Luxury Insights

U.S. record residential sale --$100 million

Russian billionaire buys Silicon Valley home

In a transaction which set a new record for most expensive U.S. residential sale, Russian billionaire Yuri Milner (who heads Digital Sky Technologies) has reportedly paid $100 million for a 25,500-square-foot Los Altos Hills (CA) home which was not even listed for sale.  According to The Wall Street Journal, the sellers, Fred and Annie Chan took back a $50 million note on the home.  

This record-setting sale is just one indication that the wealthy have opened their wallets and are shopping for homes again.  The million dollar and above housing market rose 4% in February year-over-year as luxury buyers snapped up homes, often for all cash. Earlier this month a Palm Beach (FL) home sold and closed for a reported $24.6 million.  The jump in luxury purchases is counter to the real estate resale trend in general.  In February, total residential sales dropped 2.8% as compared to February a year ago.     

Why the rise in luxury sales?  According to Laurie Moore-Moore, Founder of The Institute for Luxury Home Marketing, “The number of wealthy U.S. households is almost back to where it was before the downturn.  Add the fact that many affluent pulled money out of investments and have been waiting in the wings with cash in hand while deciding where to invest.  Residential real estate is now attracting many of these dollars.”  Moore-Moore goes on to say, “This bodes well for the luxury home market in the short term.  Luxury may well be the real estate segment that leads the recovery.”

More coverage on the sale:
Forbes
MSNBC

March 'Wealth Report' now available

The March 2011 Wealth Report Newsletter is now available for Members.

In this month's issue:

• Luxury Rebound Shows Legs
  Optimism for a sustained recovery spreads and sales surge across the board in February with luxury outperforming again. 
• 2011 Luxury Consumer Experience Index (LCEI)
  Wealthy shoppers evaluate luxury retailers based on store personnel,shopping environment and satisfaction with the overall experience.
• Luxury Institute WealthSurvey: Facebook Usage and Trends
  Wealthy consumers embrace the social network for its ability to keep them in touch with friends and family despite privacy concerns.          

Members can access this report and an archive of past reports on our website (login required). 

The report is produced by the New York based Luxury Institute, a uniquely impartial, independent and objective ratings and research organization that is the global voice of the high net-worth consumer. 

No Hope in Sight?

The Case Shiller numbers are out again, and the headlines are grim.  The AFP headline reads, "No hope in sight on US home prices: S&P."  The article quotes David Blitzer of S&P who says, "January brings us weakening home prices with no real hope in sight for the near future."  

Is it true?  Altos says there's no reason to panic.  

Regardless, focusing exclusively on price levels may make for dramatic headlines, but to get the full story you have to look beyond price to inventory levels, days on market, and number of closed transactions to really get a sense of market conditions.

We've talked about the limitations of the Case Shiller Index before, and we know that the truly meaningful trends affecting your business are local--not just geographically, but those in particular price segments of your market.  

For example, while prices in South Florida may be down in general, yesterday we spoke with a member who has closed 14 sales in the last 14 weeks in the tony neighborhoods in and around Coral Gables and Coconut Grove.   

What are you seeing in your market?  
Where are the opportunities?

The Canadians are coming, eh?

Motivated by a strong Canadian dollar and what they perceive as bargain U.S. home prices, as many as 1 in 5 Canadians say they’d consider purchasing property in the U.S.  

A new survey for BMO Bank of Montreal and conducted by Leger Marketing reveals that as home prices have dropped in the regions of the U.S. which are traditional destinations for Canadian snowbirds, interest in purchasing U.S. property has risen.  

Want to know which Canadians to target?  Regionally, those in Alberta (31 percent), British Columbia (28 per cent), and the Prairie Provinces (27 per cent) are most interested buying property in the U.S. 

Bank of Montreal suggests that Canadians wanting to purchase in the United States should consider the questions shown below.  While some of these are lifestyle questions which the prospects will have to answer for themselves, to answer other questions, a REALTOR’s input will be valuable.  If you want to tap into this market, make sure you are knowledgeable and can refer prospects to tax advisors and others as needed.  

Questions for Canadians Considering Purchasing in the United States:

• What states and neighborhoods fit your needs?
  • Since you are responsible for property maintenance, consider how easily you can access your property from your Canadian home throughout the purchasing process and after acquisition. 
  • Consider flights and airlines, if you can fly there direct, and the cost. 
  • Research and even ask locals about the community to ensure it suits your needs. 
• What to consider when financing the purchase with a U.S. based financial institution?
  • It is important to be aware of the differences in mortgage financing and how interest is charged in the U.S. 
  • What mortgage money is available to international buyers?
  • Furthermore, understand the impact of penalties and withholding taxes if and when you decide to sell your home in the U.S. 
• Do you understand the status of the property?
  • Understand the terms of the property. For instance, is it labeled as short-sale or on foreclosure? 
  • The status of the property can have a variety of implications. Be sure to consult an expert before making any buying decisions. 
• How will you use your property?
  • Is your purchase for investment or lifestyle purposes? This will affect where you buy and how you hold the property. Also, understand the options available and what will benefit you in the long run. 
  • If your purchase is for income purposes, keep in mind that renting your property means added responsibility. Research the possibilities of increased utility usage, property management needs and the vacancy rate in the area to ensure you're prepared. Investment properties can be subject to taxation in two countries, so make sure you speak to a taxation specialist. 
• How much time will you spend south of the border?
  • Consider how many months of the year you'll be living there so that your purchase reflects your lifestyle.
  • Be aware that there are rules regarding the amount of time you can spend in the U.S. before being considered a U.S. resident and subject to paying income tax. 

How many billionaires are out there?

Wealth is on the rise again.  The Forbes magazine list of The World’s Billionaires for 2011 reports that the total number of billionaires has reached an all time high – 1,210 individuals now have a net worth of a billion dollars or more.  Topping the list is Mexican businessman Carlos Slim Helu, who is worth an estimated $74 billion.  Bill Gates and Warren Buffet took the next two top spots on the list with $56 billion and $50 billion respectively.  

Although one in three billionaires is from the U.S. (413), the emerging economies of Brazil, Russia, India and China are creating billionaires at a rapid rate (108 of this year’s 214 new billionaires are from the BRIC countries).  Other trends to note:  There are more billionaires in Moscow than in any other world city.  Online businesses like Facebook and Groupon continue to spawn billionaires.  Hot stock markets in Asia have been key in bumping the number of billionaires up to 332 in the Asia-Pacific region as compared to just 130 billionaires in 2009.

For lots of detailed information and profiles on all 1,210 billionaires, check out the list on the Forbes website.