The $1-million home, from fixer to fabulous

By Diane Wedner

March 2, 2003 12 AM PT

Times Staff Writer

If you had $1 million to spend, you could buy a 176-diamond Harry Winston necklace weighing in at 100 carats, a 48-foot high-performance sport-fishing boat or five entry-level homes in the Inland Empire.

But selecting a million-dollar home in Southern California is like choosing between a yacht and a dinghy. Or, more precisely, between a five-bedroom estate in Riverside and a tear-down in Pacific Palisades. Either way, $1 million doesn’t buy the eye-popping mansion of the past.

Less than 10 years ago, a million-dollar home conjured an image straight out of the television show “Dallas”: a 10-room mansion on several acres, with a pool, stables and guesthouse.

Not today. For those able to cash in on last year’s equity bonanza, there now comes the realization that crossing the seven-figure threshold often means buying a modest house that’s only a tad bigger than the one they’re selling. No pool, no grounds, no stable.

“A million dollars isn’t what it was in the mid-’90s,” said Encino real estate agent Mike Glickman. “It really depends on where you buy.”

If it’s north Santa Monica, you might get a small tear-down on a small lot, or in parts of Sherman Oaks, a large tear-down on a large lot. In Manhattan Beach, according to Shorewood Realtors agent Phyllis Cohen-Edwards, you’re looking at a small three-bedroom home with no yard whatsoever.

But about 60 miles east, you can buy a 6,000-square-foot home on an acre, with six bedrooms, four fireplaces, a pool, Jacuzzi and basketball court in the Royal Hunt Ridge area of Riverside. The house comes with a long commute, however.

The brisk pace of appreciation last year propelled a record number of home sales -- 13,828 statewide, or 45.5% more than the year before -- into the million-dollar-and-up range, allowing equity-rich owners to move up to a level they once would have thought unreachable.

In Southern California, where high-end sales were the strongest in the state during the second and third quarters last year, million-dollar-plus home sales surged 56.5% to 7,611 over the same period in 2001.

“We’re selling modest homes, with just a touch of English or Spanish architecture and only about three bedrooms, for $1 million here in La Canada,” said Dickson Realtors broker Michael Dilsaver. “We’re selling fixers for $1 million; you need $2 million for a nice house on half an acre.”

Robert and Jennifer Munakash fully understand the limited buying power of $1 million on the Westside. The couple recently bought their first home, a fixer with a view in Pacific Palisades, for a bit over that amount. Wanting to live within minutes of his businesses, Robert, 34, saved for the down payment while he and Jennifer lived rent-free in an apartment complex Robert managed for his father.

After being outbid on two Westside homes earlier in their search, the couple boosted their $750,000 budget to $1 million for the 2,500-square-foot Palisades home, which will require an additional $130,000 for a new kitchen, master bath, roof and other amenities.

Family helped the pair pull together a 20% down payment, putting their monthly payments at about $4,700. A three-year 5 1/8% fixed loan that switches to an adjustable-rate loan also helped keep their monthly payment a bit lower than most in their mortgage range, but the couple is dreading the $12,500 a year they’ll have to come up with for property taxes.

“At first, I didn’t think we’d get the loan approved, and I was worried,” Robert said. “Then I almost hoped we wouldn’t.”

Although it’s unusual for first-time buyers like the Munakashes to spend $1 million on a home, more move-up buyers are able to take the plunge today.

With prices surging across Southern California, move-up buyers are taking large chunks of home equity and sinking them into down payments on million-dollar homes, lenders say.

The median down payment on a $1-million home was 40%, or $400,000, according to DataQuick Information Services, a real estate research firm. Down payments typically are 20%. About 17% of the million-dollar-home buyers last year paid cash for their homes.

Best of all for many million-dollar-home buyers, the combination of big down payments and historically low mortgage interest rates has allowed them to move up to that end of the market and still make about the same monthly payments as those on their former houses, said Gregory Sayegh, Washington Mutual’s sales manager for the southwestern United States.

With so-called hybrid adjustable-rate mortgages, buyers can get rates as low as 2% for five years, for example, then switch to adjustable rates.

Even as new million-dollar-home owners find ways to make their monthly mortgages, many are shocked by property tax bills and hefty maintenance tabs, said Jeff Hyland, of Hilton & Hyland in Beverly Hills.

“People get religion real fast when they get in the million-dollar-home range,” Hyland said. “Suddenly they’re writing six checks for maintenance instead of one.” Those costs include fees for gardeners and pool cleaners, security patrols and utilities that often jump much higher than expected.

JoAnn and Edward McSpedon, who recently bought a million-dollar home in West Hills in the San Fernando Valley, are fairly typical move-up buyers in that price range. With the equity gained after 12 years in their former home, they were able to sink $500,000 into their new five-bedroom, 4,800-square-foot house. They’re putting an additional $300,000 into a pool, landscaping and hardwood floors.

Their big down payment and low interest rates will keep their monthly mortgage payments in the “comfortable” range, but they’re facing property taxes and insurance costs that have doubled, along with the increased utilities, JoAnn McSpedon said.

“It’s worth it to us,” she said. “We made sure we bought a house we could afford.”

Moving from one high-end neighborhood to another can create challenges of a different sort, as one family recently learned. Michael and Annie Wasson wanted to downsize from the five-bedroom, 4,000-square-foot San Marino home they bought in 1996 for $400,000 to a smaller home.

After extensive remodeling and upgrading of their old home and benefiting from Southland home appreciation, they were able to sell the five-bedroom house recently for $1 million.

A search of nearby areas took the Wassons to La Canada Flintridge, a hillside community near the Angeles National Forest, that five years ago barely had a million-dollar home sale, area agents say. They “downsized” to a 2,600-square-foot home with four bedrooms for $1 million, but to get all the family members on one floor of the house, they’ve decided to add three bedrooms. They might also add a pool.

“I was talking to friends in Texas about home prices here, and they were aghast that I have a $1-million home,” Michael Wasson said. “I had to tell them it was the equivalent of a $200,000 home where they live.”

Inland Empire deals

The median seven-figure home sold in California last year had four bedrooms in 2,885 square feet. Only 43% had pools and relatively few were horse properties. The median $1-million home 10 years ago also had four bedrooms but was larger at 3,822 square feet.

The neighborhoods that have seen the most million-dollar-plus sales activity during the last decade are Del Mar and Coronado in San Diego County; Trabuco Canyon and Coto de Caza in Orange County; and Calabasas, Manhattan Beach and La Canada Flintridge in Los Angeles County, according to DataQuick.

The most expensive community in California is Rancho Santa Fe in northern San Diego County, DataQuick reported, where the $1-million median home price recently surpassed the Bay Area’s record medians of the last few years.

Riverside County, known for affordable homes for first-time buyers, also has seen an increase in million-dollar sales, surprising some veteran agents.

Janet Madsen, an agent at Coldwell Banker Town & Country in Riverside, has seen a trend toward wealthier Orange County professionals buying new million-dollar estates in gated Riverside communities. Equivalent homes in Orange County, where most of these buyers work, would cost $3 million.

“Orange County-based doctors are buying these homes here because you get much more for your million in Inland Empire,” Madsen said.

That trend also is gaining a foothold in eastern Los Angeles County: San Dimas, Covina and Glendora, said Century 21 Citrus Realty agent Barbara McClelland. There, million-dollar homes in areas such as Morgan Creek are 5,000 square feet and come with mountain views.

Orange County buyers who want to live near their work are buying tract homes for $1 million. Walt Tamulinas, an ERA North Orange County Real Estate agent, recently bought a newly constructed million-dollar home in Yorba Linda, where, in early 2002, homes suddenly jumped into the million-dollar range.

Although Tamulinas’ new home is part of a tract, the Catalina Island view and the home’s proximity to the town center have made it worthwhile, he said.

“I put 30% down, got a 6 3/8% loan for the rest, so my $5,000 monthly budget has turned out to be $4,400,” Tamulinas said. “This will pay big dividends down the line.”

Agents who remember when a million-dollar home sale was a rarity just shake their heads at today’s unexpectedly strong market for high-end homes.

“A few years ago, the big deal for agents was getting a $1-million listing,” said Marti Snider, an agent with Paramount Rodeo Realty in Sherman Oaks. “But today, the big deal is a $3-million home. It’s wild.”

(BEGIN TEXT OF INFOBOX)

What $1 million buys in Southern California

Overlook area of Riverside

Price: $1 million

Lot Size: 43,560 square feet

House size: 5,900 square feet

Features: 6 bedrooms, 5 baths, library, pool, 4 fireplaces

Moorpark, Ventura County

Price: $989,000

Lot Size: 12,614 square feet

House size: 5,100 square feet

Features: 6 bedrooms, 5.5 baths, large pond, panoramic view