Dwelling on Money : Views, Luxury Put Price Tags in the Millions
The 1947 beach cottage closed escrow for $1 million in late December. For their money, the buyers get a home smaller than most one-bedroom condominiums.
The entire lot, with 3,034 square feet, is smaller than many of the tile-roofed tract homes that stand shoulder to shoulder on the flatlands of Irvine and sell for less than half the price.
But this property sits on the sand at Capistrano Beach, and realtors say that explains its hefty price tag.
Welcome to the world of high-priced homes, Orange County style, where location and a view often matter more than whether the roof leaks.
It is an exclusive world. Despite soaring housing prices during the 1980s, only 227 of the nearly 7,000 residences sold in the county last year changed hands for seven-figure prices.
And while the million-dollar home market slows during a recession or war and speeds up during boom times, it does so with far less volatility than the rest of the county’s real estate market, said Newport Beach realtor Bill Cote, a longtime specialist in that city’s high-end market.
So constant has it been, in fact, that some realtors make a big chunk of their income selling the same million-dollar properties over and over.
Cote, for instance, said he sold one bay-front property four times in 10 years. It fetched $400,000 the first time, in 1976, and $3 million the last time, in 1986.
“I could sell it again tomorrow for $5 million,” he said, “but the owners won’t sell because they can’t find one with a bigger dock.”
County real estate experts estimate that there are between 300 and 400 high-end homes on the market at any given time, most clustered in the $1-million to $3-million range.
The most expensive home on the market in Orange County today is the DeAngelo estate, a 30,000-square-foot behemoth owned by the founder of the Clothestime women’s wear retail chain.
The 5-year-old Mediterranean-modern house crowns 26 acres of grounds on a hilltop near Orange. Besides the view, a buyer will get two pools, a gymnasium, 12 bathrooms, seven of them in bedroom-sitting room-bathroom suites for family members and three in servants’ suites (in this price range they aren’t called maids’ quarters). The price: $14.95 million.
(Bargain hunters might want to note that the home has been on the market for about a year and that the asking price before the real estate crunch set in was $22 million.)
To see any million-dollar home generally requires an appointment and a screening interview with the listing agent. People selling homes for that kind of money don’t throw open their doors to the hoi polloi for Sunday afternoon open houses.
To buy one takes money--lots of it.
First, there’s the earnest money that must be plunked down with the offer to purchase. The absolute minimum for a $1-million home would be $50,000, and $100,000 or more is usual, said Nancy Lavigne, a realtor with Coldwell Banker in Dana Point.
New federal tax laws that abolished deductions for interest on mortgage loans of more than $1 million for primary residences has increased the number of cash sales, she said. But there are still a lot of high-priced properties bought by people who take out loans.
One way the wealthy do it, said realtor Thomas Brunson of the George Elkins Co. in Newport Beach, is to borrow against their businesses or income properties--loans with fully deductible interest--to get the cash for their residential purchase.
“People who move in these circles usually are smart enough to know all the tax ramifications, and if they don’t know them, they hire people who do,” said Brunson, who shares billing with colleague Pat Hug as exclusive Orange County agent for the property of Michael and Pat DeAngelo.
A typical down payment on a $1-million home purchased through borrowing would be about $300,000, leaving a $700,000 mortgage. Monthly payments would be roughly $6,000, and property taxes would run an additional $1,000 or so a month.
For that, the typical buyer gets either a small, older home at or near the water or a larger inland property.
The 44 homes that sold for $1 million or more in the final four months of 1990 ranged from the 716-square-foot Capistrano Beach property to a $2.75-million, 2,676-square-foot home in Laguna Beach.
The typical place had four bedrooms, three bathrooms, a formal dining room and a three-car garage.
The days of the formal mansion have mostly passed. “Most of them these days are not ultra-formal homes,” Lavigne said. “They are comfortable family-oriented homes.”
Oversize living and family rooms, well-equipped entertainment centers and luxurious baths equipped with whirlpool tubs and gold fittings have replaced the formal ballroom and baronial dining hall, said Rod Gilliland, vice president of marketing for Arvida Corp.’s California division, developer of the gated Coto de Caza community.
But while a home’s size and the quality of its fittings are important in establishing a million-dollar price tag in most markets, all bets are off on the water, where $3 million is cheap for a decent-size waterfront lot on which the existing house has to be demolished.
Not surprisingly, more than two-thirds of the million-dollar homes sold in the county last year were in beach communities. Newport Beach accounted for nearly 42% of the total.
In the inland market, it is acreage, privacy and the exclusivity of a neighborhood or a spectacular hilltop view that help boost most properties over the million-dollar mark.
And who buys?
In Orange County the typical high-end home is bought by an entrepreneurial business owner, successful investor or, occasionally, by someone with inherited money. Unlike the more flamboyant market in Los Angeles, there are few rock stars, movie idols or sports superstars in the local market, realtors say.
“One thing we have seen, though, is that the buyers are getting younger,” said Brunson. “There are a lot more in their late 30s and early 40s than there were five years ago.”
The current recession and the Iraqi invasion of Kuwait in August combined to slow sales in the last quarter of 1990, and the outbreak of war in the Persian Gulf will doubtlessly further affect the market.
“But no matter what the state of the economy, there always will be wealthy people who want homes,” said Mike Ela, vice president of Dataquick Information Systems, a real estate researcher in San Diego.
Several major land developers are banking on that as they prepare to expand the supply of million-dollar homes in the county.
At Coto de Caza, the company recently opened up the Arbors, a posh tract development with lots measured in acres rather than square feet, in which about 25% of the homes will sell for $1 million or more, Gilliland said.
One of the first buyers was 18-year-old tennis star Michael Chang, who is trading his parents’ place in Placentia for a nearly $1.4-million, 5,300-square-foot Mediterranean style home and five-car garage on 7 1/2 acres.
And expected to add hundreds of million-dollar properties to the high-end market over the next decade are the Irvine Co.’s exclusive Newport Coast project and the Monarch Bay area of Dana Point.
Homes, Homes In The Million-Dollar Range The odds are good that if a home sold for $1 million or more, it was in either Newport Beach orLaguna Beach, but other megabuck havens are scattered here and there along the coast, in South County and the hills east of Anaheim. Anaheim: 8 Brea: 1 Capistrano Beach: 5 Costa Mesa: 1 Coto de Caza; 2 Dana Point: 2 El Toro: 1 Fullerton: 1 Huntington Beach: 21 Irvine: 2 Laguna Beach: 41 Laguna Hills: 3 Laguna Niguel: 3 Mission Viejo: 2 Newport Beach: 91 Orange: 5 San Clemente: 3 San Juan Capistrano: 11 Santa Ana: 9 Seal Beach: 2 Sunset Beach: 3 South Laguna: 8 Tustin: 1 Yorba Linda: 1 Total: 227 In the last four months of the year, the monthly-average of million-dollar sales fell to ll from an average of 22.5 in the first of eight months. Price ranges of homes sold in 1990 (in millions of dollars) $1.00-1.24 1.25-1.49 1.50-1.74 1.75-1.99 2.00-2.24 2.25-2.49 2.50-2/74 2.75-2.99 3.00-3.24 3.25-3/49 3.50-3.74 3.75-3.99 4.00-4.24 4.25-4.49 4.50-4.74 4.75-4.99 5.00-5.25
