January 9, 2011

We Wuz Robbed Again

Zillow Blog recently had a post covering “Some of 2010’s Top Real Estate Sales.”  Yet not one of them was in the Bay Area, let alone the Real Bay Area.  The ten featured home sales were mostly in Southern California, with one at Pebble Beach, one in Manhattan, and three in Florida.

Something has got to be wrong with those statistics.  The most expensive home in the article was a Bel Air beast, and another Bel Air battlement checked in at #5.  There were also two from Malibu, the aforementioned Pebble Beach, plus Santa Barbara.  Florida had disasters in Delray Beach, Naples, and Highland Beach.  (No wonder Florida real estate is hurting even more than California, at least we know how to spell del Rey over here.)

I was able to find several properties that sold in 2010 over $10 million in the Real Bay Area, and we’ll talk about those places another time.  Instead, there’s something more of interest about this Zillow piece:  How bad were the haircuts on each of these houses?  When the seller thought they could get $20 million, how much did they actually get?  Are we talking five percent?  Ten?  Fifteen?  Zillow didn’t feel this information was all that important, but we at Burbed know that watching the sellers chase the market down is the biggest part of the fun.

image

#1. Le Belvedere – Bel Air, CA

Original Price: $85 Million (February 2009)

Reduced Price: $72 Million (November 2009)

Sale Price: $50 Million (June 2010)

Haircut: -43%

This house leads to all kind of speculation since nobody is sure exactly who owns it.  It has since been sold to 2 limited liability corporations.  The 11 BR/14 BA 48,000 sf home (yes, 48,000 square feet) requires a staff of 15 and is on a 2.2 acre lot.  You can pick up this Bel Air listing for $53 million (9 BR/21 BA) if looking at this picture is making you think, “You know what?  I really want an insanely large and expensive home in Southern California.”

Redfin had this listing for a 7 BA/15 BA 35,000 sf house on 2+ acres, which Zillow says is the same one, but key details differ.  A 10/15 did sell for $18 million last January, but it was less than half the size of La Belvedere.

image

#2. Carbon Beach Gem – Malibu, CA

Original Price: $57 Million (March 2010)

Reduced Price: $47 Million (June 2010)

Sale Price: $36,969,000 (October 2010)

Haircut: -35%

This 8 BR/12 BA is 12,785 sf and has a mere 3/4 acre lot.  However, that lot includes 180 feet of Malibu beachfront.  Plenty of instant equity, this place has a Zestimate of $39,733,000!  While the first house write-up above freely speculated over who the owner is, not a peep as to who bought or sold a home on “Billionaire’s Beach,” where “you could run into celebrities such as Jennifer Aniston and David Geffen.” Or in this case, older ladies who go to lots of fundraisers.  Property Shark didn’t indicate who the new owner was.

image#3. Malibu Colony Beach House – Malibu, CA

Original Price: $23,950,000 (April 2010)

Sale Price: $21,475,000 (September 2010)

Haircut: -10.3%

Zillow points out that this house is only 5,000 sf, so we’re talking $4,295 a foot.  A half acre lot but only 60 feet of beachfront, and that’s 60 more feet than any house in Silicon Valley will have until the Pacific and the Bay rise a couple dozen feet.  The property has not one but two guest suites and a gym, separate from the main building.  Given that exterior has all the charm of a Santa Cruz 8-plex motel, that’s an improvement.  Plus, you might run into Tom Hanks, Bill Murray, and other celebrities even older than I am.

Property Shark doesn’t have the most recent sale record, but the seller lived in Tiburon.

image#4. Pebble Beach Jewel – Pebble Beach, CA

Original Price: $25 Million (March 2010)

Sale Price: $18.75 Million (May 2010)

Haircut: -25%

Almost twice as large as the last beach house, this 6 BR/4.5 bath on 1.3 acres has all the charm of a Presidential library, minus the historical documents or the gravitas.  Unlike Malibu Beach, here you have “Out one set of windows is the surf crashing along Pebble Beach’s craggy coast where harbor seals come to visit.”  Evidently out the back windows is some golf club or something.  Guess any celebrities worth running into would be out there clubbing the seals.

Seriously, does Zillow think nothing in the RBA has sold for more than $10 million last year?  Or just that they weren’t trying very hard?  I found this place in San Francisco that went for $15.5 million, and this one in Woodside.  Someday we’ll talk about those…

image#5. Bel Air Mediterranean – Bel Air, CA

Original Price: $24,500,000 (February 2009)

Reduced Price: $19,750,000 (July 2009), $18,950,000 (February 2010)

Sale Price: $16,250,000 (May 2010)

Haircut: -34%

Want it?  It’s for sale again, showing that flipping houses hasn’t gone out of style in some places.  Listed for $19.5M this October, only 5 months after it sold for $16.25M, the price was cut a whopping 3.8% to $18.75M a month later.  This is a 13,000 sf 7 BR/11 BA behemoth on 0.85 acre, plus the listing agent is married to a Real Housewife of Beverly Hills.  I swear I am not making this up.

Given that the listing doesn’t mention a speck of improvement that the new owner put in, anyone want to predict their exit price point?

Bonus feature: The property was foreclosed on during bubblicious 2004 for $700,000, before the current structure was put in.

image#6. Dramatic Delray – Delray Beach, FL

Original Price: $24,900,000 (July 2008)

Reduced Prices: $21,900,000 (November 2008), $18,950,000 (June 2009), $21,500,000 (July 2009), $18,950,000 (September 2009), $18,975,000 (February 2010)

Sale Price: $12,650,000 (April 2010)

Haircut: -49%

Nothing says dramatic real estate crash like Florida real estate, and here’s a spectacular example.  Best of all, it’s up for sale again at $19.5M with the exact same agent, showing some people are very slow learners.  At least they have over 14,500 sf of house to learn slowly in, with 6 bedrooms and a WTF 7.3 bathrooms on 2.13 acres.  Florida real estate is definitely different than anywhere in the US.  Where else would a 16 foot elevation be described as “commanding”?  Features 160 feet of “frontage” but onto what isn’t clear.  Perhaps the 16 foot towering precipice above the Atlantic.

image#7. Upper East Side – New York, NY

Original Price: $17,000,000 (September 2009)

Reduced Price: $15,900,000 (January 2010)

Sale Price: $13,150,000 (September 2010)

Haircut: -23%

Gordon Gekko might have said that “Greed is good,” but in New York City, stock market traders have another slogan about making money: “Bulls make money, bears make money, pigs get slaughtered.”  And this “grand 20-foot wide mansion” sold for $10.5M in March, 2008.  Yes, you too can pay eight digits for a five story house that literally has the breadth of a double garage, and it doesn’t even come with one!  Boasting 6 bedrooms, 6 baths, 8000 square feet and a lot size of (get ready) 2000 sf (0.05 acres), and around the corner from an actual Park Avenue address.

The current owner is now a floplord, looking for a tenant for 109 E 69th St.  The rent?  $48,000 a month.  Hope they don’t expect three months’ security up front.

In case you’re interested, that makes this property have a rent ratio of 22.8.  Typical rent ratio for Manhattan is well over 30, which suggests some pig is about to get slaughtered again.

image#8. Santa Barbara Villa – Santa Barbara, CA

Original Price: $19.5 million (August 2008)

Reduced Price: $16 million (March 2009)

Sale Price: $13 million (September 2010)

Haircut: -33%

Whew!  That was too long outside of California.  Between the old people of Florida and the New York cabbies who enjoy speeding up to love-tap pedestrians in crosswalks, that was a definite dollop of cognitive dissonance.  Face it, high prices should stay in California where they belong.  Why would anyone pay lots of money to live in a city where 16 inches of snow shuts the whole place down?

No doubt the Zillow blogger who put this piece together was so relieved to cover a California property that s/he neglected to notice the original (and much higher) list price for this house.  Maybe this one item was farmed out to Tech Gal, the Peninsula real estate agent notorious for her sales to listing price ratios based on reduced asking prices.

Speaking of the house… This 8592 sf home thinks of itself as a Tuscan villa, but it’s got a modern tax bill to greet you.  A 5 BR/6.5 BA main house plus a 1 BR/1 BA guest home on the 3.4 acre grounds guarantee you’ll keep a gardening staff busy all year.

image#9 Gulf Coast Grace – Naples, FL

Original Price: $16.5 million (May 2009)

Reduced Price: $15.9 million (July 2009)

Sale Price: $13 million (January 2010)

Haircut: -21%

This over 9000 sf house on Naples Bay is situated on 3/4 of an acre but is still in the sinkhole of Florida real estate.  Even Zillow looks at last year�
��s sales figure and comes up with a Zestimate of $11,013,000, suggesting that this palatial estate lost another 15% of its value merely by spending all of 2010 in Florida.  Once more, the Zillow blogger missed the original price, misunderestimating the amount a Florida property can plummet.

image#10. Living the High Life – Highland Beach, FL

Original Price: $18,900,000 (May 2009)

Reduced Price: $15,950,000 (July 2009)

Sale Price: $12,650,000 (January 2010)

Haircut: -33%

If a second marriage is the triumph of hope over experience, then buying a 12,000 sf house on 0.95 acres of Florida real estate for 67% of the original asking price is the knifecatcher’s exhilaration.  This brain-damaged fool has put the place back on the market for $14,950,000, just six months after taking delivery.  Given that Zillow has depreciated the previous property by 15%, I would calculate that this Adventure in Real Estate is going to lead to another 28% trip down Equity Burn Esplanade.

Comments (49) -- Posted by: madhaus @ 5:06 am

49 Responses to “We Wuz Robbed Again”

  1. The Gilroy Alex Says:

    People who can afford these places are looking for something a bit different these days ….. bunkers ….. in Switzerland ….

  2. MrBEE Says:

    They left this guy off the list:

    http://la.curbed.com/archives/2006/05/the_most_expens_1.php

    Asking 75 mill, sold recently for 49.6mill.

    OC rules baby.

  3. madhaus Says:

    Nice find, #2. But 49.6M was the reduced asking price. It sold in October for $34 million. Or was it $31.4? I think the latter, it was more than a 50% haircut for this place.

    Link: http://www.zillow.com/HomeDetails.htm?city=Newport+Beach&state=CA&zprop=25503582

  4. nomadic Says:

    Hilarious description:
    Designed for intimate family living and social gatherings…

    It’s 22000 square feet – for an “intimate” family gathering, you’d need a huge family.

  5. madhaus Says:

    Who the heck did they pay off to build that house? It’s 22,000 square feet… on a 21,900 sf lot. I think I did a triple take seeing the house size and the lot size next to each other.

  6. Real Estater Says:

    Despite the high price, these homes actually have many deficiencies:

    1. When you get beyond a certain size, you no longer live in a home. You live in a building. That’s not cozy, nor comfortable. You can get lost just looking for the bathroom.
    2. Not enough smart people in the community. Mainly you’ll find movie stars or pro athletes living in these areas. For most of us that’s just not what we want.
    3. Fails gallon of milk test. Too much scenery; not enough town life (except for the NY property). What’s the big deal with ocean view? Who needs to see the ocean all the time? That’s mostly a useless feature in my book. I want to be able to walk to “Star Bucks”, “Face Book”, and “Stan Ford”.
    4. Too much maintenance. Even if you can afford it, it’s still too much maintenance. For the maintenance cost alone you can check yourself into Four Seasons and have them serve you all year round.

    In summary, for $20M I’d rather buy a bunch of Bay Area houses than any of the above.

  7. sonarrat Says:

    Got to agree with RE here. Except, for $20M, I’d rather buy an apartment building.. in San Jose (gasp) where there’s no rent control and the median rent is the highest in the USA.

  8. Real Estater Says:

    Apartment prices in San Jose are very depressed. You can pick up a 4-plex for the price of a median price home. I looked into buying one at one point, but decided against it due to the low rate of return.

  9. madhaus Says:

    If the prices are depressed (#8) and the rents are the highest in the USA (#7), this says LOW PRICE RENT RATIO. Isn’t that exactly when you should buy investment property?

    That said, the recent feature with price rent ratios showed San Jose was still over 30.

    #6 raised some good points about why someone with $20 million could do better than buy the homes featured today (although the first two homes were not available for only $20M). I would pay big bucks for an ocean view, and even bigger for my own beach, and a lot of other people agree. The price of beachfront property shows demand is there. The size of the haircuts on these houses show that high-end properties got too high.

    If I had $20M to play with, I sure wouldn’t put it all in real estate, so let’s assume I actually have $60M and I’m willing to put $20M in property. I wouldn’t put it all in the RBA, or even the Bay Area. I think $2M for my house and $18M for investment property is a reasonable mix.

    Maybe with that rent ratio of 8, it’s time to look at Fresno. And I bet I can pick up some real bargains in Hemet. (kidding) Seriously, I’d buy property where the jobs are, which is why I’d avoid anywhere more than ten miles from a major job center. Sorry, Tracy.

  10. Real Estater Says:

    >>I would pay big bucks for an ocean view, and even bigger for my own beach, and a lot of other people agree.

    You can go to Half Moon Bay and get Ocean View for not a lot of money. Is there any major difference between the view from Half Moon Bay vs. any of the place above? See, ocean view is all hype. It’s worth a lot when movie stars in there. It’s worthless by itself (like in Half Moon Bay).

    If you like the beach, just go to the beach. You’ll get tired of it if you actually live at the beach. It’s like Tahoe is great for skiing, but I doubt you’d want to live there as your primary residence.

  11. Real Estater Says:

    >>If the prices are depressed (#8) and the rents are the highest in the USA (#7), this says LOW PRICE RENT RATIO. Isn’t that exactly when you should buy investment property?

    That sounds reasonable, but why do you think all these guys are so motivated to sell their apartments at such a low price? Are they tired of making money?

  12. madhaus Says:

    #11, that is a great question. Maybe they have noticed rents are getting rather soft and squishy, what with the Recession that is no longer taking place. I know Willow Glenner only bought houses rather than apartment buildings, but I’d love to hear his take on where rent is going.

    #10, if I were buying beachfront around here, I’d want Santa Cruz as it faces south rather than west. Beachfront down south is more valuable because the water isn’t quite as c-c-c-c-c-cold down there.

    No, I wouldn’t want to live in Tahoe because I absolutely hate the cold. But that’s just me, just as you wouldn’t pay money for an ocean view and I would. Let’s compare houses when we both get our $60 million.

  13. DreamT Says:

    “It’s worthless by itself (like in Half Moon Bay).”

    Except if you’re at the Ritz Carlton – a little piece of Scotland, right on the peninsula.
    Proximity to the ocean is a matter of personal preference… look at Balboa Island for example. Personally I prefer green to blue, but I wouldn’t call blue all hype: an ocean view comes with air, smells and sounds, there’s more to it than just a beach.

  14. nomadic Says:

    I wouldn’t mind beachfront either, but I’d like a high viewpoint more than that. Like a view of the valley/bay from Los Alto Hills or points north. I wouldn’t want to be more than ten minutes from 280 either. Half Moon Bay would be okay for a weekend place if the city wasn’t on the verge of bankruptcy.

  15. SEA Says:

    #11 Q: “That sounds reasonable, but why do you think all these guys are so motivated to sell their apartments at such a low price? Are they tired of making money?”

    #12 A: “Maybe they have noticed rents are getting rather soft and squishy, what with the Recession that is no longer taking place.”

    Discussing the future expectations, cash flows, of rents is a reasonable analysis, if one were going to be invested in real estate forever.

    Once we allow other options, then we need to worry about market value risk.

    Using my basic formula:

    total return = operational return + change in value when sold (net of taxes, as always)

    The operational returns are rooted in the future rent cash flow. The change in value when sold still needs to be considered when looking to maximize total return.

  16. Alex Says:

    You can go to Half Moon Bay and get Ocean View for not a lot of money.

    #10, Estater, is this for $500K-not-a-lot-of-money or a little more not-a-lot-of-money?

  17. Real Estater Says:

    This is $500K not a lot of money, or a little less not a lot of money, or really not a lot of money.

    These properties are all within jogging distance of the beach. Your car will even rust from the sea salt in the air.

  18. A. Lewis Says:

    madhaus, thanks for the properties – nice posting!

    Color me not surprised that the main thing #6 advises is to spend your money only in the RBA. Gosh, can anyone else speculate as to his motivations?

    I love the BS reasoning – oceanviews are worthless! Brilliant!

  19. Tuno Says:

    #6 – those are reasonable points, RE, but I think they miss what these houses are about. other than the NYC place, they are probably not primary residences. they are places to spend a few months a year at, and to throw parties in. I would think the owners also have (opulent) apartments in major cities that pass the smart neighbors, easy-to-buy-milk tests.

  20. nomadic Says:

    For anyone who loves snow, here’s the most expensive house in Canada. Only $27M. That proves a cold climate hurts property values:

    http://thechive.com/2011/01/10/the-most-expensive-mansion-in-canada-oh-surrre-21-photos/

    Good thing they put in the indoor putting range, pool, tennis courts, etc. You wouldn’t use them outdoors for 8+ months of the year.

  21. Real Estater Says:

    #20,

    In other words, this is a space capsule house. It should be worth more, because there is value-add. It enables you to enjoy Canada all year round, as opposed to 6 months out of the year.

  22. Real Estater Says:

    #19,

    I totally agree. However, if I want to enjoy this kind of setting, I’d rather just go to Vegas. Going to your own house to have a party is just plain boring.

  23. Tuno Says:

    #22 – this is an example of why, for all its faults, Southern California (RE’s place of origin) deserves its fame and glory. You’re *right*, RE, that having a big party at one’s own house *is* boring, and that e.g. Vegas would be more fun. People have big parties at houses like those listed, to show off, and because it is a Ye Olde Rich Person Tradition. A dreary one, that few people actually enjoy. It takes someone with an outside view; a charming lack of sense of history, to get that right.

    A sense of history is still useful, however, in re predicting house prices.

  24. nomadic Says:

    I’m surprised that RE would find big, ostentatious parties to flaunt one’s wealth boring. After all, just last week he was saying how nice it was just to sit in a realtor’s office in Palo Alto. Much better to tour a rich person’s house while drinking their wine and eating their food. Speaking of which, it parallels another one of his favorite past times: eating cookies at open houses.
    ;-)

  25. Real Estater Says:

    nomadic,

    You would say that because you probably haven’t been to any big parties or rich people’s houses. Else, you’d realize no matter how big one’s home is, it’s just a home. It won’t have gambling, shows, and various features you can get at the true entertainment destinations such as Vegas. After visiting one venue you can move on to the next.

  26. nomadic Says:

    Why do you go to open houses when you aren’t planning to buy them, RE?

  27. nomadic Says:

    Comparing a house to Vegas is just plain stupid. Apples and oranges.

  28. Real Estater Says:

    >>Why do you go to open houses when you aren’t planning to buy them, RE?

    I’m talking about friends’ homes in Los Altos Hills, Hillsborough, Atherton, and of course many other homes in Palo Alto.

  29. Real Estater Says:

    >>Comparing a house to Vegas is just plain stupid. Apples and oranges.

    At this level it’s about comparing entertainment value regardless of cost.

  30. Alex Says:

    If you want entertainment, just go cruising in east San Jose or Palo Alto.

  31. nomadic Says:

    #28, What does that mean? Going to friend’s houses for parties is boring, but open houses are fun? Or you go to the open houses your friends have when trying to sell their house (presumably because they don’t invite you over)?

  32. Real Estater Says:

    Where did I mention Open Houses? That’s a different subject. Why are you comparing apples and oranges?

  33. nomadic Says:

    It’s all in your post #28. Try to keep up, at least within your own post.

    Never mind.

  34. Real Estater Says:

    Nobody was talking about open houses in this thread until you brought it up in #26 out of the blue.

  35. nomadic Says:

    If I may shift the subject a bit (apparently this requires announcement)…

    Hmm, those posts are disappearing. Funny. I haven’t rated a single one of them either.

  36. Tuno Says:

    This is ridiculous. Now I am actually clicking on RE’s posts – which are hidden due to getting a low rating – in order to see what annoying thing he said. I’ve been conditioned by Burbed to seek RE’s silly posts and the blistering refutations they inspire.

  37. SEA Says:

    #36 agree- RE’s comments are not spam, per se. Just because someone’s comment is a bit silly should it be hidden?

    Maybe burbed can just let the system score the comments without hiding them? Many of RE’s comments, like fine art, are outside of my appreciation, but I am sure there are others who appreciate them more than myself.

    Also, as you point out, it’s nice to read the “Real Estate is guaranteed to go up sooner or later” stuff too, as long as it’s not embedded with personal attacks, and so on.

  38. madhaus Says:

    I agree that only comments with personal attacks should be hidden… but Karma is a bitch.

  39. Real Estater Says:

    We got communism at this site now, but you know what? The more you try to hide something, the more people will want to see it.

  40. nomadic Says:

    If people don’t neg a silly comment, and only do it to flamebait & insults, then we can read the comedic posts more easily.

    Aww, what am I thinking? It’s such a fine line for some people.

  41. Real Estater Says:

    nomadic,

    You’ve been the most active person here today. I suspect you had a part in checking off the voting to hide my posts. Will you come clean on that?

  42. nomadic Says:

    Nope, because it’s not true. I only negged one of your posts from last night. Don’t you suppose there are lurkers reading who just don’t appreciate your remarks?

    And if you’re counting, we are tied in the number of posts today, excluding this one. It’s been a monumentally shitty day so I’ve come here for your humour. Nice of you not to let me down.

  43. Real Estater Says:

    OK, no prob. I’ll give you the benefit of the doubt.

  44. SEA Says:

    nomadic- I was wondering who was clicking all those ratings, and then I noticed #41 talking about such activity. Mystery solved?

  45. madhaus Says:

    I was wondering who the hell would dislike Ponytail Dude. He’s the nicest guy here!

  46. bob Says:

    Ahhh… so now we have ratings on each other’s comments? Oh boy! How very democratic.

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