Mansion Market Heats Up : Real estate: A price plunge since the ‘80s has triggered ‘bargain hunting’ in O.C. for $1-million-plus homes.
The same forces driving the stampede to buy that first home are pushing action in another arena. Local real estate brokers and experts say they’re seeing a notable increase in sales of mansions.
Behind the buying binge by the well-heeled are low interest rates, an improving economy--and some rock-bottom deals. Prices of multimillion-dollar estates with spacious rooms and breathtaking views have plummeted more than 30% since the 1980s. As a result, those who can afford to are deciding that now is the time to buy that magnificent estate or ocean-view property, real estate brokers and analysts say.
“We have seen a flurry of activity in homes priced more than $1 million in the past six months,” said Margaret Goedeke, a broker with real estate company Donmar Ltd. in Newport Beach. “The prices have softened, and people are trying to scoop those homes up.”
Wealthy buyers today are much more cautious than in the go-go 1980s, brokers say, and are more careful not to overextend themselves when they borrow. Also, they’re being picky--their prerogative, given the dramatic decline of prices.
Bargains abound. One 6,000-square-foot home in Linda Isle, off Bayside Drive in Newport Beach, sold for $3.6 million in 1989; last year it went for $2.8 million, according to Dataquick Information Systems, a real estate information firm in La Jolla.
William Cote, a Newport Beach realtor who specializes in multimillion-dollar properties, said he recently sold another Linda Isle home for $650,000. The seller had bought the house in 1990 for $1.3 million.
“There has been an increase in sales of $1-million homes in the past couple months, but with a discount,” Cote said. “There are a lot of bottom fishers out there who are buying the foreclosed properties, and I’ve seen some big properties sell recently,” he said.
Even the wealthy, Cote said, are bargain hunting.
“We are so spoiled around here. As a result, there is a great level of caution among buyers. They just want deals. If you’ve got a $3-million house on the market, they want a $400,000 discount,” he said.
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The number of multimillion-dollar home sales has steadily declined during the recession, according to Dataquick. There were 302 such transactions in Orange County in 1990, 246 in 1992 and only 186 last year. For 1994, however, the trend may reverse, at least locally.
“I’ve been hearing that properties in the $1-million range are going like crazy in both Orange and San Diego counties but not Los Angeles,” said John Karevoll, an analyst with Dataquick. “The multimillion-dollar sales have really picked up in the last three months.”
Barbara Amstadter, a Prudential California agent for homes in pricey neighborhoods such as Linda Isle and Harbor Ridge, about half a mile from Pelican Hill, said she is seeing some increased interest in luxury homes, but she noted that buyers are extremely careful.
“People are looking for bargains. They are not speculating like they were in the 1980s,” she said. “They want homes in perfect condition, they don’t want to inherit someone else’s problems, and as a result they are making great buys.”
One of those buyers is Bob Siemon, who runs his own manufacturing and distributing firm. Siemon, who had been planning to remodel his home, recently decided instead to invest in a Newport Beach hilltop site and build his dream house.
“The remodeling grew and grew, and it was going to cost an arm and a leg. So we decided to take a look at houses,” Siemon said. “We looked at about 50 of them. It’s funny, first you start looking at homes for $1 million, then it’s $2 million, then you start looking at $3 million.”
Finally, Siemon decided to build. After selecting a prime lot in Pelican Hill, Siemon spent the night on the doorstep of the Irvine Co. to make sure he was first in line when the $1.5-million lot went on sale as part of the second phase at the development.
“The next guy showed up at 4 a.m., so I beat him,” Siemon said.
The Irvine Co. is one of several firms benefiting from the boom. Its ritzy Newport Coast development, considered one of the last pieces of coastal property in California available for new homes, has been very successful, brokers say.
During the past two years, the company has sold 123 coastal lots in Pelican Point, Pelican Hill and Ocean Ridge at an average price of $1 million each. Reflecting the upturn in the mansion market, the company has sold 42 custom lots, or about six a month, since August--and in the past four weeks it has sold 11 lots at about $1 million apiece.
“The buyers’ level of confidence is clearly increasing as their businesses are improving,” said Rudy Svrcek, vice president of sales for the Irvine Co. “We hear quite often they feel we’ve hit the bottom of the market, so they want to buy now.”
Svrcek said that 51% of the buyers at Newport Coast are business owners, 25% are doctors, 12% are chief executive officers of major companies and 7% are lawyers.
“This signals to us that these buyers are mostly business leaders. These are people who have a history of making good business decisions with a keen sense of timing,” Svrcek said.
Of those buyers, he said, at least 50% are paying cash, so low interest rates are not much of a factor in the sales spurt.
Another exclusive development in the same area has not done so well but may be poised for a turnaround.
Smithcliffs, once a private estate, was purchased by developer Greg Brinderson for $15 million in 1985. The enclave has 26 ocean-view sites on the cliffs above Laguna Beach overlooking Emerald Bay.
Because of regulatory snags and other delays, the lots were not put up for sale until last year, and only one lot was sold during 1993. In January, however, three Smithcliffs lots were sold for about $400,000 each.
“We’ve had a lot of interest since Jan. 1,” said Jack Chuster, director of sales at Smithcliffs, where prices go as high as $4.9 million for a lot with water on three sides. “There’s an ‘up’ feeling.”
That’s exactly the sentiment expressed by buyer Siemon, who is building an 8,000-square-foot house with lots of glass to take advantage of his ocean and bay views.
“Basically, I’m on top of the world,” he said.
Top-Dollar Homes
Orange County’s five biggest home sales in 1993 all were in the Newport-Laguna Beach areas. Neither of the homes in Laguna Beach was damaged in the fire that swept through the area late last year.
Buyer Address City Winslow Maxwell 106 Emerald Bay Laguna Beach J&M; French Trust 3601 Ocean Blvd. Newport Beach Ira & Gail Rosenstein 933 Via Lido Sound Newport Beach Brown Trust 20 Linda Isle Newport Beach DeClark Trust 47 Emerald Bay Laguna Beach
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Year Bldg. Lot Bed- Bath- Price Buyer built area* area rooms rooms (millions) Winslow Maxwell 1948 1,929 10,500 4.0 4.5 $5.3 J&M; French Trust 1988 4,056 7,200 4.0 3.5 3.3 Ira & Gail Rosenstein 1947 2,904 15,834 5.0 4.0 3.2 Brown Trust 1970 5,995 7,360 n/a n/a 2.8 DeClark Trust 1987 4,139 3,100 4.0 4.0 2.7
* In square feet n/a: Information not available
Source: Dataquick Information Systems; Researched by JANICE L. JONES / Los Angeles Times
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