Tag Archives: Los Angeles

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

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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:

Over 150 People Move Out Of Chicago Every Day

With its nation-leading murder rate, lake-effect weather, endemic corruption and financial mismanagement, who really wants to live in Chicago? Well, the data is in, and as Mayor Rahm Emmanuel prepares to hand power to a new administration next year, his legacy – already marred by the above-mentioned scourges – has accrued another ignominious distinction. According to Census data analyzed by Bloomberg, Chicago experienced the highest daily net migration in the US, losing 156 residents a day (strictly due to migration, not murder) a day in 2017.

After Chicago, Los Angeles came second with 128, followed by New York with 132.

On the other side of that coin were cities across the US sun belt, like Dallas (No. 1, with 246 net incoming), followed by Phoenix (with 174) and Atlanta (No. 3 with 147).

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In terms of total net migration for the year, the tallies differed only slightly. While the sun belt was the biggest beneficiary of Americans’ growing preference for sunnier weather, lower rents and plentiful job opportunities…

Dallas was the greatest beneficiary of this domestic migration, adding nearly 59,000 domestic movers in 2017, followed by Phoenix (51,000) and Tampa (41,000), which serve as anchors for the western and southern regions that got the bulk of the gains.

…some of America’s largest cities saw net outflows as rising rents, crumbling (or inadequate) public infrastructure. The city with the biggest outflow was NYC, followed by Los Angeles and – in third place – beautiful Bridgeport, Conn.

On the flip side, more than 208,000 residents left the New York City metropolitan area last year. This was nearly twice as many as the second biggest loser, Los Angeles, which had a decline of nearly 110,000. Chicago fell by 85,000. Honolulu, San Jose, New York and Bridgeport, CT lost the highest shares of their residents to other parts of the country.

In Chicago, New York and Los Angeles, the three areas with a triple-digit daily exodus, people are fleeing at a greater rate than just a few years earlier. Soaring home prices and high local taxes are pushing local residents out and scaring off potential movers from other parts of the country.

But maybe if Emmanuel’s successor can successfully implement the outgoing mayor’s plans for a city wide UBI (which we imagine would go a long way toward offsetting its hated ‘amusement tax’ and other levies needed to pay off the city’s brutal debt burden), maybe he can bribe residents into staying.

Source: ZeroHedge

L.A. to Worsen Housing Shortage with New Rent Controls

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Los Angeles, home to one of the least affordable housing markets in North America, is now proposing to expand rent control to “fix” its housing problem. 

As with all price control schemes, rent control will serve only to make housing affordable to a small sliver of the population while rendering housing more inaccessible to most. 

Specifically, city activists hope that a new bill in the state legislature, AB1506, will allow local governments, Los Angeles included, to expand the number of units covered by rent control laws while also restricting the extent to which landlords can raise rents. 

Unintended Consequences 

Currently, partial rent control is already in place in Los Angeles and landlords there are limited in how much they can raise rents on current residents. However, according to LA Weeklylandlords are free to raise rents to market levels for a unit once that unit turns over to new residents. 

This creates a situation of perverse incentives that do a disservice to both renters and landlords. Under normal circumstances, landlords want to minimize turnover among renters because it is costly to advertise and fill units, and it’s costly to prepare units for new renters. (Turnover is also costly and inconvenient for renters.) 

By limiting rent growth for ongoing renters, however, this creates an incentive for landlords to break leases with residents — even residents who the landlords may like — just so the landlords can increase rents for new incoming renters in order to cover their costs of building maintenance and improvements. The only upside to this current regime is that at least this partial loophole still allows for some profit to be made, and thus allows for owners to produce and improve housing some of the time

But, if this loophole is closed, as the “affordable housing” activists hope to do, we can look forward to even fewer housing units being built, current units falling into disrepair, and even less availability of housing for residents. 

Why Entrepreneurs Bring Products to Market 

The reason fewer units will be built under a regime of harsher rent control, is because entrepreneurs (i.e., producers) only bring goods and services to market if they can be produced at a cost below the market price. 

Contrary to the myth perpetuated by many anti-capitalists, market prices — in this case, rents are not determined by the cost of producing a good or service. Nor are prices determined by the whims of producers based on how greedy they are or how much profit they’d like to make. 

In fact, producers are at the mercy of the renters who — in the absence of price controls — determine the price level at which entrepreneurs must produce housing before they can expect to make any profit. 

However, when governments dictate that rent levels must be below what would have been market prices — and also below the level at which new units can be produced and maintained — then producers of housing will look elsewhere. 

Henry Hazlitt explains many of the distortions and bizarre incentives that emerge from price control measures: 

The effects of rent control become worse the longer the rent control continues. New housing is not built because there is no incentive to build it. With the increase in building costs (commonly as a result of inflation), the old level of rents will not yield a profit. If, as often happens, the government finally recognizes this and exempts new housing from rent control, there is still not an incentive to as much new building as if older buildings were also free of rent control. Depending on the extent of money depreciation since old rents were legally frozen, rents for new housing might be ten or twenty times as high as rent in equivalent space in the old. (This actually happened in France after World War II, for example.) Under such conditions existing tenants in old buildings are indisposed to move, no matter how much their families grow or their existing accommodations deteriorate.

Thus, 

Rent control … encourages wasteful use of space. It discriminates in favor of those who already occupy houses or apartments in a particular city or region at the expense of those who find themselves on the outside. Permitting rents to rise to the free market level allows all tenants or would-be tenants equal opportunity to bid for space. 

Nor surprisingly, when we look into the current rent-control regime in Los Angeles, we find that newer housing is exempt, just as Hazlitt might have predicted. Unfortunately, housing activists now seek to eliminate even this exemption, and once these expanded rent controls are imposed, those on the outside won’t be able to bid for space in either new or old housing.

Newcomers will be locked out of all rent-controlled units — on which the current residents hold a death grip — and they can’t bid on the units that were never built because rent control made new housing production unprofitable. Thus, as rent control expands, the universe of available units shrinks smaller and smaller. Renters might flee to single-family rental homes where rent increases might still be allowed, or they might have to move to neighboring jurisdictions that might not have rent controls in place. 

In both cases, the effect is to reduce affordability and choice. By pushing new renters toward single-family homes this makes single-family homes relatively more profitable than multi-family dwellings, thus reducing density, and robbing both owners and renters of the benefits of economies of scale that come with higher-density housing. Also, those renters who would prefer the amenities of multi-family communities are prevented from accessing them. Meanwhile, by forcing multi-family production into neighboring jurisdictions, this increases commute times for renters while forcing them into areas they would have preferred not to live in the first place. 

But, then again, for many local governments — and the residents who support them — fewer multi-family units, lower densities, and fewer residents in general, are all to the good. After all, local government routinely prohibit developers from developing more housing through zoning laws, regulation of new construction, parking requirements, and limitations on density. 

And these local ordinances, of course, are the real cause of Los Angeles’s housing crisis. Housing isn’t expensive in Los Angeles because landlords are greedy monsters who try to exploit their residents. Housing is expensive because a large number of renters are competing for a relatively small number of housing units. 

And why are there so few housing units? Because the local governments usually drive up the cost of housing. As this report from UC Berkeley concluded: 

In California, local governments have substantial control over the quantity and type of housing that can be built. Through the local zoning code, cities decide how much housing can theoretically be built, whether it can be built by right or requires significant public review, whether the developer needs to perform a costly environmental review, fees that a developer must pay, parking and retail required on site, and the design of the building, among other regulations. And these factors can be significant – a 2002 study by economists from Harvard and the University of Pennsylvania found strict zoning controls to be the most likely cause of high housing costs in California.

Contrary to what housing activists seem to think, declaring that rents shall be lower will not magically make more housing appear. Put simply, the problem of too little housing — assuming demand remains the same — can be solved with only one strategy: producing more housing

Rent control certainly won’t solve that problem, and if housing advocates need to find a reason why so little housing is being built, they likely will need to look no further than the city council.

By Ryan McMaken | Mises Institute

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

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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

Los Angeles Is Re-Segregating — And Whites Are A Major Reason Why

Parents walk their daughter to class on the first day of kindergarten at the Telesis Academy in West Covina on Aug. 17, 2015. (Los Angeles Times)

Some of America’s most racially integrated neighborhoods and cities are on a path to becoming segregated all over again. In Los Angeles this means neighborhoods where Latinos and Asians now live alongside black or white neighbors may have few to no whites or blacks in 10 to 20 years.

In research I conducted with Siri Warkentien, another sociologist, we used a statistical model and census data to identify the most common changes in racial composition in 10,681 neighborhoods in metropolitan L.A., Houston, Chicago and New York, beginning as far back as 1970 in some areas. That starting point corresponds with the implementation of the 1968 federal Fair Housing Act, which protects buyers and renters from discrimination in choosing where to live.

Covina, 22 miles east of downtown L.A., provides an example of one city at risk of re-segregating. Whites make up about 26% of Covina as of 2014 and Latinos about 57%. Typically we consider neighborhoods with at least 10% of each group to be racially integrated. But the mix is crumbling. Latinos made up 13% of Covina’s residents in 1980, 26% in 1990, 40% in 2000, and 52% in 2010. Four years later, according to the most recent census estimate, the Latino population had grown by five more percentage points. By 2025, Covina is likely to be overwhelmingly Latino.

Something similar happened already in nearby Norwalk. In 1990, just under half its residents were Latino and about a third were white (not unlike Covina now). By 2014, Latinos made up 70% of residents and whites 11%.

The data show that vast portions of south and east Los Angeles are slipping from mixed populations toward single race populations. And the change has not just occurred in formerly white areas. One of the trajectories that we identified followed a similar pattern in neighborhoods that were once black. Compton residents were nearly three-quarters black in 1980; by 1990, the mix was about 52% black and 43% Latino; in 2014, two-thirds Latino. Such slow but steadily increasing Latino growth can be found in 46% of the neighborhoods we studied in the Los Angeles metropolitan region.

What’s causing a shift from mixed to single-race populations?

Immigration is one obvious factor. The Latino population increased in Los Angeles after immigration laws were changed in 1965 to encourage family reunification. That population was bolstered by a steady increase in Mexican immigrants from the mid-1990s until the recession. Newly arrived Latinos, like all immigrant groups, tend to find housing in neighborhoods already pioneered by their countryman who are already here.

Our research found that this process is occurring again in Southern California, but this time among immigrants from Asia, the source of the largest number of U.S. newcomers now. For example, the Asian proportion of the population in Cerritos increased from 44% in 1990 to 58% in 2000 to 62% in 2014. It appears to be following a path toward Asian segregation much like Covina is on the path to Latino segregation.

White preferences are another major factor that helps explain re-segregation.

Our model showed that, broadly speaking, during the 1980s, whites stopped fleeing from neighborhoods that were becoming integrated. But then — more than any other racial group — when whites did move they chose new neighborhoods with same-race neighbors.

In other words, Latinos moving to an area would not cause most whites to move out. But the prospect of having Latino neighbors might be enough to prevent whites from moving into a neighborhood. (Whites are moving to one kind of integrated neighborhoods: those that are gentrifying like downtown Los Angeles. But many fewer neighborhoods are gentrifying than segregating.)

For a time, places like Covina and Norwalk will remain integrated. But as whites in these areas get older and die, the outcome is clear. Consider the age patterns: In Covina, 22% of whites are 65 or older; only 14% are under the age of 18. Among Latinos in Covina, 6% are 65 or older; 32% are younger than 18.

Segregation is not, however, inevitable. Our statistical model found that in 20% of L.A. neighborhoods we examined, whites, blacks, Latinos and Asians have been living together for 10 to 30 years, and no group’s population is changing much faster or slower than any other. In fact, among L.A., Houston, Chicago and New York, Los Angeles had the highest proportion of these “quadrivial” neighborhoods.

There are ways to encourage integration. The Department of Housing and Urban Development has taken a positive step in this direction by requiring all grant recipients to show how they would promote integration, although Congress is threatening to undo this rule. At a local level, investment in neighborhood infrastructure, especially schools, attracts diverse residents and promotes integration. There is also new research that shows whites are choosing same-race neighborhoods not solely because of prejudice or animus, but because they don’t know about more mixed areas. In a separate study of Chicago area residents, for instance, whites were 2 to 6 times less likely than Latinos to even know about majority Latino neighborhoods.

Because so much of the shift in integration is based on whites’ decisions about where they will move next, Los Angeles’ future demographic patterns are in their hands. If whites do their homework, and find out more about neighborhoods that are now unfamiliar to them, they can make L.A. an example to the nation of how to create integration in the 21st century. Otherwise, knowingly or not, they may reproduce the problems of racial segregation for the future.

by Michael Bader | Los Angeles Times

 

Some Wild Stuff Going On in the Los Angeles Housing Market Last Month

Housing prices in Crenshaw jumped way up, while Hancock Park’s tumbled way down

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Redfin’s housing market report for February has been released, and, as per usual, a lot of activity took place east of Vermont. Neighborhoods like Echo Park, Eagle Rock, Glassell Park, Mount Washington, and East LA all saw double digit rises in median housing price.

Mount Washington’s median price for February was up 19.2 percent to $790,000, which is up significantly from the $699,000 median price Redfin cited in January when it predicted Mount Washington would be the hottest neighborhood of 2016. Their prediction may be coming true (self-fulfilling?). Sellers in Mount Washington are getting 6.5 percent above asking price and houses are staying on the market for an average of only 13 days.

 

The Valley also saw some action in February: Studio City, Sherman Oaks, Sun Valley, and Van Nuys all had double digit jumps in median housing prices. Studio City fared the best with a 26.9 percent increase, to $888,250, and a 22.9 percent increase in total sales.

Around town other neighborhoods experienced some major fluctuations. On the positive end, Crenshaw had a big February; median prices in that neighborhood shot up a whopping 66.8 percent, to $628,125. Total sales in Crenshaw were up 64.3 percent.

Redfin also reports a 25 percent increase in the median price of houses on the Westside of town—those are now selling for a median of $1.5 million.

Conversely, Hancock Park did not fare so well in the February report. Median prices for the neighborhood contracted 68.8 percent, to an even (and crazy low) $500,000. Sales were down 31.3 percent and sellers were getting 1.7 percent below asking price.

Los Angeles on the whole had a 14.6 percent increase in median price, up to $590,000. The city also saw a lot of new houses added to the market in February, with inventory moving up 10.5 percent. But total sales were down 2.5 percent for the month.

by Jeff Wattenhofer