Bidding Wars Are Back for Los Angeles Luxury Homes
A week after Christine Lynch listed her five-bedroom, six-bathroom house in the Brentwood neighborhood of Los Angeles for $3.625 million, she had seven offers. Within 10 days, she had a deal—for $225,000 more than the asking price. The all-cash transaction was completed on April 23. “My first reaction was, ‘Wow, I guess we’re really doing this,’ ” says Lynch. “I was really surprised by this level of interest and how quickly it sold.”
Bidding wars are breaking out for luxury homes in such wealthy enclaves as Brentwood, Beverly Hills, and Bel Air as an increasing number of buyers bet on rising home prices and investors return to the market. Even properties in need of extensive renovation are being fought over by shoppers who expect to resell them for more after a remodel or rebuild. “The percentage of people who think prices are only going to go up is the greatest I have ever seen in my career,” says Syd Leibovitch, president of Rodeo Realty in Beverly Hills.
The number of sales of Beverly Hills homes priced at $2 million and higher climbed 11 percent in the first quarter from a year earlier, to 39, according to DataQuick, a provider of property information. In Brentwood they increased 56 percent, to 25, and in Malibu they gained 64 percent, to 23.
U.S. residential property sales of $1 million and higher rose 7.2 percent in March, the most recent month for which figures are available, from a year earlier, according to the National Association of Realtors. Demand has been rising for high-end homes in the northeastern U.S., including Boston and New York; on the California coast; and in parts of the southern U.S. amid a recovery in financial markets, according to Paul Bishop, vice president of research at the Realtors group.
In Brentwood and Beverly Hills, homes on smaller plots in low-lying areas usually start at $2.8 million to $3.2 million. Houses with larger plots can sell for as much as $20 million, according to John Gould, manager of Rodeo Realty’s Beverly Hills office. Properties in the hillier areas, which usually are larger and boast views, can range anywhere from $5 million to $75 million.
As late as last year, many luxury properties in the Los Angeles area lingered on the market for weeks or months, according to Stephen Shapiro, co-founder of Westside Estate Agency in Beverly Hills. Now, he says, offers come in on the day of the first showing, a phenomenon that was common during the 2007 buying frenzy. “In recent history, buyers would look at homes and return six months later to find the same home was still on the market,” he says. “Now if buyers hesitate, the house is often sold by the time they come back. And each time one sells, the next one comes on at a higher price.”
Sales of homes priced $5 million and higher at all of Coldwell Banker Previews International’s West Los Angeles offices were up 35 percent this year through May 8 from a year earlier, according to Joyce Rey, head of the company’s estates division. “There’s an added degree of confidence in the future and that prices are likely going to go up,” Rey says. “There is a definite change in consumer attitude.”
Some of the fresh demand for high-end properties is coming from investors looking to make a profit, a buyer pool that’s been almost nonexistent for the past couple of years, according to Rey. Since the beginning of the year, she says, investors have grown to about 20 percent of the shoppers she represents. Throughout Southern California, the portion of investor purchases was close to a record last month, and the share of buyers who paid cash was double the historical average, according to DataQuick. “This is the first time since 2007 that I have investor clients again,” says Rey. “The speculative buyer is back.”
By Nadja Brandt – www.businessweek.com