Real Estate Investing

Are you in foreclosure? You’re not the only one. Click here to view a photo gallery of million-dollar homes that are in the foreclosure process. What is the deal?

A recent Forbes magazine article points to a series of unfortunate occurrences. In many cases, the buyers found themselves in a negative equity situation. In other words, they overpaid for the home initially or the house’s value has declined along with the overall housing market, leaving them panicked and seeking an escape. In many cases, housing lenders approved outrageous loans that far surpassed the homeowner’s ability to pay.

“There were people with $100,000 incomes getting million-dollar loans,” Wendell Cox, founder of St. Louis-based housing research firm Demographia, told Forbes.

The situation puts banks in a prickly position. They must either continue paying brokers to maintain, market and sell the properties, or — in light of the surplus of foreclosure properties and the sea of choosy buyers — they must decrease the price and take a financial hit. Forbes reports that sellers in the pre-foreclosure stages are getting some decent offers from international investors, but there is often still no meeting of the minds between buyers and sellers.

This is far from the first time the high-end housing market has experienced trouble, although the problem seems to be more significant now than before. But before we go entirely into the Land of Gloom, take a look at Peter Viles’ real estate blog for the L.A. Times. The blog lists several neighborhoods around Los Angeles where the housing prices have not dropped “one iota.” Granted, they are all sub-million dollar homes, meaning the $700,000 to $900,000 range. Still, not too shabby, right? So here again, there may be local pockets of prosperity amidst the nationwide picture of despair. In any case, if you’ve ever thought about buying a luxury home, now may just be the time.

Forbes had an interesting piece recently on the “Celebrity Real Estate Losers” of Hollywood. Unfortunately, it seems Ed McMahon is the biggest loser, having to reduce his asking price from $7.7 million to a mere $5.7 million. Poor Ed.

In other news, Guns N’ Roses guitarist Slash is suing his real estate agent for much the same reason as San Diego couple Vernon and Marty Ummel. Like the Ummels, Slash feels he overpaid for the Spanish-style Hollywood Hills home he purchased in January 2006. Slash sold the home in December 2007 for $5.7 million, a loss of $500,000. The ongoing California Supreme Court case has Slash alleging that the home is neither as big nor as private as his real estate agent led him to believe it was. Real estate agent lawsuits seem to be a new trend. Couple that with the rash of personal attacks on real estate agents during home tours and it sums up to a good time to be exiting the business. Which indeed, many realtors are doing, but I digress…

Other Hollywood real estate losers:

Rock star Avril Lavigne had to reduce her asking price from $6.9 million to $5.8 million. With tennis courts, a pool, five bedrooms and six baths, the Beverly Hills house is being touted “one of the best values on the market today” by Lavigne’s agent, Forbes reports.

TV star Wilmer Valderrama reduced the asking price by $200,000 on his five-bedroom home. He received only $1.75 million for the home, which is in the less desirable Tarzana neighborhood.

Legendary hairstylist Vidal Sassoon has seen the asking price for his lavish Mulholland Drive estate drop by $5 million to only $20 million.

Access Hollywood is linking this trend to the writer’s strike. The L.A. real estate downturn began alongside the strike in November, Access claims, with December sales volume 48 percent less than a year prior and average home price down 11 percent.

It is no secret that the housing market in Las Vegas, and Nevada as a whole, took a hit in the recent housing slump. But according to area realtor Ken Lowman, the city’s ultra-luxury market has remained quite strong.

“The ultra-luxury market remains the best performing part of the residential real estate market today,” Lowman said to the Las Vegas Review-Journal in late January. “We have had four closings in the past five months for over $3,000,000 and I have finished the year with more momentum than it began.”

The focus of the article is on a local dentist who downgraded from a $5.6 million home with 7,000 square feet of living space to one in the same subdivision with only 5,000 square feet.
The 2-year-old, custom-built home was on the market for 118 days.

“Unique features in the estate home include a circular bar, a water wall entry feature, great room with four televisions, infinity edge pool overlooking the valley and mountains, a wine cellar, four-car garage and second-story observation loft.”

The ultra-luxury homes market is so rife with competition, in fact, that developers are scrambling to up their game. Granite countertops, high ceilings and top-notch kitchen appliances are standard expectations, according to New Homes magazine. In fact, discerning buyers looking to customize their living spaces are choosing counter surfaces like onyx and imported marble tiling. To further entice buyers, many ultra-luxury condos and developers offer on-site design centers with various levels of customization available.

Las Vegas is not the only city seeing a relatively healthy ultra-luxury housing market. The ongoing construction of ultra-lux condo projects like the Chicago Spire (scheduled opening 2011) indicate that elite buyers are indeed shopping across the United States. San Francisco statistics from February indicate that multi-million dollar home sales are strong there as well. With 68 homes on the market in the $2 to $4 million range, 15 sold in January at an average price of $2.53 million after an average 117 days on the market. Indeed, the luxury and ultra-lux homes market seems to have weathered the real estate storm just fine, perhaps thanks in part to the tremendous influx of foreign investment?