’s 1892 “When Will You Marry?”

Picasso and Gauguin are deceased. The supply of their paintings is known and limited. Nevertheless, the recent price frenzy extends to a significant number of living artists, led by the American Jeff Koons and the German Gerhard Richter, and extending well down the food chain.

For economists, the art bubble raises many fascinating questions, but an especially interesting one is exactly who would pay so much for high-end art. The answer is hard to know, because the art world is extremely opaque. Indeed, art is the last great unregulated investment opportunity.

Much has been written about the painting collections of hedge fund managers and private equity art funds (where one essentially buys shares in portfolios of art without actually ever taking possession of anything). In fact, emerging-market buyers, including Chinese, have become the swing buyers in many instances, often making purchases anonymously.

But doesn’t China have a regime of strict capital controls that limits citizens from taking more than $50,000 per year out of the country? Yes, but there are many ways of moving money in and out of China, including the time-honored method of “under and over invoicing.”

For example, to get money out of China, a Chinese seller might report a dollar value far below what she was actually paid by a cooperating Western importer, with the difference being deposited into an overseas bank account. It is extremely difficult to estimate capital flight, both because the data are insufficient and because it is tough to distinguish capital flight from normal diversification. As the late MIT economist Rüdiger Dornbusch liked to quip, identifying capital flight is akin to the old adage about blind men touching an elephant: It is difficult to describe, but you will recognize it when you see it.

Many estimates put capital flight from China at about $300 billion annually in recent years, with a marked increase in 2015 as the economy continues to weaken. The ever-vigilant Chinese authorities are cracking down on money laundering; but, given the huge incentives on the other side, this is like playing whack-a-mole.

Presumably, the anonymous Chinese buyers at recent Sotheby’s and Christie’s auctions had spirited their money out of the country before bidding, and the paintings are just an investment vehicle that is particularly easy to hold secretively. The art is not necessarily even displayed anywhere: It may well be spirited off to a temperature- and humidity-controlled storage vault in Switzerland or Luxembourg. Reportedly, some art sales today result in paintings merely being moved from one section of a storage vault to another, recalling how the New York Federal Reserve registers gold sales between national central banks.

Clearly, the incentives and motives of art investors who are engaged in capital flight, or who want to hide or launder their money, are quite different from those of ordinary investors. The Chinese hardly invented this game. It was not so long ago that Latin America was the big driver in the art market, owing to money escaping governance-challenged economies such as Argentina and Venezuela, as well as drug cartels that used paintings to launder their cash.

So how, then, will the emerging-market slowdown radiating from China affect contemporary art prices? In the short run, the answer is ambiguous, because more money is leaking out of the country even as the economy slows. In the long run, the outcome is pretty clear, especially if one throws in the coming Fed interest-rate hikes. With core buyers pulling back, and the opportunity cost rising, the end of the art bubble will not be a pretty picture.

Miami’s One Thousand Museum Tower Enjoys $1 Million an Hour Sales Rate

The developers of Miami’s new and uber-luxe One Thousand Museum reported approximately $24 million in new condo sales contracts signed within 24 hours of their 24-hour concrete pour.

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“If we knew we’d sell $1M an hour, we would have poured longer,” said Louis Birdman, one of the developers of the 62-story skyscraper. Four contracts were signed during the pour with buyers from the US, Mexico City, and Argentina. All sales were for half-floor units ranging in price from $5.8 to $6.5 million.
 
The 83-unit tower, slated for completion in late 2017, will expect 4,800 pieces of the project’s revolutionary exoskeleton being shipped from Dubai to initiate this installation.

Once complete, One Thousand Museum will be the first building in the country to utilize this glass-fiber reinforced concrete (GFRC) outer shell as a permanent formwork.
 
“Zaha Hadid is a visionary. The buildings she designs not only make headlines worldwide, but also garner critical acclaim and promise to be in history books for generations to come,” said Louis Birdman on the architectural component of the project.
 
Some noted amenities include 30,000 square feet of luxury communal areas include a two-story amenity space at the top of the tower, an aquatic center, garden areas, event spaces, a two-story health spa, multiple art galleries, a theater, and the city’s only private rooftop helipad.

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Via Miho Favela in World Property Journal

‘Most Expensive’ Mansion Listing In U.S., Palazzo di Amore Cut Price By $46 Million

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Despite the $46-million price cut, the 53,000-square-foot Beverly Hills home is still asking a top-of-the-charts $149 million. (Marc Angeles | Inset: Tribune Publishing)

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Margin Calls Mount On Loans Against Stock Portfolios Used To Buy Homes, Boats, “Pretty Much Everything”

Boat house good for family vacations: Ultimate Spider-Man, Crui Ships, Yachts Design, Swim Pools, Palms Trees, Tropical Islands, Ocean View, Heavens, Super Yachts

Take the Ultimate Vacation on Tropical Island Paradise Super yacht

In a securities-based loan, the customer pledges all or part of a portfolio of stocks, bonds, mutual funds and/or other securities as collateral. But unlike traditional margin loans, in which the client uses the credit to buy more securities, the borrowing is for other purchases such as real estate, a boat or education.

The result was “dangerously high margin balances,” said Jeff Sica, president at Morristown, N.J.-based Circle Squared Alternative Investments, which oversees $1.5 billion of mostly alternative investments. He said the products became “the vehicle of choice for investors looking to get cash for anything.” Mr. Sica and others say the products were aggressively marketed to investors by banks and brokerages.

From the Wall Street Journal article: Margin Calls Bite Investors, Banks

Today’s article from the Wall Street Journal on investors taking out large loans backed by portfolios of stocks and bonds is one of the most concerning and troubling finance/economics related articles I have read all year.

Many of you will already be aware of this practice, but many of you will not. In a nutshell, brokers are permitting investors to take out loans of as much as 40% of the value from a portfolio of equities, and up to a terrifying 80% from a bond portfolio. The interest rates are often minuscule, as low as 2%, and since many of these clients are wealthy, the loans are often used to purchase boats and real estate.

lakehouse!: Lake Houses, Dreams Home, Dreams Houses, Lakes Houses, Boats Houses, Boathouse, Garage, Vacations Houses, Dreamhous

At the height of last cycle’s credit insanity, we saw average Americans take out large home loans in order to do renovations, take vacations, etc. While we know how that turned out, there was at least some sense to it. These people obviously didn’t want liquidate their primary residence in order to do these things they couldn’t actually afford, so they borrowed against it.

In the case of these financial assets loans, the investors could easily liquidate parts of their portfolio in order to buy their boats or houses. This is what a normal, functioning sane financial system would look like. Rather, these clients are so starry eyed with financial markets, they can’t bring themselves to sell a single bond or share in order to purchase a luxury item, or second home. Of course, Wall Street is encouraging this behavior, since they can then earn the same amount of fees managing financial assets, while at the same time earning money from the loan taken out against them.

I don’t even want to contemplate the deflationary impact that this practice will have once the cycle turns in earnest. Devastating momentum liquidation is the only thing that comes to mind.

So when you hear about margin loans against stocks, it’s not just to buy more stocks. It’s also to buy “pretty much everything…”

From the Wall Street Journal:

Loans backed by investment portfolios have become a booming business for Wall Street brokerages. Now the bill is coming due—for both the banks and their clients.

Among the largest firms, Morgan Stanley had $25.3 billion in securities-based loans outstanding as of June 30, up 37% from a year earlier. Bank of America, which owns brokerage firm Merrill Lynch, had $38.6 billion in such loans outstanding as of the end of June, up 14.2% from the same period last year. And Wells Fargo & Co. said last month that its wealth unit saw average loans, including these loans and traditional margin loans, jump 16% to $59.3 billion from last year.

In a securities-based loan, the customer pledges all or part of a portfolio of stocks, bonds, mutual funds and/or other securities as collateral. But unlike traditional margin loans, in which the client uses the credit to buy more securities, the borrowing is for other purchases such as real estate, a boat or education.

Securities-based loans surged in the years after the financial crisis as banks retreated from home-equity and other consumer loans. Amid a years long bull market for stocks, the loans offered something for everyone in the equation: Clients kept their portfolios intact, financial advisers continued getting fees based on those assets and banks collected interest revenue from the loans.

This is the reason Wall Street loves these things. You earn on both sides, while making the financial system much more vulnerable. Ring a bell?

The result was “dangerously high margin balances,” said Jeff Sica, president at Morristown, N.J.-based Circle Squared Alternative Investments, which oversees $1.5 billion of mostly alternative investments. He said the products became “the vehicle of choice for investors looking to get cash for anything.” Mr. Sica and others say the products were aggressively marketed to investors by banks and brokerages.

Even before Wednesday’s rally, some banks said they were seeing few margin calls because most portfolios haven’t fallen below key thresholds in relation to loan values.

“When the markets decline, margin calls will rise,” said Shannon Stemm, an analyst at Edward Jones, adding that it is “difficult to quantify” at what point widespread margin calls would occur.

Bank of America’s clients through Merrill Lynch and U.S. Trust are experiencing margin calls, but the numbers vary day to day, according to spokesman for the bank. He added the bank allows Merrill Lynch and U.S. Trust clients to pledge investments in lieu of down payments for mortgages.

Clients may be able to borrow only 40% or less of the value of concentrated stock positions or as much as 80% of a bond portfolio. Interest rates for these loans are relatively low—from about 2% annually on large loans secured by multi million-dollar accounts to around 5% on loans less than $100,000.

80% against a bond portfolio. Yes you read that right. Think about how crazy this is with China now selling treasuries, and U.S. government bonds likely near the end of an almost four decades bull market.  
 

About 18 months ago, he took out a $93,000 loan through Neuberger Berman, collateralized by about $260,000 worth of stocks and bonds, and used the proceeds to buy his share in a three-unit investment property in the Bushwick section of Brooklyn, N.Y. He says that his portfolio, up about 3% since he took out the loan, would need to fall 25% before he would worry about a margin call.

Regulators earlier this year had stepped up their scrutiny of these loans due to their growing popularity at brokerages. The Financial Industry Regulatory Authority put securities-based loans on its so-called watch list for 2015 to get clarity on how securities-based loans are marketed and the risk the loans may pose to clients.

“We’re paying careful attention to this area,” said Susan Axelrod,head of regulatory affairs for Finra.

Beach Vacations

I think the window for “paying close attention” closed several years ago.

All I have to say about this is, good lord.

by Mike Kreiger

Nine Elms: sky pool to be suspended 10-storeys high between two apartment blocks

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Described as a “world first”, a 90ft-long “sky pool” that floats in the air is the latest show stopper at Nine Elms, the capital’s new riverside district beside Battersea Power Station

A spectacular  glass-encased outdoor swimming pool, suspended 10 storeys up and providing a “bridge” between two apartment blocks with communal rooftop sun terraces, is the latest architectural show stopper at Nine Elms, the riverside district wrapping around Battersea Power Station.

The pool at Embassy Gardens, a 2,000-home complex being built alongside the new American Embassy, is described as a “world first”.

Entirely transparent, it measures 90 feet long by 19 feet wide and is nearly 10 feet deep, with a water depth of about four feet. It is the inspiration of Sean Mulryan, chairman and founder of developer Ballymore. Next month, the group will unveil Legacy Buildings, the second phase of the scheme.

 
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Using eight-inch-thick glass, the  so-called “sky pool” appears to float in the air and resembles a giant aquarium.

It will be for the private use of residents, who will be able to swim from one building to the next and enjoy a dramatic vista of the Palace of Westminster and the London Eye. The linked sky deck at the top of the two buildings will have a summer bar and sun loungers, a spa and orangery.

read more in homes & property luxury

Wealthy Russians Rush to Buy Up Luxury Greek Villas

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Russian buyers are scrambling to buy bargain properties in Greece as the financial meltdown has eroded luxury real-estate prices, Damien Sharkov reported for Newsweek.

Just to give you an idea of the scale of sales: The Greek real-estate agency IRM Aegean Estate has put properties in package deals, with two villas in Corfu —private beach and all — selling together for $4.9 million.

According to the German magazine Bild, the number of luxury Greek villas bought by Russians has more than doubled in the past year, Newsweek reported.

That’s partially because of Russia’s own currency crisis — rich people are looking for safe places to park cash — but also because real-estate prices in Greece have fallen roughly 50% since 2009, Bild reported.

“If a villa on the Greek island of Syros still cost €1.6m a few years ago, it is now selling for just €800,000,” IRM founder Isabelle Razi told Newsweek. That’s a fall to roughly $870,000 from $1.74 million with today’s exchange rates.

The strengthening relationship between Russian buyers and their Greek holdings is mirrored by ties between their national governments.

Last month the two countries agreed to build a $2.27 billion gas pipeline, Sharkov reported for Newsweek, and some critics are concerned the move signifies a tug-of-war between the West and Russia, as Athens may be inching toward the Kremlin’s umbrella of influence.

Foreign Buyer Demand for Caribbean Real Estate Spikes in 2015

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According to analysis of inquiries conducted by Caribbean luxury property specialist 7th Heaven Properties, demand for Caribbean real estate has doubled during the first six months of 2015 compared to the same period last year.

Analysis of inquiries received via the 7th Heaven Properties website and the company’s magazine The Caribbean Property Investor indicates that interest in residential and commercial real estate in the Caribbean has increased dramatically across all price brackets.
 
Caribbean Market Highlights:

  • The majority of inquiries originate from the USA, Canada and the UK with inquiries from American and Canadian buyers more than doubling and inquiries from British buyers up over 30%.
  • Particularly high increase in inquiries for residential real estate in St Kitts & Nevis, Turks & Caicos Islands, Antigua and the Dominican Republic.
  • Inquiries for properties in all price brackets up: Inquiries for properties priced from $1m to $2m USD more than doubling, and a proportion of inquiries for properties priced below $1m USD increasing from 39% to 44%.
  • St Lucia and Jamaica have also seen a notable increase in inquiries for commercial real estate, including hotels for sale and land for development.

According to Walter Zephirin, Managing Director of London-based 7th Heaven Properties, “Inquiries for Caribbean real estate have increased dramatically during the first half of this year as economic growth in the USA, Canada and the UK has stimulated buyer confidence. Growth in demand for Caribbean property has been underpinned by the impressive performance of the region’s tourism sector, particularly in locations such as the Dominican Republic and the Turks & Caicos Islands, and the continued success of highly attractive Citizenship by Investment Programs in St Kitts & Nevis and Antigua. “
 
Zephirin added, “The outlook for the second half of 2015 is extremely promising with a strong sales pipeline. A succession of announcements on increasing airlift to the region and major resort developments linked to Robert de Niro in Antigua & Barbuda and Leonardo DiCaprio in Belize, as well as the first licensed casino in Jamaica have boosted the Caribbean’s profile and enhanced its accessibility and appeal to buyers.”

Read more at the World Property Channel

An Inside Look At Manhattan’s Billionaires’ Row

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Along Manhattan’s 57th Street, stretching from Columbus Circle on the west side to Park Avenue on the east, you’ll soon find more than a half-dozen glittering, ultra-exclusive condominium towers that will offer unparalleled views of Central Park — and virtually the entire city. Welcome to Manhattan’s Billionaires’ Row, the current trophy real estate of the 1%.

The mega projects, with some penthouse floor plans such as those at 432 Park Ave. expanding to more than 8,200 square feet, are expected to list on average for more than $14.5 million (or $4,375 a square foot). Some even have living rooms bigger than most condominium units in Manhattan (the average size of a condo unit in Manhattan being 1,100 square feet.)

The sky-high prices on Billionaires’ Row will also help push the average price for a unit at new developments in Manhattan to $7 million (or $2,787 a square foot) by 2017, according to Gabby Warshawer, head of research for CityRealty, a New York real-estate research firm. Manhattan condo units on average were just $1 million as recently as 2005, says Warshawer.

An inside look at ‘Billionaires’ Row’

For the Manhattan, and global, elite, trophy apartments in the sky, overlooking Central Park, will set new marks for luxury and price.

Aside from the luxuriously appointed apartments and the central location, there’s something else that’s appealing about the apartments: As Noble Black, a real-estate agent who has marketed condominium units in One57, points out, unlike many city co-ops — whose boards are famously picky and have turned down such notables as pop singer Madonna and former President Richard Nixon as potential residents — buyers on Billionaires’ Row don’t need to open up their financial books to co-op boards or even submit to interviews.

Here’s a look at what $14 million–plus will buy you along Billionaires’ Row …

These sky-high trophy homes overlooking Central Park set new marks for both luxury and price

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157 West 57 St.

One57, built by developer Extell, was the first on the Billionaires’ Row strip to be built and is 75 stories tall and more than 1,000 feet high. The building, which includes a Park Hyatt hotel with services catering to owners’ every whim, with room service, maid service and a spa and gym, saw its penthouse apartment sell for a record $100.5 million in December 2014 to a yet-unnamed buyer. All told, the entire building’s 92 condo units were worth an estimated $2 billion and will sell for an average of $6,300 a square foot, according to CityRealty.

111 West 57th St.

Built by JDS Development Group, this extraordinarily slender skyscraper will rise 80 stories and more than 1,400 feet. That’s taller than the Empire State Building. The 60 apartments will start at $14 million according to the developer’s website and rise to $100 million, according to CityRealty. Completion is expected in 2018.

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550 Madison Ave.

The rehab of the 37-story Sony Building will include a $150 million penthouse and possibly a five-star hotel. The skyscraper, completed in 1983, was sold to Joseph Chetrit, a real-estate developer for more than $1 billion in 2013. The sell-out price for the property will likely approach $2 billion, or more than $4,400 a square foot, CityRealty says.

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432 Park Ave.

Currently the tallest residential building in the city at 1,396 feet, the condominium development by CIM Group/Macklowe Properties recently sold its penthouse for $99.5 million.The building’s total sales will be worth an estimated $3 billion (or nearly $6,300 a square foot), according to CityRealty, assuming the 144-unit building is sold out. Closings on the remaining units — which range from $17 million to $81 million — are expected to start at the end of the year.

53 W. 53rd St.

Hines Development’s 77-story condominium has been in the works for 10 years but has only recently started marketing its 100-plus units. The 1,050-foot-high trapezoidal tower with geodesic elements is set to be completed in 2018 and to include a unit priced at $70 million, according to CityRealty. All told, the sell-out price is anticipated at upward of $2 billion.

by Daniel Goldstein for Market Watch

 

Thinking About Selling Your Home? ― They Already Know

How Real Estate Agents Are Using Big Data to Track Prospects


Tech-savvy agents are teaming with data companies to identify cognition

Sitting in bed at 1:40 a.m. one morning last November, Jon Hoefling was thinking about selling his 4,300-square-foot home in Morgan Hill, Calif. While browsing Facebook on his phone, he clicked on a real-estate ad offering to estimate his home’s value. His future listing agent, who paid for the ad, was waiting.

Mr. Hoefling, the 50-year-old owner of an office-furniture resale company, had been targeted for the ad—along with 1,500 others in California’s Silicon Valley area—by an algorithm that identified him as a likely home seller. The telltale signs: Mr. Hoefling has lived in the home for more than 15 years, and his home’s market value is high for the area. Most important, his youngest son will soon leave for college. Empty nesters might as well wear a bull’s-eye.

To target prospective clients in competitive markets, tech-savvy agents are buying data subscriptions and teaming up with firms that identify potential buyers using increasingly precise metrics. Exotic-car owners can be courted to buy a car-collector’s mansion. Equestrians are rounded up for ranch homes

Last year, Sotheby’s International Realty announced a partnership with Wealth-X, a consulting group that uses public records and research staff to manually track the habits of “ultrahigh-net-worth individuals.” There are about 211,000 people world-wide valued at more than $30 million, according to the company’s president and co-founder, David Friedman—and the firm’s goal is to write a detailed dossier on each one of them.

These reports may contain everything from an individual’s net worth and social circles to even more personal details. For example, the dossier for one Australian multimillionaire notes that he is likely fond of topiary, because he proposed to his wife in front of a massive topiary created by artist Jeff Koons.

Mark Lowham, managing partner at TTR Sotheby’s in Washington, D.C., enlisted Wealth-X to help find a buyer for a penthouse apartment listed at $9 million in the Georgetown neighborhood. His team first established a basic description of the people they were looking for: Homeowners with a combined income of $2 million who have lived in a house assessed at more than $4 million for at least five years.

Consulting group Wealth-X was enlisted to find prospective buyers for this penthouse, which is asking $9 million in Washington, D.C. Photo: Sean Shanahan.

Then, they got more specific: Art collectors, because the condo has ample wall space. Empty nesters, because they prefer single-floor living. Private-aircraft users, because the area attracts jet-setters.

Using a combination of data from Wealth-X and their client contact base of about 700,000, they might be left with 400 targeted leads, Mr. Lowham says. The listing isn’t public yet, but the next step is to launch a mail campaign to their targeted list of prospects.

Sophisticated data collection has been crucial to the growth of the Agency, says Billy Rose, co-founder of the Beverly Hills, Calif.-based real-estate firm. His company, which launched in 2011, closed on 12 transactions of $20 million or more last year. He says the Agency so far has spent about $800,000 to create a database of people with high-net worth. “When I have a house coming up for sale with a garage for six cars, I’ll reach out to my Lamborghini owners,” he says.

Mr. Rose declined to describe the sources that make up the database, but says they have 100,000 individuals in their direct network and another half-million through partnerships. People familiar with the system say it incorporates data from credit-card companies, as well as sales information from luxury brands.

Scanning obituaries for leads has long been a tactic of up-and-coming real-estate agents looking for new business. Today, the practice is getting a 21st-century makeover. Tracking major life events—marriage, divorce, death, all of which frequently entail a home purchase or sale—is big business for a number of new firms.

The 90,000 Square Foot, 100 Million Dollar Home That Is A Metaphor For America

Just like “America’s time-share king”, America just keeps on making the same mistakes over and over again.  Prior to the financial collapse of 2008, time-share mogul David Siegel and his wife Jackie began construction on their “dream home” near Disney World in Orlando, Florida.  This dream home would be approximately 90,000 square feet in size, would be worth $100 million when completed, and would be named “Versailles” after the French palace that inspired it.  In fact, you may remember David and Jackie from an excellent 2012 documentary entitled “The Queen of Versailles”.  That film documented how the Siegels almost lost everything after the financial collapse of 2008 devastated the U.S. economy because they were over leveraged and drowning in debt.

Source: Zero Hedge – Author: Michael Snyder

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But since that time, David’s time-share company has bounced back, and the Siegels now plan to finally finish construction on their dream home and make it bigger and better than ever before.


But before you pass judgment on the Siegels, it is important to keep in mind that we are behaving exactly the same way as a nation.  Instead of addressing our fundamental problems after the last financial crisis, we have just continued to make the exact same mistakes that we made before.  And ultimately, things are going to end very, very badly for us. As Americans, we like to think that we are somehow entitled to the biggest and best of everything.  We have been trained to believe that we are the wealthiest and most prosperous nation on the entire planet and that it will always be that way.  This generation was handed the keys to the greatest economic machine in world history, but instead of treating it with great care, we have wrecked it.  Our economic infrastructure is being systematically dismantled, Wall Street has been transformed into the biggest casino in the history of the planet, we have piled up a mountain of debt unlike anything the world has ever seen, and the reckless Federal Reserve is turning our currency into Monopoly money.  All of our decisions have been designed to make things better for ourselves in the short-term without any consideration about what we were doing to the future of this country.

That is why “Versailles” is such a perfect metaphor for America.  The Siegels always had to have the biggest and the best of everything, and they almost lost it all when the financial markets crashed

David Siegel (“They call me the time-share king”) and his wife, Jackie Siegel — titular star of the 2012 documentary “The Queen of Versailles” — began building their dream home near Disney World about a decade ago. Soon it became evident that the sheer size of the mansion was almost unprecedented in America; it’s thought that only Biltmore House and Oheka Castle are bigger and still standing, and both of those are now run as tourist attractions, not true single-family homes.

But when the bottom fell out of the financial markets in 2008, their fortunes were upended too. By the time the documentary ended, their dream home had gone into default and they’d put it on the market. The listing asked for $100 million finished — “based on the royal palace of Louix XIV of the 17th century or to the buyer’s specifications — or $75 million “as is with all exterior finishings in crates in the 20-car garage on site.”

But just like the U.S. economy, the Siegels have seemingly recovered, at least for the moment.

Thanks to a rebound in the time-share business, the Siegels plan to finally complete their dream home and make it bigger and better than ever

The unfinished home sits on 10 acres of lakefront property and when completed will feature 11 kitchens, 30 bathrooms, 20-car garage, two-lane bowling alley, indoor rollerskating rink, three indoor pools, two outdoor pools, video arcade, ballroom, two-story movie theater modeled off the Paris Opera House, fitness center with 10,000-square-foot spa, yoga studios, 20,000-bottle wine cellar and an exotic fish aquarium.

Two tennis courts, a baseball diamond and formal garden will be included on the grounds.

The couple admitted that some of their plans for the house – such as children’s playrooms – will have to be modified now that their kids are older.

However, they are determined to see the project through.

‘I’m not at the ending to my story yet, but so far, it’s a happy ending, and I’m really looking forward to starting the next chapter of my life and moving into my palace, finishing it and throwing lots of parties – anxious for the world to see it,’ Mrs Siegel said.

It is easy to point fingers at the Siegels, but the truth is that they are just behaving like we have been behaving as an entire nation.

When our financial bubbles burst the last time, our leaders did not really do anything to address our fundamental economic problems.  Instead, they were bound and determined to reinflate those bubbles and make them even larger than before.

Now we stand at the precipice of the greatest financial crisis in our history, and we only have ourselves to blame.

Just consider what has happened to our national debt.  Just prior to the last recession, it was sitting at about 9 trillion dollars.  Today, it has just crossed the 18 trillion dollar mark…

Total Public DebtYou may not think that you are to blame for this, but most of the people that will read this article voted for politicians that fully supported all of this borrowing and spending.  And yes, that includes most Democrats and most Republicans.

We have stolen trillions of dollars from future generations of Americans in a desperate attempt to prop up our failing standard of living in the present.  What we have done is a horrific crime, and if we lived in a just society a whole lot of people would be going to prison over this.

A similar pattern emerges when we look at the spending habits of ordinary Americans.  This next chart shows one measure of consumer credit in America.  During the last recession, we actually had a brief period of deleveraging (which was good), but now we are back on the exact same trajectory as before…

Consumer Credit 2015Even though we had a higher standard of living than all previous generations of Americans, that was never good enough for us.  We always had to have more, and we have borrowed and spent ourselves into oblivion.

We have also shown absolutely no respect for our currency.  Having the primary reserve currency of the world has been an incredible advantage for the U.S. economy, but we are squandering that privilege.  Like I said at the top of the article, the Federal Reserve has been treating the U.S. dollar like Monopoly money in recent years in an attempt to prop up the financial system.  Just look at what “quantitative easing” has done to the Fed balance sheet since the last recession…

Fed Balance SheetMost of the new money that the Fed has created has been funneled into the financial markets.  This has created some financial bubbles which are absolutely insane.  For example, just look at how the NASDAQ has performed since the last financial crisis…

NASDAQThese Fed-created bubbles are inevitably going to implode, because they have no relation to economic reality whatsoever.  And when they implode, millions of Americans are going to be financially wiped out.

Just like David and Jackie Siegel, we simply can’t help ourselves.  We just keep on making the same old mistakes.

And in the end, we will all pay a great, great price for our utter foolishness.

Housing Contribution To US GDP Lowest In Post-War Era

In “Underwater Homeowners Here To Stay” we highlighted a report from Zillow which showed that negative equity has now become a permanent fixture of the US housing market. The report also showed that the percentage of homeowners who are underwater was flat from Q314 to Q414, breaking a string of 10 consecutive quarters of declines. We also recently noted that a completely ridiculous new home sales print that defied all logic notwithstanding, housing data, including starts and existing home sales, has come in below expectations. On a side note, home price appreciation has outpaced wage growth at a rate of 13:1, to which we would add: 

Of course, the biggest determinant of home price appreciation over the past 2 years has nothing to do with US consumers, or household formation, as confirmed by the collapse in first-time home buyers or the unprecedented depression in new mortgage origination, and everything to do with what we first suggested is one of the main drivers of the US housing bubble – foreigners parking their illegally procured cash in the US and evading taxes, now that US housing, with the NAR’s anti-money laundering exemption blessing, is the new normal’s Swiss Bank Account. That and flipping homes from one “all-cash” buyer to another “all-cash” buyer in hopes of a quick capital appreciation and the constant presence of the proverbial dumb money.

Against this backdrop, Deutsche Bank is out predicting that a sluggish US housing market is likely to impact the supply of MBS going forward. As DB notes, housing isn’t the GDP contributor it once was and not by a long shot. Not only that, but when it comes to recoveries, the housing market’s GDP contribution was 7 times below its post WW2 average in year one and has fared even worse since. Here’s DB with more:

The contribution of housing to US GDP continues to run at some of the lowest levels since the end of World War II. New construction of single- and multi-family homes, renovations, broker fees and the like still only make up a bit more than 3% of current GDP, well below the post-war average of 4.7%. Not only has the level of lift from housing come in low, but it has bounced out of the last official recession slowly, too. Housing on average has contributed a half a percentage point to GDP a year after the end of every post-war US recession. This time around, housing added only 7 bp. And the contribution of housing in the second and third years after the recent recession also has fallen well below post-war averages.And while “insufficient supply” (not enough homes) was cited as a possible contributor to the existing home sales miss, DB notes that at least as of today, there appears to still be a “supply hangover” (although it’s waning):

US home ownership started the decade at 66.9%, peaked in 2004 at 69.2% and ended at 66.5%. It has since dropped to 64.0%. The exodus of owners initially threatened to leave a lot of extra houses behind and reduce the need to build new ones. But investors have come in to pick up the keys, and many houses have found a new home in the market for single-family rentals. This has helped reduce the supply of distressed homes, although it’s still higher than the levels that prevailed in the early 1990s when homeownership last ranged around 64% . The supply hangover isn’t done but should be in the next two or three years.

And demand isn’t looking so hot either: 

Demand has likely played a part in slow housing, too, starting with owners that bought their homes in the last decade. Thanks to a 38% drop in home prices nationally from 2006 to 2012, according to Case-Shiller, a lot of those owners walked out the front door without any equity and without the ability to reenter the market as buyers. This has almost certainly contributed to the drop in rental unit vacancies from 10.6% in mid-2009 to 7.0% today. As for potential new owners, Americans, even before the crisis, started moving into their own place at a much slower pace than the long-term average of 1.2 million new households a year, that is, until recently. Demand from former and potential new owners has been soft.

Even in the best case scenario is which supply falls and demand rises, banks’ reluctance to lend could end up hobbling the market for the foreseeable future. 

Although the market seems to be clearing out the lingering housing supply and the economy and the labor market look likely to repair demand, the availability of credit could prove to be the lasting constraint. Today’s lending standards reflect limits designed to keep the last decade’s boom and bust from happening again. Borrowers today without the ability to repay will not get a loan. But it looks like some borrowers with the ability to repay—but with low FICO scores or with needs that keep them outside the agency or prime jumbo markets—will also not get a loan. The market is reducing risk today to avoid risk tomorrow. But it also is likely reducing housing growth today to avoid a downturn tomorrow.

And here’s further confirmation of this from BofAML:


So there is your housing recovery in a nutshell: supply hangover, lackluster demand, and reluctant lenders all coalescing in a housing market whose contribution to US economic growth is virtually nonexistent. 

And if you’re looking for the next shoe to drop, here’s a hint: 

Read more at Zero Hedge

Leading Texas Golf Resort Communities Revealed

By Scott Kauffman | World Property Journal

Tops in Texas: Leading Golf Resort Communities Revealed

While much of America struggled during the last financial crisis, Texas grew in greater economic stature on a number of levels. Fueled by a thriving energy economy, strong tech sector and job market, one strong growth area was real estate development.

Texans have always had a strong affinity to golf so it’s no surprise real estate communities, resorts and private clubs feature golf as a central component.  Two top leisure properties in Texas are 72-hole Horseshoe Bay Resort in Texas Hill Country and TPC Four Seasons at Las Colinas, home to the AT&T Byron Nelson Championship.

On the private club front, the “Big D” features a collection of renowned golf clubs, including Brook Hollow Country Club, Dallas National and Preston Trail Golf Club, where initiation fees start at $125,000.

The following is a handful of golf and resort-style communities leading the Lone Star State’s leisure real estate sector today.

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When it comes to country club living, this Dallas-area private club is as luxurious as they come. Originally developed by Discovery Land Company, the Beverly Hills, Calif.-based company known for creating such elite clubs as Estancia in Scottsdale, Ariz. the Madison Club in La Quinta, Calif., and Kukio on the Big Island of Hawaii, Vaquero Club is now member-owned and fresh off an extensive $2.8 million renovation to its Tom Fazio-designed golf course.

According to club executives, part of the motivation behind the project was to enhance real estate vistas and create a more core-golf experience. A perfect example of this took place on the club’s drivable par-4 fourth hole, where new tee boxes were added, as well as on nine other holes.

This means resident members inside Vaquero’s stately manors have even more beautiful views to enjoy. Of an estimated dozen listings by the Jeff Watson Group of Briggs Freeman Sotheby’s International Realty, Vaquero’s most affordable home is currently listed at $1.295 million for a 4-bedroom, 4 1/2 -bath residence and it goes up to $5.995 million for a 5-bedroom estate on 3.8 acres featuring a 5-car garage and wine cellar with 1,500-bottle capacity.

The Vaquero Club consists of 385 equity memberships with an initiation fee approaching $200,000. Besides world-class golf, the club also offers a family-friendly Fish Camp, wine programs and other member amenities and services.

Cordillera Ranch, Boerne, Texas

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Located 30 minutes northwest of San Antonio, Cordillera Ranch is a debt-free 8,700-acre master-planned residential community in the Texas Hill Country. The family-owned and operated development is not short on activities, considering residents of the gated community can join The Clubs of Cordillera Ranch that feature seven resort-style clubs in one location: The Golf Club, The Social Club, The Tennis and Swim Club, The Equestrian Club, The Rod and Gun Club, The Spa and Athletic Club and The River Club.

Opened in 2007, the community’s Jack Nicklaus Signature golf course has consistently been ranked among the best in Texas, most recently placing fifth on the Dallas Morning News‘ annual poll. Its par-3 16th has claimed the No. 1 spot as “Most Beautiful Hole” by the same publication for the past five years.  

Among the community’s newest real estate offerings are golf course frontage lots, villas and an entirely new section aimed at young families. Overall, Cordillera Ranch boasts ¼-acre villa homes, valley-view and Guadalupe River-front homes, hilltop home sites and 1-to-10-acre estate residences.

According to the developer, 2014 was a banner year in both real estate and membership sales. For instance, Cordillera Ranch sold 33 homes at an average of $886,000 and total lot sales increased by 32 percent.

Trending in 2015: 46 new homes are under construction totaling more than $60 million in new starts – easily the highest total of any upscale community in the San Antonio area, according to the developer. Another 39 homes are in the architectural review approval process – a 65 percent increase over 2013.

Since its inception in 1997, more than 1,200 lots have been sold and approximately 700 homes have been completed. At final build-out, this low-density Hill Country community will total approximately 2,500 homes and preserve approximately 80 percent of the land in its natural vegetation. More than 70 new members were added in 2014, bucking the national trend of private club membership attrition.

“We’re excited and humbled to be a leader in the luxury lifestyle category,” says Charlie Hill, Vice President of Development at Cordillera Ranch. “With the economy thriving and the San Antonio area continuing to prosper, we expect the upward trend in real estate sales to continue in 2015.”

Cordillera Ranch credits much of its growth to being in the highly acclaimed Boerne School District, which is regarded as one of the best in Texas and boasts schools ranked in numerous national-best lists. The community is also benefitting from being in the prosperous Eagle Ford Shale. While other oil-rich areas have struggled with the drop in oil prices, the Eagle Ford Shale has continued to produce. That has attracted oil and gas executives to come to the Texas Hill Country and settle down in communities like Cordillera Ranch.

Boot Ranch, Fredericksburg, Texas

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Three years after being put up for sale, the once-bankrupt Boot Ranch community has kicked back into high sales gear. This posh 2,051-acre master-planned golf community in Texas Hill Country’s Gillespie County started selling luxury lots in 2005 and opened a golf course designed by PGA Tour star Hal Sutton in 2006.

But sales were sluggish as the real estate market started to collapse worldwide and Lehman Brothers eventually foreclosed on the property in 2010. Then, the Municipal Police Employees Retirement System of Louisiana, one of Sutton’s original backers and a past partner on the project, sued a number of Boot Ranch partnerships and corporations, putting the project under further stress.

With all of these financial and legal troubles behind them, Boot Ranch is now able to focus on a revitalized real estate market and the renewed life is paying off for this private golf and family community near the popular town of Fredericksburg.

Case in point is Boot Ranch is coming off an eight-year record high for home and property sales, highlighted last year by $13.781 million in year-to-date sales through Sept. 30. Of the $13.781 million in sales, $9.057 million came from estate home sites; another $1.524 million was from Overlook Cabin home sites and $2.825 million were sales of fractional shares of the club’s Sunday Houses.

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Overall, Boot Ranch sold 135 lots last year and had 16 homes completed with another 20 under construction or in the planning stages. Boot Ranch real estate options range from fractional ownership shares of 4,500-square-foot Sunday Houses to large Overlook Cabins priced from the $800,000s to estate home sites from $300,000 to $2.5 million for 2-18 acres.

“The booming demand for luxury ranch living is a byproduct of the successful Texas economy, particularly the energy business,” says Sean Gioffre, Boot Ranch director of marketing and sales. “The advent of hydraulic fracturing and the achievements of prized shale formations, like the Eagle Ford, Permian and Bakken, have pushed oil and gas production to record highs. With low interest rates, many people are looking to second homes as a hedge against inflation and as a tangible asset in which to put their money.”

Five miles north of the historic town of Fredericksburg, Boot Ranch is a master-planned retreat featuring one of the rare Sutton-designed courses, and a 34-acre practice park comprised of a short game range and executive par-three course. Other amenities at Boot Ranch include access to the 55,000-square-foot Clubhouse Village, casual and fine dining, a fully-stocked wine cellar, golf shop, ReStore Spa & Fitness Center, the 4.5-acre Ranch Club with pavilion, pools, tennis and sports courts, 10 member/guest lodge suites, a trap and skeet range overlooking Longhorn Lake, hiking, mountain biking, canoeing and fishing.

Construction is under way on a fishing pier and comfort station near Boot Ranch’s signature tenth hole on the golf course.

“We call Boot Ranch the ‘American Dream Texas Style,'” says co-director of marketing and sales Andrew Ball. “The motivation for buyers seems to be for recreational property – somewhere where owners can golf, fish, dine, swim, relax and generally enjoy the Texas outdoors. Many people say they just want to get their kids and grandkids out of the city, even if for only a few days or weeks at a time.”

Traditions Club and Community, Bryan, TX

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This new upscale golf and country club development gives Texas A&M loyalists something else to brag about in Aggieland. Located less than 10 minutes from 10 minutes from a bustling college town and burgeoning health and research center, it’s no surprise why this is shaping up to be another successful Texas real estate project.

Traditions Club and Community is the private golf and residential community in “Aggieland” and home to the Texas A&M men’s and women’s golf teams. Located in Bryan-College Station, the club rests in the shadow of the university and in the heart of The Research Valley’s “One Health Plus Biocorridor.”

From custom-garden homes to large estate lots, Traditions Club has a wide range of developments that cater to many buyers. Future plans to attract even more residents call for a multi-use retail, entertainment and health/fitness complex to be built within the neighboring Biocorridor area that would mirror one of the top suburbs in Houston, The Woodlands.

Traditions’ tournament-caliber, Jack Nicklaus/Jack Nicklaus II-designed golf course hosts many high-profile junior, collegiate and amateur events. Other amenities include a 21,000-square foot, four-building clubhouse with men’s and women’s locker rooms; 25-meter junior Olympic lap and sport-leisure pools; family swim center with beach-like wading pool; and fully-equipped fitness center.

Casual fare is offered at the Poole Grille and fine dining at the clubhouse, home to an impressive wine cellar. Overnight accommodations are available in two-, three- and four-bedroom cottages and casitas located just walking distance from all the club’s amenities.

Overlooking stately oak trees, gently rolling terrain and the lush green fairways of the golf course, the Traditions Club and Community is an enclave of custom estates, Game Day Cottages, cozy casitas, villas, garden homes and luxurious condominiums. Home sites range from .25 acres up to an acre, with homes spanning 1,800 to 8,000 square feet.

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Traditions Clubhouse

The newest phase being marketed is the Blue Belle home sites, a collection of 34 lots designed for two and three-bedroom custom homes. Overlooking a heavily wooded and rolling landscape in a peaceful and quiet enclave, the home sites encompass up to one-third of an acre and are priced with the home. The residences range from 2,200 to 3,500 square-feet and start in the low $400,000s.

Blue Belle residents can enjoy the outdoors without having to worry about extensive home and yard maintenance. Creative landscaped patios open up to peaceful settings that exemplify private community living. A multi-use trail meandering around a small lake is perfect for short walks and hikes

Interiors exude Texas Hill County elegance, with hardwood flooring, granite countertops, gourmet kitchens, high ceilings and open living area. The floor plans are highly personalized, providing a rich, distinguished selection of upscale finishes and features.

“Real estate sales in vibrant college towns like Bryan/College Station continue to thrive as master-planned communities like Traditions build to suit an array of buyers,” says Spencer Clements, Traditions Club Principal. “Empty-nesters or those seeking a second home with minimal maintenance will find Blue Belle offers the square-footages, relaxing setting and customized features catering to their needs and lifestyle.”

Tribute, The Colony, Texas

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The Tribute, a Matthews Southwest, Wynne/Jackson master-planned community on the shores of Lake Lewisville, is one of the more ambitious golf and country club developments in the Dallas-Fort Worth metroplex.

Located just 23 miles from Dallas-Fort Worth International Airport, the Tribute is a 36-hbole upscale semi-private facility whose original plans call for 1,150 single-family homes, 160 golf villas, 183 townhomes, and 700 European condominium units.

The community’s newest course, Old American Golf Club, opened in the summer of 2009 and was designed by Tripp Davis and PGA Tour player and native son Justin Leonard. When Old American opened (it was originally called the
New Course), the developers offered premium lake-view, golf course-fronting lots in the Balmerino Village.

This initial phase of lots, located adjacent to the No. 5 green and the No. 6 tee box featured unobstructed views of Lake Lewisville and ranged in price from $135,000 to $275,000 for little more than 1/3 of an acre.

What makes the Tribute so unique it its Scottish links-inspired setting. For instance, the Tribute’s namesake layout, or “Old Course” as it’s often called, is patterned after the legendary courses of Scotland and the Open Championship what with its wind-swept dunes and fescue grasses.

The first and 18th holes share the same broad fairway, just the Old Course at St. Andrews, and you’ll also find a likeness of Royal Troon’s Postage Stamp hole and experience replica holes from Prestwick, Muirfield, Western Gailes and Royal Dornoch. For a special treat, make sure to stay in one of the overnight guest suites above the clubhouse that overlook the course.

The Tribute’s newest course pays homage to famed golf course architects such as Donald Ross and A.W. Tillinghast, many of whom came to the United States from Great Britain around the turn of the century.

According to an Old American spokesman, the new course currently has about 58 resident members of the club, which represents approximately 25 percent of the overall membership. Among the other amenities enjoyed by members are first-class amenity centers, pools, parks, playgrounds, on-site schools, hike-and-bike trails, landscaped canals and hundreds of acres of accessible open space reminiscent of the Scottish Highlands.

Airbnb And Other Short-Term Rentals Worsen Housing Shortage, Critics Say

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Landlords in Venice and other tourist-friendly areas are converting units into short-term rentals, worsening the area’s housing shortage, a study says.

The last time he advertised one of his apartments, longtime Los Feliz landlord Andre LaFlamme got a request he’d never seen before.

A man wanted to rent LaFlamme’s 245-square-foot bachelor unit with hardwood floors for $875 a month, then list it himself on Airbnb.

“Thanks but no thanks,” LaFlamme told the prospective tenant. “You’ve got to be kidding me.”

But he understood why: More money might be made renting to tourists a few days at a time than to a local for 12 months or more.

Where are the short-term rentals?

About 12,700 rental units were listed on Airbnb in Los Angeles County on Dec. 22, 2014, but they were not spread out equally. In parts of Venice and Hollywood, Airbnb listings accounted for 4% or more of all housing units.

As short-term rental websites such as Airbnb explode in popularity in Southern California, a growing number of homeowners and landlords are caving to the economics. A study released Wednesday from Los Angeles Alliance for a New Economy, a labor-backed advocacy group, estimates that more than 7,000 houses and apartments have been taken off the rental market in metro Los Angeles for use as short-term rentals. In parts of tourist-friendly neighborhoods such as Venice and Hollywood, Airbnb listings account for 4% or more of all housing units, according to a Times analysis of data from Airbnb’s website.

That’s worsening a housing shortage that already makes Los Angeles one of the least affordable places to rent in the country.

“In places where vacancy is already limited and rents are already squeezing people out, this is exacerbating the problem,” said Roy Samaan, a policy analyst who wrote the alliance’s report. “There aren’t 1,000 units to give in Venice or Hollywood.”

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Fast-growing Airbnb and others like it say they help cash-strapped Angelenos earn a little extra money. Airbnb estimates that 82% of its 4,500 L.A. hosts are “primary residents” of the homes they list, and that nearly half use the proceeds to help pay their rent or mortgage. And the effect on the broader housing market is so small that it’s all but irrelevant, said Tom Davidoff, a housing economist at the University of British Columbia whom Airbnb hired to study its impact.

“Over the lifetime of a lease, rents maybe go up 1.5%,” he said. “That’s peanuts relative to the increases we’ve seen in housing costs in a lot of places.”

But there are growing signs of professionalization of the short-term rental world, from property-manager middlemen like the one who e-mailed LaFlamme to Airbnb “hosts” who list dozens of properties on the site. The Los Angeles Alliance study estimates that 35% of Airbnb revenue in Southern California comes from people who list more than one unit.

“I don’t think anyone would begrudge someone renting out a spare bedroom,” Samaan said. “But there’s a whole cottage industry that’s springing up around this.”

City Council member Mike Bonin, whose coastal district includes Venice, and Council President Herb Wesson want to study how these rentals have affected the city. No regulations have been drafted, and Bonin said the council would seek extensive community input. Current rules bar short-term rentals in many residential areas of the city, but critics say they’re rarely enforced.

As city officials craft new ones, they’ll certainly be hearing from Airbnb and its allies. Last year, the company spent more than $100,000 lobbying City Hall and released a study touting its economic impact in L.A. — more than $200 million in spending by guests, supporting an estimated 2,600 jobs. A group representing short-term rental hosts has made the rounds of City Council offices as well.

This industry “needs to be regulated and regulated the right way,” said Sebastian de Kleer, co-founder of the Los Angeles Short Term Rental Alliance and owner of a Venice-based vacation rental company. “For a lot of people, this is a very new issue.”

Neighborhood groups are sure to weigh in too, especially in Venice.

https://i0.wp.com/fc09.deviantart.net/fs4/i/2004/194/c/7/canals_of_venice_california_11.jpgThe beach neighborhood has the highest concentration of Airbnb listings in all of metro Los Angeles. Data collected by Beyond Pricing, a San Francisco-based start-up that helps short-term rental hosts optimize pricing, show that in census tracts along Venice Beach and Abbott-Kinney Boulevard, Airbnb listings accounted for 6% to 7% of all housing units — about 10 times the countywide average.

A letter last fall from the Venice Neighborhood Council to city officials estimated that the number of short-term rental listings in the area had tripled in a year, citing a “Gold Rush mentality” among investors looking for a piece of the action. That’s hurting local renters, said Steve Clare, executive director of Venice Community Housing.

“Short-term rentals are really taking over a significant portion of the rental housing market in our community,” Clare said. “It’s going to further escalate rents, and take affordable housing out of Venice.”

Along the Venice boardwalk, a number of apartment buildings now advertise short-term rentals, and houses on the city’s famed “walk streets” routinely show up in searches on Airbnb. Even several blocks inland, at Lincoln Place Apartments — a 696-unit, newly renovated complex that includes a pool, gym and other tourist-friendly amenities — Roman Barrett recently counted more than 40 listings on Airbnb and other sites. Barrett, who moved out over the issue, said Airbnb effectively drives up the rent. He paid $2,700 a month for a one-bedroom; now he’s looking farther east for something he can afford.

“It’s making places like Santa Monica and Venice totally priced out. Silver Lake is impossible. I’m looking in Koreatown right now,” Barrett said. “They need to make a law about this.”

 

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A new law of some sort is the goal at City Hall. New York, San Francisco and Portland, Ore., have crafted regulations to govern taxes, zoning and length of stay in short-term rentals, and Airbnb says it’s glad to help in that process here.

“It’s time for all of us to work together on some sensible solutions that let people share the home in which they live and contribute to their community,” spokesman Christopher Nulty said in a statement Tuesday.

Will Youngblood, the man who e-mailed LaFlamme about managing his apartment in Los Feliz, says he’d also appreciate clearer rules and an easier way to pay occupancy taxes.

Youngblood runs five Airbnb apartments, mostly in Hollywood. A former celebrity assistant, he’s been doing this for two years; it’s a full-time job. Most of Youngblood’s clients own their homes but travel a lot or live elsewhere. One, he rents and lists full time. He’s been looking around for another.

“I’m honest about what I do,” he said. “Some [landlords] are like, ‘That’s insane. No way.’ Other people say, ‘We’d love that.'”

If the city decides it doesn’t like what he’s doing, Youngblood said, he’ll go do something else. But for now, he said, it’s a good way to make some cash and meet interesting people.

But he won’t meet LaFlamme. The longtime landlord concedes he “might be old-fashioned,” but he just doesn’t like the idea of strangers traipsing through his apartments. He prefers good, long-term tenants, and in L.A.’s red-hot rental market he has no problem finding them.

“I almost find it painful to rent things these days,” he said. “There’s so much demand and so many people who are qualified and nice people who I have to turn away.”

For that apartment in Los Feliz, LaFlamme said, he found a tenant in less than 24 hours.

Dreaming Big: Americans Still Yearning for Larger Homes

by Ralph McLaughlin | Trulia

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43% of adults would prefer homes bigger than where they currently live, but attitudes differ by age. Baby boomers would prefer to upsize rather than downsize by only a small margin, while the gap among millennials is much wider, with GenXers falling in between. Would-be downsizers outnumber upsizers only among households living in the largest homes.

Last year, we found that Baby Boomers were especially unlikely to live in multi-unit housing. At the same time, we noted that the share of seniors living in multi-unit housing rather than single-family homes has been shrinking for decades. These findings got us thinking about how the generations vary in house-size preference. So we surveyed over 2000 people at the end of last year to figure out if boomers have different house-size preferences than their younger counterparts. And that led us to ask: What size homes do Americans really want?

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Most Americans are not living in the size home they want

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As a whole, Americans are living in a world of mismatch – only 40% of our respondents said they are living in the size home that’s ideal. Furthermore, over 43% answered that the size of their ideal residence is somewhat or much larger than their current digs. Only 16% told us that their ideal residence is smaller than their existing home. However, these overall figures mask what is going on within different generations.

It’s natural to think that baby boomers are the generation most likely to downsize.  After all, their nests are emptying and they may move when they retire.  As it turns out though, more boomers would prefer to live in a larger home than a smaller one: 21% said their ideal residence is smaller than their current home, while 26% wanted a larger home – a 5-percentage-point difference. Clearly, boomers don’t feel a massive yearn to downsize. On the contrary, just over half (53%) said they’re already living in their ideally sized home. Nonetheless, members of this generation are more likely to want to downsize than millennials and GenXers.

In fact, those younger generations want some elbow room. First, the millennials. They’re looking to move on up by a big margin: just over 60% told us their ideal residence is larger than where they live now – the largest proportion among the generations in our sample. By contrast, only a little over 13% of millennials said they’d rather have a smaller home than their existing one – which is also the smallest among the generations in our sample. The results are clear: millennials are much more likely to want to upsize than downsize.

The next generation up the ladder, the GenXers, are hitting their peak earning years and many in this group may be in a position to trade up. Many aren’t living in their ideally sized home. Just 38% said where they live now is dream sized. Nearly a majority (48%) said their dream home is larger, while only 14% of GenXers would rather have a smaller home.  This is the generation that bore the brunt of the foreclosure crisis. So, some of this mismatch could be because a significant number of GenXers lost homes during the housing bust and may now be living in smaller-than-desired quarters. But a much more probable reason is that many GenXers are in their peak child-rearing years. With kids bouncing off the walls, the place may be feeling a tad crowded.

Even the groups that seem ripe for downsizing don’t want smaller homes

Of course, age doesn’t tell the whole story about why people might want to downsize. It could be that certain kinds of households, – such as those without children, and living in the suburbs or in affordable areas – might be more likely to live in larger homes than they need. But our survey shows that households in these categories are about twice as likely to want a larger than a smaller home. For those with kids especially, the desire to upsize is strong: 39% preferred a larger home versus 18% who liked a smaller home.  For those living in the suburbs, the disparity is even greater – 42% to 16%. And even among those living in the most affordable zip codes, where ideally-sized homes might be within the budgets of households, 40% of our respondents preferred larger homes versus 20% who said smaller.

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Are all households more likely to upsize than downsize?

At this point you might be asking, “Are there any types of households that want to downsize?” The answer is yes. But only one kind of household falls into this category – those living in homes larger than 3,200 square feet.  Of this group, 26% wanted to downsize versus 25% that wanted to upsize – a slight difference. But, when we looked overall at survey responses based on the size of current residence, households wanting a larger home kicked up as current home size went down. We can see this clearly when we divide households into six groups based on the size of the home they’re living in now. Among households living in 2,600-3,200 square foot homes, 37% prefer a larger home versus 16% a smaller home; in 2,000–2,600 square foot homes, its 34% to 18%; 38% to 18% in 1,400–2,000 square foot homes; 55% to 13% in 800–1,400 square foot homes; and 66% to 13% in homes less than 800 square feet. This makes intuitive sense.  Those living in the biggest homes are most likely to have gotten a home larger than their ideal size. And those in the smallest homes are probably the ones feeling most squeezed.

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The responses to our survey show significantly more demand for larger homes than for smaller ones. But the reality, of course, is that households must make tradeoffs between things like accessibility, amenities, and affordability when choosing what size homes to get. The “ideal” sized home for most Americans may be larger than where they’re living now. But that spacious dream home may not be practical.  As result, the mismatch between what Americans say they want and what best suits their circumstances may persist.

Inaccurate Zillow ‘Zestimates’ A Source Of Conflict Over Home Prices

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By Kenneth R. Harney

When “CBS This Morning” co-host Norah O’Donnell asked the chief executive of Zillow recently about the accuracy of the website’s automated property value estimates — known as Zestimates — she touched on one of the most sensitive perception gaps in American real estate.

Zillow is the most popular online real estate information site, with 73 million unique visitors in December. Along with active listings of properties for sale, it also provides information on houses that are not on the market. You can enter the address or general location in a database of millions of homes and probably pull up key information — square footage, lot size, number of bedrooms and baths, photos, taxes — plus a Zestimate.

Shoppers, sellers and buyers routinely quote Zestimates to realty agents — and to one another — as gauges of market value. If a house for sale has a Zestimate of $350,000, a buyer might challenge the sellers’ list price of $425,000. Or a seller might demand to know from potential listing brokers why they say a property should sell for just $595,000 when Zillow has it at $685,000.

Disparities like these are daily occurrences and, in the words of one realty agent who posted on the industry blog ActiveRain, they are “the bane of my existence.” Consumers often take Zestimates “as gospel,” said Tim Freund, an agent with Dilbeck Real Estate in Westlake Village. If either the buyer or the seller won’t budge off Zillow’s estimated value, he told me, “that will kill a deal.”

Back to the question posed by O’Donnell: Are Zestimates accurate? And if they’re off the mark, how far off? Zillow CEO Spencer Rascoff answered that they’re “a good starting point” but that nationwide Zestimates have a “median error rate” of about 8%.

Whoa. That sounds high. On a $500,000 house, that would be a $40,000 disparity — a lot of money on the table — and could create problems. But here’s something Rascoff was not asked about: Localized median error rates on Zestimates sometimes far exceed the national median, which raises the odds that sellers and buyers will have conflicts over pricing. Though it’s not prominently featured on the website, at the bottom of Zillow’s home page in small type is the word “Zestimates.” This section provides helpful background information along with valuation error rates by state and county — some of which are stunners.

For example, in New York County — Manhattan — the median valuation error rate is 19.9%. In Brooklyn, it’s 12.9%. In Somerset County, Md., the rate is an astounding 42%. In some rural counties in California, error rates range as high as 26%. In San Francisco it’s 11.6%. With a median home value of $1,000,800 in San Francisco, according to Zillow estimates as of December, a median error rate at this level translates into a price disparity of $116,093.

Some real estate agents have done their own studies of accuracy levels of Zillow in their local markets.

Last July, Robert Earl, an agent with Choice Homes Team in the Charlottesville, Va., area, examined selling prices and Zestimates of all 21 homes sold that month in the nearby community of Lake Monticello. On 17 sales Zillow overestimated values, including two houses that sold for 61% below the Zestimate.

In Carlsbad, Calif., Jeff Dowler, an agent with Solutions Real Estate, did a similar analysis on sales in two ZIP Codes. He found that Zestimates came in below the selling price 70% of the time, with disparities ranging as high as $70,000. In 25% of the sales, Zestimates were higher than the contract price. In 95% of the cases, he said, “Zestimates were wrong. That does not inspire a lot of confidence, at least not for me.” In a second ZIP Code, Dowler found that 100% of Zestimates were inaccurate and that disparities were as large as $190,000.

So what do you do now that you’ve got the scoop on Zestimate accuracy? Most important, take Rascoff’s advice: Look at them as no more than starting points in pricing discussions with the real authorities on local real estate values — experienced agents and appraisers. Zestimates are hardly gospel — often far from it.

kenharney@earthlink.net Distributed by Washington Post Writers Group.

And the state where richest people live is…

A new survey lists the states with the highest number of ultra rich

               CA US Senior Senator Dianne Feinstein’s net worth estimated at over $40 million

by Quentin Fottrell

Which U.S. state has the wealthiest residents of them all? It’s the home state of Facebook Chief Executive Mark Zuckerberg but not America’s richest man, Bill Gates, who lives in the state of Washington.

California is the state with the highest number of ultra wealthy individuals, according to a report from private wealth consultancy Wealth-X. There are 13,445 ultrahigh-net-worth individuals — defined as those with $30 million and above in net assets — based in the Golden State, up 6% on a year-over-year basis. They’re mostly located in San Francisco (5,460 people) and Los Angeles (5,135). In fact, California’s population of ultra wealthy individuals is larger than the ultrawealthy population in the entirety of the United Kingdom (11,510).

                       Facebook founder Mark Zuckerberg: Born in New York state, resides in California.

Other states are experiencing a super-rich surge. New York was No. 2 on the list, with 9,530 ultrahigh-net-worth individuals in 2014, up 6% in the last year, and — perhaps unsurprisingly — 8,655, or 91%, of them were based in New York City. The population of people with $30 million or more rose 14% on a year-over-year basis to 80 in North Dakota, which is currently experiencing an energy oil boom. Florida’s ultrahigh-net-worth population increased by more than 10%, adding almost 500 new individuals to 4,710 in 2014 due to strong growth in the state’s financial and real-estate sectors.


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Luxury Home Sales Are Surging In Southern California

Luxury home sales sizzle

The number of Southern California homes bought for $2 million or more in recent months is the highest on record. Above, Rafael Lopez, left, and his wife, Jacqueline, step out of a model luxury home in Irvine’s Orchard Hills community. (Cheryl A. Guerrero, Los Angeles Times)

by Tim Logan

By most measures, the housing market these days is a bit sluggish. Prices are flat. Sales are drooping. A lot of people are priced out.

But not everyone. The high end is hopping.

Luxury home sales in Southern California are hitting levels not seen in decades. The number of homes bought for $2 million or more in recent months is the highest on record. Sales worth $10 million or more are on pace this year to double their number from the heights of the housing bubble.

“It’s pretty mind-blowing, to be honest,” said Cindy Ambuehl, an agent with the Partners Trust in Brentwood. “The luxury market has been completely on fire.”

Low interest rates, a strong stock market and waves of cash sloshing in from overseas are boosting demand for high-dollar homes. A record 1,436 homes worth $2 million or more were sold in the six-county Southland in the second quarter, according to CoreLogic DataQuick.
In the more recent third quarter, 1,431 were sold. That was up 14% from the third quarter of 2013, and well ahead of any three-month period in the housing bubble years of the mid-2000s. This comes even as the broader market has plateaued, with prices in the Southland still about one-fifth below their pre-crash highs and sales at less than two-thirds their 2005 pace.
It reflects a housing market that is now moving at two speeds, said Selma Hepp, senior economist for the California Assn. of Realtors. Fast for the high end, sluggish for the rest.
“It’s just a completely different story between the two segments of the market,” she said. “Those who are doing well are doing really well.”

between now and a decade ago is that the world is smaller, said Drew Fenton, an agent who specializes in high-end homes at Hilton & Hyland in Beverly Hills. Wealthy international buyers are scooping up second homes, investment properties and safe havens for their cash. And it’s easier for them to scout — and travel — the world to do so.

“Everything’s just more global now,” he said. Ten years ago “it was much harder to reach those people and they didn’t travel as much.”

Now they are, and so are the agents who cater to them. Sandra Miller, a broker at Volker & Engels in Santa Monica, last week was jet-lagged from a trip to London, where she met with nearly two dozen brokerages that represent high-end buyers. At the end of the month, she’s off to Kuwait. Every week, she has a conference call with international agents.

The South land scores points with these buyers for its weather, its glamor and a population diverse enough that nearly any transplant can feel at home. And despite its reputation as one of the nation’s least-affordable housing markets, Los Angeles can look like a steal compared with other high-end havens.

“We talk to private wealth managers around the world who think California is a very good market right now,” Miller said. “Compared to New York or London, L.A. real estate is a bargain.”

But it’s not just foreign money that’s heating up the high end.

A surging stock market has boosted portfolios for domestic buyers in recent years, especially for those who have money to invest. Low interest rates have made mortgages cheap. And banks — still risk-averse — are offering lower rates and better terms to deep-pocketed borrowers than to cash-strapped first-time buyers. Meanwhile, wealthier households have seen their incomes grow faster than average in recent years.

Builders are recognizing this. Aliso Viejo based home builder New Home Co. has several developments underway in Orange County targeting high-end buyers, including 6,700 square-foot five-bedroom homes in Irvine and ocean-view condos in Newport Beach.
Sales have been brisk, said Joan Marcus Colvin, New Home’s senior vice president of sales, marketing and design, especially at that Newport condo building, the Meridian, where 34 units have sold since February, at an average price of nearly $3 million. That’s without even having a model home to show customers — the site is still under heavy construction. Renderings and drone shots of the views are all that’s offered.

Meridian Newport Beach, California

“It’s quite a testament to the strength of the high end of the market,” Colvin said. “These were bought sight unseen. We couldn’t even stand people there and show them it.”

But it’s the first new home development in Newport Center in a quarter-century, Colvin said, so there’s demand. And income growth has been strong in coastal Orange County, minting new buyers for high-dollar homes. The same trend is happening in places less associated with luxury than Fashion Island.

High-end home sales are surging in “Silicon Beach,” too, with tech entrepreneurs and Bay Area transplants scooping up multimillion-dollar homes in Santa Monica, Venice and Marina del Rey. Many of the buyers work in the area, said Miller, and prefer walkable neighborhoods, relatively close to work, to the traditional hubs of Westside glitz.

“These people don’t want to commute an hour and a half to Beverly Hills, which is a whole 13 miles away,” Miller said.

Then there’s the formerly sleepy South Bay. The average sales price in Manhattan Beach through the first nine months of the year topped $2.2 million, said Barry Sulpor at Shorewood Realtors. That’s up from $1.85 million in the same period last year. Even empty lots in the beach town’s “Tree Section” are going for $1.3 million.

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Downtown Manhattan Beach

“That’s just lot value,” Sulpor said. “And as you get closer to the beach it goes up from there.”
Prices have been climbing so fast that even fairly recent buyers say they’re lucky they got in when they did. About 18 months ago, Ray Ahn and his wife bought a place half a block from the beach, a pocket listing that was never widely marketed. Before the purchase even closed, the house’s appraised value started climbing. And of the eight or so houses that neighbor Ahn’s, three have gotten high-end remodels since he moved in.

“I probably wouldn’t be able to buy here today,” said Ahn, who works for an investment firm in downtown Los Angeles.

But to live by the beach, he said, it’s worth it. So did Daphna Oyserman. She and her husband — professors who relocated from the University of Michigan to USC — spent $2.2 million in January for a house just a few blocks from the sand. They expected to pay a premium to live in a nice beach town, Oyserman said, and they did. But, although their house is “half the size at three times the price” of what they owned in Ann Arbor, Mich., Manhattan Beach offers amenities Michigan can’t.

“We thought, if we’re moving to L.A., we’d like to enjoy it,” she said. “In the morning I go for a run on the beach. When we go to sleep we can hear the ocean.”

These well-heeled professionals have played a big part in the South Bay’s surge, said Sulpor, along with those in the tech industry who prefer a more laid-back scene than Santa Monica and a growing cadre of professional athletes. Then there are young buyers who walk in with trust funds or family money.

“A lot of folks in their 20s and 30s are coming in and taking properties off the table at $3 million or $4 million,” Sulpor said. “Sometimes all-cash.”

Ambuehl said her luxury buyers also are starting to skew younger. Among her clients, tech entrepreneurs and other wealthy shoppers in their 20s and 30s are gradually replacing baby boomers, who often weren’t as young when they earned enough to afford a big-ticket house. They’re looking for different kinds of homes — often with more outdoor space — and in different neighborhoods. And, she predicts, they’ll be driving up the high end of the market for a long time.

“You’ve got 70 million baby boomers. You also have 70 million Gen Yers. They are a huge part of our buyer pool,” she said. “It’s a market we have to pay attention to.”

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