Archive for April, 2012

The Luxury Insider: Want a Piece of the City of Lights?

By Alain Pinel | April 25th, 2012 0 Comments

Last week, I wrote about the power of the “Leading Real Estate Companies of the World” network and their “Luxury Portfolio” high end division. They are our partners in the marketing and sale of upscale homes and estates all over the globe. Our counterpart in France is a firm by the name of FEAU,” Daniel Feau Conseil Immobilier” to be exact. They are to luxury Parisian real estate what Cartier is in the jewelry business. It can be said that they have their stamp on the most desirable and expensive apartments and mansions in and around Paris and they are the place to go for the fortunate few who want to buy them.

A few days ago, Charles-Marie Jottras, their President whom I have known for several years, sent me a study they just completed of the captivating high end market in Paris and the Western suburbs. I thought you would enjoy reading some of the findings. Perhaps you are looking to buy in Paris, or perhaps you just want to do some free “window shopping “…. Or maybe you are curious to know who the people who buy those multi-million dollars condos in the City of Lights are. Well, whatever your motive may be, enjoy!

The first thing that jumps at you at first glance is that the Paris market traits, as far as the buying demand, are pretty similar to what we are observing in other European capitals, like London, or in our own large metropolitan city centers, like New York, Miami, Los Angeles or the San Francisco Bay Area, to name a few.  There are two kinds of buyers: the domestic buyers and the foreign buyers. They are not targeting the same real estate…Question of means. The foreign buyers now represent the lion’s share of the qualified demand, and the higher the price, the bigger the share. And you know what? At the very top of the price scale, it looks like we are competing for the same exact buyers!

Basically, the domestic demand in Paris is confined to a relatively small range, between roughly $1.5M and $3.5M, the entry level to what could be considered the high end in the region. Above $3.5, the large majority of the French buyers are out of the picture. Enter the foreigners…  They are having a blast buying the crown jewels, right and left, up to $100M, or whatever.  Who is counting?  They buy beauty, they buy financial security (kind of), they buy in full ownership (which is not necessarily the case where they come from), they buy glamour and fame.

FEAU went as far as determining who, among the foreigners, was buying what and in what price range in Paris. Take a look at the findings of their study based on recent months and compare with your own big city market. I know that Paris, at this point, is ahead of the pack, but this will give us the flavor of things to come in our most desirable and very pricey US markets.

  • European buyers (euro zone) represent, together, 13% of the foreign buyers in Paris. Just like the French locals, they are in the $1.5M to about $5M max and prefer the historic districts.
  • The British (they are European too you might say, although they don’t admit to it) represent 10% of the buyers. They are shopping for the same goods mentioned above and in the same price range.
  • The Swiss count for 15% of the sales (which was a big surprise to me) and they buy up to about $13M. Their economy is doing alright. They have quite a bit of the world’s money; maybe some of yours.
  • Africans have an 8% share of the Paris luxury stock and buy also up to about $13M.
  • The Middle East buyers represent 12% of the total. They start their shopping at roughly $10M and go up to $100 or so. Whatever it takes.
  • We, Americans, together with our Canadian friends, account for 10% of the Paris buyers according to the study. We have more modest means. Our range is $2.5M to $6M, mostly in historic districts. Nostalgia.
  • Brazil and the rest of South America is good for 4%. They spend up to $6M but want the money districts.
  • The Russians absorb 20% of what’s offered and they want the best of the best, up to about $25M.
  • Finally, the growing numbers of Chinese buyers represent today 8% of all buyers in the City of Lights. They too want the cream of the cream, at least what they can buy up to $13M.

That’s it. What do you want to buy? What’s your budget?

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Intero Insider: Demand Grows Like a Weed After a Spring Rainstorm

By Gino Blefari | April 25th, 2012 0 Comments

We’re well into the spring home-buying season and the latest numbers for March are out to help us gauge how the 2012 real estate market is faring. The verdict is that we’re settling into a stable pattern of growth as monthly existing home sales have trended above year-ago levels for nine consecutive months.

However, there’s another interesting thing that’s happening. While year-over-year sales volume is up, there was a drop in March from February. The reason? National Association of Realtors Chief Economist Lawrence Yun notes that inventory levels are low, creating a situation in which there aren’t enough homes for sale to satisfy demand from buyers.

Total existing home sales declined 2.6% to a seasonally adjusted annual rate of 4.48 million in March from February, but were 5.2% above the 4.26 million-unit pace in March 2011, according to NAR’s report. Meanwhile, housing inventory declined 1.3% in March to 2.37 million existing homes for sale. Listed inventory is 21.8% below a year ago.

There’s no exact answer to why inventory has dropped so much. But we can infer that the shrinking foreclosure rate is contributing to a lack of properties on the market, as well tepid sellers playing the waiting game. If you don’t have to sell right now and you’re in a slower market or traumatized from the declining state of the last few years, then you’re likely staying put and waiting out the market until there are clear signs of an upswing.

In addition, buying conditions are so stellar in many markets right now  - with extremely attractive interest rates and home prices – that demand is growing like a weed after a spring rain! NAR says that many of its members have reported a definite increase in “foot traffic” to see listings and open houses And we recently covered how some markets are back in bidding-war situations. So the signs are good, folks!

Another solid factor in the spring home-buying season this year is the 2.5% year-over-year increase in median sales price at $168,800. Additionally, distressed homes accounted for a smaller portion of sales in March (29%) than they did in February (34%) and in the same month a year ago (40%) – indicating that the distressed portion of the market is steadily shrinking.

The facts are in and it’s clear the real estate market is no longer a clear punching bag for economic ailments. We’re building momentum that appears to be built on a strong foundation – not just temporary home-buying tax credits and other federal initiatives. Spread the word!

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The Luxury Insider: The Truth About International Marketing of Luxury Homes

By Alain Pinel | April 18th, 2012 0 Comments

I am in a very good mood this morning, just reflecting on the facts & figures that I saw on a giant screen while attending the “Leading Companies of the World Conference” in Orlando a couple of weeks ago. ”LeadingRE,” as it is known in the professional circles, is Intero’s bridge to qualified high end buyers all over the globe. It is our partner in the ever important mission to successfully market luxury homes in 2012 and the years to come. Intero and LeadingRE, that’s a pretty formidable combination!

A few blogs back, I wrote about the need to open the marketing window to all states and all continents to optimize our chances of reaching out to all prospective high end buyers. At a time when the percentage of out-of-area, and especially foreign buyers, represents a huge and growing share of the demand for unique properties, global exposure is hardly an option. Doing without it may end up costing a seller over 50% of the likely buyers, possibly the highest bidders and probably cash buyers. It could also be the difference between selling and not selling.

To be honest, I am amazed that some sellers of pricey homes still defy the odds when they choose to list their property with a small brokerage with little or no access to the right buyers, here and there and everywhere. Who can afford to take that chance?

With this said, let me give you a better sense of the power of Leading RE and its upscale division: The Luxury Portfolio. First, their mission: give listing exposure to the largest sphere of international buyers & sellers. The way they do it is quite simple: associate and network with the finest, most reputable and powerful group of brokers in the industry, anywhere.

The results are spectacular. Judge for yourselves; In 2011, Luxury Portfolio won, again, the leading market share of all global high end residential properties, with 11,594 such properties. Behind us, we want to give credit to the usual competitors: Sotheby’s (10,072 properties), Christie’s (7,498) and Coldwell Banker Previews (4,671). Of course the list of brokers goes on with a host of other brands but I will save some ink since they hardly register on this radar.

Perhaps even more important to our sellers is the fact that Luxury Portfolio is the purveyor of the most relevant segment of upscale properties, which is what it’s all about. Look at these numbers:

• 84% of The Luxury Portfolio homes are listed above $1Million. This is to be compared to…
• 57% only of such properties (over $1M) for Coldwell Banker Previews
• 41% only of such properties for Sotheby’s.

Just a few more bullets to add to the above show of power and effectiveness:

• The Luxury Portfolio has a total inventory of….$40Billion
• The average price of a home is….$2,535,000. That’s a lot considering that in many countries you can buy better than a hand full of luxury homes with a check of this size.
• Luxury Portfolio has listings in 27 countries and 45 US states.
• We market to buyers all over the world. The advertising program reached over 47million targeted luxury consumers. Visitors came from 22 different countries.

As I said in a previous blog: real estate firms may be created equal but they sure don’t evolve the same way and at the same speed. Given the choice, it is obviously safer and more meaningful to trust your listing with a company that can deliver on the promises.

PS. Quick heads up to our franchisees and friends out there in the US and abroad: if you have reliable info/data about the high end real estate market in your major city, region, state or country, please forward. We want to be as relevant as possible in terms of the topics we choose to write about and the accuracy of the information that you want to read in order to list, buy or sell exceptional real estate. I cannot promise we will use your info, but we certainly thank you in advance for whatever precious input you may provide.

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The Intero Insider: Mitt Romney Eyes Mortgage-Interest Deduction

By Gino Blefari | April 18th, 2012 0 Comments

Throughout the economic downturn and recovery, we’ve seen the topic of the mortgage-interest deduction come up time and again. It’s fitting that Republican presidential candidate Mitt Romney would bring it up this week as millions of Americans are frantically filing income taxes to avoid being late.

In a speech on Sunday, Romney said he’s considering eliminating the mortgage-interest deduction for second homes for high-income individuals. This often comes up with politicians and congressional groups as a viable option for creating more revenue for the federal government.

Let’s first look at the number of homes and owners this might affect. The National Association of Realtors estimates that second homes – including vacation and investment properties – accounted for 38% of home sales in 2011. The group said that about half a million vacation homes and 1.2 million investment properties were sold last year, continuing a trend in which these homes have accounted for the largest chunk of sales since 2005.

Generally speaking, eliminating or making changes to the mortgage-interest deduction is not going to have a great impact on the housing market. While the government may reap some rewards in the form of more cash made via taxation, most homeowners and first-time buyers still see the deduction as an important perk or benefit of owning a home. Messing with this deduction now at a time when the recovery is still quite fragile and slow would be a bad idea.

Eliminating or scaling back the mortgage-interest deduction would hit states in which vacation homes are most popular harder than others. Florida, Maine, Michigan and Colorado could see fewer sales as a result.

Moreover, more buyers have been jumping in the market and buying investment properties in recent years. Sales of investment properties spiked 64% last year. These are properties that otherwise may not have been purchased, which makes a pretty big case for keeping all incentives in place for investors to continue buying, and therefore aiding the housing recovery along.

While some say that the mortgage-interest deduction isn’t as big a deal for second home buyers because of the emotional nature of those purchases, I’m leery of mucking up a homeownership perk that’s long been held as a great benefit to owning a home. If incentives like this are working to keep investors hungry for real estate – and that hunger in turn is helping the market as a whole – then let’s back off and find another way to fix our fiscal mess.

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The Luxury Insider: Alert: Sellers Wanted!

By Alain Pinel | April 11th, 2012 1 Comment

If you own a high end home in Silicon Valley and you are considering selling your property at some point in the near future, I have a question for you: what exactly are you waiting for?

Please understand. My question is totally earnest: no tricks, no ulterior motive. I would love to know what is actually causing you to delay putting your property on the market. I am sure you have a good reason; I am just curious as to what the reason is.

You see, I am a little puzzled because, from my point of observation, it seems like the right time to sell. If you are in the San Francisco Peninsula, the South Bay and much of the East Bay, the market is buzzing, particularly in the million dollar range. You list a property one day and there is a good chance that it will be gone in a matter of days if the price is within shooting range. There is also a good chance that a few would-be buyers will fight over it since there is so little inventory available to be sold.

The MLS stats reflect the fact that new sales are outnumbering active listings about 2 to 1. Looking at the number of multiple offers on homes priced between $1M and $2M, you would have to conclude that you have 3 buyers for each home. I am not surprised that buyers are coming out of the woodwork in masses after years of economic slowdown. This is clearly shown in a recent NAR study which points to the fact that in 2011, “typical sellers” sold their home after 9 years, while between 2001 and 2006, the sellers’ tenure in a home was only 6 years. That can only further exacerbate the pent up demand phenomenon.

So, no surprise there. What does surprise me is the fact that so few sellers are taking advantage of the opportunity this above reality is offering them on a silver plate. Hence my original question: if you are thinking about selling, why not now?

Let me list a few reasons, pertinent or not, to try to guess what yours might be, and then I will give you my take:
• Prices are just starting to go up; I don’t want to rush selling if it ends up costing me plenty in potential appreciation over the next few months…..
AP: OK, I hear you, you may not lose much by waiting, unless of course you are buying up, in which case your argument is working against you: the more expensive property you are looking to buy will logically appreciate more & faster than the one you need to sell.
• When Facebook’s IPO strikes in May, a crowd of jackpot winners will pay a lot more for my home….
AP: Perhaps but I hate gambling on future bonanza since much of the fuzz about forthcoming IPO’s has been in the news for months and the real estate values correction has already been integrated in today’s prices. There is not one single listing on the market which does not reflect this anticipation.
• I read that next year the market might be even stronger….
AP: We’ll see. Nobody knows. To be honest with you, I too thought a few months ago that 2013 would be a dandy. I still kind of feel that way but I don’t know anymore whether it is because I successfully convinced myself or because I have objective tangible indicators proving the point. The fact is the economy is so manipulated by politics these days that you just cannot smell the market more than 6 months at a time.
• Mortgage money may get even cheaper….
AP: I don’t buy that one. It would be more reasonable to assume that if the rates move this year, it will be in the other direction.
• I would love to sell but It’s awfully tough to find the right home to buy and then to move quickly before another bidder snaps it!…
AP: I know, and that’s the whole point of what I am saying. We need a lot more listings to choose from to satisfy the demand. Is it likely to happen? Well, a lot more new properties are going to hit the market in April & May but…a lot more buyers will be in line to get them. No change really. The market is what it is. Persistence leads to winning.

Conclusion (strictly from my perspective): if you wish to sell and buy something else, do it. You may not find and buy the perfect home in the perfect location and at the perfect price, but you know what? Nobody does, irrespective of the market. Love is rarely at first sight.

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The Intero Insider: Spring Has Sprung for Housing Markets

By Gino Blefari | April 11th, 2012 0 Comments

Spring is in the air – especially for real estate markets. I’ve always felt like the personal stories and anecdotes I hear from agents who are on the ground and working with buyers and sellers say much more about the state of the market than statistics, which are often time lagging and misleading.

This spring, the agents I talk to are busy – beyond belief it seems. They’re seeing multiple offers, pre-recession inventory levels, and a general thirst for real estate from consumers.

But the stats aren’t too shabby either. Another great piece of news we saw come out recently was a look at the market for second homes and investment properties in 2011. Investment home sales surged 64.5% to 1.23 million in 2011 from 749,000 in 2010, while vacation home sales rose 7% to 502,000 in 2011 from 469,000 in 2010 (according to the National Association of Realtors’ annual survey).

Overall, vacation home purchases accounted for 11% of all transactions last year, up from 10% in 2010, while investment sales jumped to 27% last year from 17% the year before. The shift is good news for real estate markets because it shows the market is able to absorb the foreclosures hitting the market.

That’s what some of the stats are saying. What do the agents say?

As I mentioned, most that I talk to are super busy. They tell me that markets where jobs have been picking up and where inventory is at a healthy level are doing very well. However, the pockets of neighborhoods that were overdeveloped for the most part are still struggling to absorb inventory.

This all points to a good spring for buyers and sellers. The tech-heavy economies like ours in Silicon Valley are benefiting from extraordinary job markets in which big standout companies like Zynga and Facebook are growing like weeds, hiring and enjoying new IPOs.

Spring historically has always been a great season for real estate, but this one feels even better as we hear anecdotes and statistics working in the same direction. There’s a turning point happening. And although many still argue we’re in a mostly jobless recovery, those who are lucky enough to be in areas where the economy is picking up are doing just fine. (Don’t get me wrong, though – those who are in badly hit areas that aren’t recovering as easily are still struggling and we need to acknowledge that.)

Americans are back in the real estate frame of mind.

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The Luxury Insider: The Best of the Best are Doing Well…..

By Alain Pinel | April 4th, 2012 0 Comments

The results are in for the most successful real estate agents in 2011. The Wall Street Journal and REAL Trends just published the summary they compiled of the best professionals in the US. If you think that last year was a miserable year in the residential real estate business, you are right…If you think that it was bad for all Realtors, you are mistaken. Judging by the astronomical numbers they put on the books (not to mention their checking account), the top guns did OK.

There is something like 1,000,000 Realtors in the country. Big business. Believe it or not, the roster shrank 25% since the high mark of 2007, the year when the slide began. Somehow, the best agents adjust, adapt, survive and often thrive in the worst years. They did it again in 2011.

Consider this: Last year, according to the study, the top 250 agents managed to sell an aggregate of over $15 billion. Numero Uno in 2011, the king of the place, sold an astonishing $279,841,487! A top gun from New York. He is good! Agent #250 on this select list sold a comfortable $35 million +. In between the two, we note that 5 agents sold over $200M, 28 sold over $100M and 129 sold in excess of $50M. Who said it was a bad year? Grant me the pleasure to note also that 5 Intero top guns made the list of the best of the best (only commercial in the text…).

As usual, the vast majority of the winners are high end specialists, listing and selling multi-million dollar luxury homes to the few citizens of the world who can afford them. It is no surprise then that they work in the priciest areas in the country, on the West Coast and the East Coast.

Two states alone account for 60% of the top 250 agents in the country, the usual suspects you might say: California and New York. 150 of the 250 work there for a living. California ranks number 1 as a state with 99 super heroes, distributed almost equally between Southern California (51) and Northern California (48), home of the hot Silicon Valley. New York follows with 51 of the best pros in the business.

With 2012 shaping up to be a vintage year in the residential industry, particularly at the top end of the market, I can guarantee that the numbers are going to go through the roof. I also would bet that, with the exception of a handful, the winners this year will be the same agents who claimed top honors last year. That’s how it goes in the real estate business: the best are getting better. Places are expensive at the top. Newcomers can earn their ticket to the top but they will have to associate with the top firms and work their tails off. What’s new?

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The Intero Insider: Bidding Wars Are Back

By Gino Blefari | April 4th, 2012 0 Comments

Bidding wars. These horror stories/glorious situations (depending on which side of the deal you were on) were abundant in the years leading up to the top of the housing market in 2006. Then the phrase slipped out of consciousness – and reality – for most markets in the last few years. And now, amidst a slow and tough-as-nails housing recovery, these situations are back.

Is this the tipping point we’ve been waiting for? A story that ran on Bloomberg last week seems to suggest that yes, it is the tipping point in the markets that are seeing multiple bids. And these markets also happen to be the ones with strong underlying economies.

What markets are we talking about? Silicon Valley, for one. And across the country, bidding wars have been noted in Seattle, Miami and Washington, D.C., according to Bloomberg.

What’s driving the voracious interest in homes in these markets is a combination of a six-year low inventory, an increase in jobs and increased affordability brought on by a handful of years of falling prices. In fact, it’s now more affordable to buy than to rent in many of these markets.

The housing market is bouncing back in these markets. That’s great news for sellers, owners and the local economies. But what about the buyers? Well, it’s certainly an incentive to get off the fence and make a move. If you’ve been waiting for prices to drop even further in these pivotal markets, you likely waited too long.

However, a positive side effect of the presence of bidding wars is that it can also spur homeowners who’ve been on the sidelines to finally jump in the market and list their homes for sale, increasing the local inventory. So it’s not as if the market is suddenly going to tip back to a boom frenzy.

The biggest takeaway for me in this latest trend of bidding wars is that it is the perfect example of the cyclical nature of housing markets, which gives me a positive view on the future. For every boom, there is a come down and for every lull there is a corresponding bounce back. That’s just the way supply and demand works.

We can feel confident knowing that homeownership is still embedded in the American life. We know that an unfavorable housing market leads to a hot rental market, which creates upward pressure on prices there and eventually leads renters to again fuel their desire to own.

Like all great things in life, it takes time. But we’re getting there. It’s going to be an exciting spring for real estate!

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