Why that million-dollar home is sitting on the market

By the time it sold last week for $4.8 million, a six-bedroom lakefront mansion in Winnetka had been on the market for most of the past six years and the sellers had already moved to California.

They're not the only high-end sellers who've had to wait: Luxury-priced homes all over the city and suburbs are taking a long time to sell.

Homes priced at $1 million and up are selling slower on average this year in 18 of 22 expensive Chicago neighborhoods and suburbs, according to Midwest Real Estate Data. Luxury homes are selling faster in just four locations: Streeterville in the city and in the suburbs of Evanston, Glencoe and Highland Park.

Agents blame an oversupply in the price range, reluctance of homeowners to head for the suburbs and the protracted struggle to clean up the financial mess in Illinois and Chicago.

"We've got these high property taxes, sales taxes and income taxes, and these crazy pension problems we'll never be able to pay for," said John Phillips, a Jameson Sotheby's International Realty agent in Winnetka. "Why buy an expensive house when you can buy a smaller one and use the rest of the money on something else, like a second home in another state?"

In Deerfield, where the slowdown has been steepest, the average home that went for $1 million or more in the 12 months ended July 31 sold in 233 days, up from 144 in the year-earlier period, MRED's data show.

Househunters in Deerfield "are seeing they can get a better deal in Highland Park," said Margie Brooks, a Baird & Warner agent with high-end listings in both Deerfield and Highland Park, to the east. "They get more of a downtown and the beaches."

Highland Park's better deals are available in part because so many homes are for sale there, which leads to price wars. There are 91 homes on the market at $1 million-plus in Highland Park, almost twice the 46 upper-end homes that sold in the previous year.

That should mean that Highland Park's high-end homes would be selling slower as well, but they're not.

In the city, the biggest slowdown is in North Center, where $1 million-and-up homes are selling in an average of 116 days this year, up 41 percent from the year before. There were 122 sales last year and 116 this year.

"It's because there's so much supply on the market," said Sean Glascott, an @properties agent. He sold a newly built home on Waveland Avenue in North Center that was on the market for 18 months before selling in June for slightly over $1.8 million.

While the 5,000-square-foot home was under construction, "there were 10 other homes being built in the immediate area, all within a couple hundred thousand dollars of ours, and we knew about more that were coming," Glascott said.

SALES UP

Although the time it takes to sell million-dollar-plus homes has lengthened this year, more of them are selling. This year, a combined 1,711 high-end homes have sold in the 22 areas, according to MRED, an increase of 3 percent from a year earlier.

Buyers may be coming for the prices. The Waveland Avenue home that Glascott sold started out at just over $2 million but eventually went for 13 percent less.

"We knew it was time to let this thing go before we were competing with 20 houses," he said.

Sales have slowed in city neighborhoods from the South Loop up to Lincoln Square. Only Streeterville has speeded up, but not by much. Million-dollar homes are selling in 140 days, down from 143 last year. But at the same time, the number of Streeterville sales is down 20 percent at 75 this year.

In the market overall, homes at all prices are selling faster than they were a year ago, according to MRED. While a single regional figure is not available that corresponds with the time period in the million-dollar study, MRED's end-of-August report showed that everywhere but Lake County had homes selling faster year-to-date than in the first eight months of 2015. In Lake County, they were selling 4 percent slower.

Evanston stands out as the bright spot for million-dollar sellers. Luxury homes are selling 35 percent faster—in 92 days this year, down from 142—and the number of sales, 45, is up 20 percent from last year.

"Evanston has always been a mini-Chicago," said Debbie Magnusen, an @properties agent who works there. "It has restaurants and culture; and if you want to go into the city easily, you can."

'THEY REALLY DON'T WANT TO GO FARTHER NORTH'

That's always been true, but Magnusen said it's become even more important in recent years as two-earner couples try to stay close to job centers and raise kids at the same time.

"They really don't want to go farther north," said Magnusen, who said listings in next-door Wilmette are getting considerably fewer showings than those in Evanston. High-end sales are taking 63 percent longer in Wilmette, an average of 101 days, up from 62 last year.

Agents in other, farther north suburbs have been saying the same recently: that younger affluent adults don't want to make longer commutes.

Phillips, the Jameson Sotheby's agent, said keeping to a shorter commute is a pragmatic choice the younger generation is making, in part because in these days of slow price recovery,

When home values "were going up 4 or 5 percent a year, you had the fun of living in it and made money at the end," Phillips said. "Now you can have a lot more fun with that money somewhere else, like Florida."

Source: Crain's Chicago Business, Dennis Rodkin
http://www.chicagobusiness.com/realestate/20160913/CRED0701/160919978/why-that-million-dollar-home-is-sitting-on-the-market

Lagging Demand for Luxury Homes May Mean Deals for Buyers

A surplus of high-end homes for sale is giving more bargaining power to buyers.

In the U.S., the inventory of homes priced from $500,000 to $750,000 rose 15.9% in March compared with the same period last year, according to the National Association of Realtors. The inventory of homes over $1 million rose 12.6% year over year. Inventories dropped in April, likely due to the seasonal pattern of spring sales and perhaps some buyers taking advantage of deals, but real-estate agents say they are still seeing more expensive homes sit longer than midrange and lower priced homes.

Behind slowing sales at the upper level: Stock-market volatility has made wealthy buyers more cautious, and there are fewer foreign buyers than last year due to the dollar strengthening and other economic issues overseas, says Lawrence Yun, NAR’s chief economist.

“The stock market has come back up, but we don’t know yet if that means the upper-end home buying market will begin to return,” Mr. Yun says.



What also could be happening is simply a “normalizing” of the home market, says Brad Blackwell, executive vice president and portfolio business manager for Wells Fargo Home Mortgage. That’s good for jumbo borrowers, who now have a wider choice of homes and won’t have to bend to sellers’ demands that waive financing and inspection contingencies to compete with cash buyers.

However, the thresholds for looser inventory differ widely by location as different market forces come into play. In suburban Hartford, Conn., homes priced between $300,000 and $450,000 are selling briskly, but listings of $600,000 to $800,000 often stall depending on location and whether they are priced reasonably, says Jessica Starr, agent/owner of Simsbury, Conn.-based Starr Realty, a team affiliated with Keller-Williams Realty. “A lot of people bought at the peak of the market [prerecession] and are taking a loss,” she adds.

Hartford is a good example of how local conditions impact the upper end of home sales. A number of big companies, including General Electric, are moving their headquarters from the area. That may create a glut in inventory, but other affluent, less geographically driven buyers, such as doctors, may swoop in for bargains in family friendly neighborhoods, Ms. Starr says.

In Portland, Ore., homes priced from $300,000 to $600,000 sell in five days with 10 to 20 offers, but listings start to sit on the market at $750,000 and get really challenged above $1 million, says Shannon Baird, a broker with Portland-based Living Room Realty. For example, a grand 1920s Tudor-style home with five fireplaces and a marble-floored ballroom was first listed at $1.6 million, but sat for five months and is finally set to close in June for $1.425 million, she says.

One of the biggest hurdles is changing the mind-set of homeowners attuned to quick sales and bidding wars, Ms. Baird says. One recent $840,000 listing had four counteroffers starting at $770,000 before buyer and seller agreed on $815,000. These days, Ms. Baird advises sellers to review their asking price and consider lower offers after 14 to 21 days.

In San Francisco, Maggie Visser, an agent with the San Francisco-based Paragon Real Estate, says stock-market gyrations have definitely slowed sales to tech-industry employees, many of whom cash out stock options to buy. Also slackening in the Bay Area is the market for newly constructed condo units, where sales had been driven by Chinese buyers, Ms. Visser says.

Here are a few things to consider when financing a more expensive home:

• Low interest rates. A bigger mortgage costs less now than it may in the future. Jumbo mortgage average interest rates are still near record lows—3.72% for the 30-year fixed rate and 2.87% for a five-year, adjustable-rate mortgage on the week ending June 10.

• More cash on hand. Lenders require higher down payments and more cash reserves as borrowers reach higher loan amounts, or “tiers.” For example, Wells Fargo will lend up to 89.9% on amounts up to $1 million, 80% on amounts between $1 million to $2 million, 75% on loans between $2 million and 2.5 million, and so on.

• Budget for all costs. Home buyers who are trading up should make sure they can also afford higher property taxes, homeowners’ insurance, and maintenance, Mr. Blackwell says. “It’s also always important for buyers of luxury houses to factor in the increased cost of furnishing that home,” he adds.

Source: Realtor.com, Anya Martin
http://www.realtor.com/news/trends/lagging-demand-for-luxury-homes-may-mean-deals-for-buyers/?iid=rdc_news_hp_carousel_theLatest

Silicon Valley Mansions Linger on Market in Real Estate Slowdown

A custom-built home in the heart of California’s Silicon Valley had its price cut by $500,000 last week after sitting on the market since the end of March -- a move that would’ve been almost unfathomable a year ago and a signal that frenzied demand has peaked.

The six-bedroom, five-bath house in Palo Alto -- located blocks from Stanford University and the homes of Google co-founder Larry Page and Steve Jobs’s widow, Laurene Powell Jobs -- is now listed for $7.5 million. It joins a growing inventory of high-end homes in the area that are taking longer to sell.

“We’ve recently noticed a slowdown,” Jack Woodson, who works at Alain Pinel Realtors in nearby Menlo Park, said on a tour of the house in the Old Palo Alto neighborhood. “Buyers are taking more time to decide about making offers.”

Silicon Valley, the most-expensive U.S. housing market, is seeing a pullback by the wealthiest homebuyers after a four-year real estate boom marked by bidding wars and multimillion-dollar prices. Stock-market turmoil, a drop in foreign investors and concerns of a technology-industry slowdown are cooling demand at the high end, even as interest remains robust for more moderately priced properties.

In Palo Alto, an ultra-wealthy city that’s home to many Google and Facebook Inc. executives, homes costing more than $5 million were on the market for a median of 16 days in April, compared with 11 in the same month in 2015 and 10 in 2014, according to data from Irvine, California-based John Burns Real Estate Consulting. The 11 active listings in that price range as of May 14 have been on the market a median of 30 days.



While that’s quick by most standards -- across the U.S., the median time on the market is 67 days -- it’s a departure from recent years, when newly minted millionaires from tech initial public offerings raced against buyers from China to scoop up anemic inventory.

“The seemingly inexhaustible well of very high-end buyers has proven exhaustible after all,” said Dean Wehrli, a senior vice president at John Burns. “The peak is behind us, and that’s becoming clearer and clearer to builders and buyers.”

Pricey Properties

The San Jose metropolitan area, encompassing Silicon Valley, is the most expensive U.S. housing market, with a median single-family home price of $970,000, according to the National Association of Realtors. In Palo Alto, the median home price was $2.5 million in the first quarter, data from Zillow show. That’s higher than San Francisco, at $1.1 million, and New York, at $616,100.

Across the country, luxury-home sales are cooling as turmoil in the global economy and the prospect of higher interest rates roils financial markets. Silicon Valley has the added pressures of being closely correlated to the tech industry and a top target for foreign buyers.

Venture-capital investments in Silicon Valley fell almost 20 percent in the first quarter from a year earlier to $4.9 billion, according to an April report from PricewaterhouseCoopers LLP. Chinese buyers -- hit by a slowing economy and government restrictions on how much money can leave the country -- have slowed purchases after they had “really been driving the market,” said Woodson of Alain Pinel.

“We’re probably moving toward normalization,” said Katharine Carroll, vice president at Pacific Union Real Estate in Palo Alto. “Buyers see that they have a few more options. They don’t feel the urgency that they have to decide on something right away and put an offer in. They can kick the tires a little bit more.”

Statewide Slower

The sale of luxury real estate is slowing statewide, with homes costing more than $3 million sitting on the market 52.5 days in the first quarter, compared with 40 days the year before, said Jordan Levine, an economist at the California Association of Realtors in Los Angeles.

In Santa Clara County, home to Palo Alto, there were 13 sales of homes costing more than $5 million in the first quarter, down from 20 a year earlier, he said. In nearby Los Altos, there were six active listings of homes costing more than $5 million on the market for a median of 25.5 days as of May 14, while the 25 listings in Atherton were on the market a median of 100 days, according to John Burns.



“Given that a larger proportion of the $3 million-plus category is purchased with cash, or folks use some of their other assets to make those kinds of purchases, I think they’re more susceptible to stock-market volatility than your entry-level buyer would be,” Levine said. “That’s one of the big drivers of the current slowdown.”

Mid-Range Demand

There’s no let-up in the demand for homes in the $2 million to $3 million range. Realtors say those properties are still generating multiple offers and selling above asking prices because they are still affordable to software engineers. Aggressive hiring at Facebook and Google is propping up the middle segment of the housing market in Silicon Valley, said Ken DeLeon, founder of DeLeon Realty in Palo Alto.

“Palo Alto is at a crossroads, where some homes are doing very well, and some homes are lingering that last year would have sold with multiple offers,” DeLeon said. “When they do sell, it’s when the seller cuts the price below what they would have gotten last year.”

High-end buyers are pickier and are more likely to let a property go, instead of competing with multiple offers and an auction dynamic that led to homes selling well above asking price until very recently, he said.

“I’m having buyers who are much more open to waiting, to taking a risk that the home might sell,” he said. “There’s just not that motivation.”

Source: Bloomberg, Alison Vekshin
http://www.bloomberg.com/news/articles/2016-05-17/silicon-valley-mansions-linger-on-market-in-real-estate-slowdown

$100 million zombie homes may signal market top

Homes listed for $100 million or more are piling up fast, but sales have ground to a halt, leading some to call a top in the very top of the real estate market.

Real estate brokers and analysts said there are roughly 20 homes for sale (either officially or unofficially) for $100 million or more in the U.S. That's up from about a dozen or 15 last year.

At the same time, sales of nine-figure homes have stalled. By the summer of 2014, three homes sold for $100 million or more. But so far this year, there hasn't been a single recorded sale at those prices, brokers and analysts said.
And as the inventory of super mansions rises, so have the price cuts—with some getting slashed by tens of millions of dollars.

Jonathan Miller, president and CEO of the Miller Samuel appraisal firm, said $100 million homes are largely "vanity listings," with owners setting prices "far detached from the market norm, the market conditions or the market price."

While some sellers may slap a blockbuster price on their homes to get marketing attention, the mega-prices have so far failed to generate sales.

"A $100 million price is just testing the market. But I don't know how much more testing they need to do," Miller said. "It's not working, this stuff isn't selling. Sellers are being extremely more aggressive and unrealistic than ever before."

Officially, there are only about seven or eight homes on the market in the U.S. that are priced at nine figures. The most recent is an eight-acre waterfront compound in Kings Point on New York's Long Island.

The property has 60,000 square feet of living space, 13 bedrooms, 35 bathrooms, an indoor lazy river, a two-story built-in doll house, a hair salon, wine room, indoor racquetball court, gym, saunas and a private pier than can hold a 200-foot yacht.

Yet Dolly Lenz, of Dolly Lenz Real Estate, said there are at least 20 homes for sale at $100 million or more when you include "whisper listings," those that are secretly for sale among high-end brokers, but not officially listed for buyers.

"These owners do not want pictures of their homes out there, and you have to show financial statements to tour the property," she said. "But there are a lot more $100 million homes out there than you think."

Lenz said that the lack of nine-figure sales is more a function of the quality of the specific listings than the result of any broader weakness in the luxury market.

"A property has to be super worthy to be sold for $100 million," she said. "But it doesn't have to be super worthy to be listed for $100 million. The buyers are the ones that matter and they haven't felt that any of these properties are worth it."

That's not to say that sales of $100 million homes have ended. Lenz said several new penthouses in New York that are coming online in the next few years will likely top $100 million. And a reported sale of the penthouse at 220 Central Park South will likely top the nine-figure mark when and if it closes.

But for now, hyper-priced homes have become the zombies of the luxury housing market—immovable and unchanging monuments to the hopes of super-rich sellers. And so far, those sellers are rarely budging.

"It seems like there is no shame to wildly over-pricing a property today," Miller said.

Granted, some sellers have shaved a little off their prices. Billionaire Jeff Greene this month cut the price of his Beverly Hills estate, called Palazzo di Amore, to $149 million from $195 million. He said the price cut was accompanied by several improvements to the house.

"We are very motivated to sell," Greene said.

Source: CNBC, Robert Frank
http://www.cnbc.com/2015/09/16/100-million-zombie-homes-may-signal-market-top.html

Manny Pacquiao BUYS DIDDY'S OLD MANSION ... And Everything In It!

Happy Saturday everyone!

Filipino boxing champ Manny Pacquiao buys a $12.5M mansion from rapper/entertainer Diddy in Beverly Hills. Featuring 7 bedrooms, 7.5 baths at 10,000 sq. ft. Apparently, Pacman fell in love with the place and wanted so badly he insisted on a quick escrow, all the furnishing and wanted the wetbar fully stocked.

Manny Pacquiao BUYS DIDDY'S OLD MANSION ... And Everything In It!