Luxury Insights

Almost 10% of jumbo mortgages 'seriously delinquent'

According to a new report by Fitch Ratings, "serious delinquencies" on prime jumbo mortgages rose again last month, nearing 10%.  "Serious delinquencies" are payments at least 60 days late.  

"The trend line for delinquencies indicates the 10% level could be reached as early as next month," according to a Fitch statement. The rate last month reached 9.6%, nearly triple that of last year.  Jumbo mortgages are loans larger than Fannie Mae or Freddie Mac will finance.

It would be interesting to know what percentage  of these loans in arrears are strategic defaults. Are you seeing luxury homeowners choosing to stop paying their loans even though they might be able to afford them?

Bubble Talk in Canada and London

The Wall Street Journal is running a couple of articles looking at the rapidly appreciating real estate markets in Canada and the London and the concerns that these might be "bubbles."

Housing Rebound in Canada Spurs Talk of a New Bubble

Last Wednesday, a housing-price index for Canada's six biggest cities posted its seventh straight monthly gain, showing home prices in November are now back to their prerecession peak. Another broader measure shows the average home price in 2009 hitting a record. Home building has picked up too, with housing starts in December jumping to their highest level since October 2008...

Canada's finance officials say they're watching home prices carefully. The finance minister in December outlined steps he can take to cool things down, if needed. The central bank last month said it is watching the booming market with "vigilance, but not alarm."

Some observers foresee trouble...

The London Real Estate Bubble Is Back—and It's Scary

Looking at the real estate listings here is like stepping back in time to that unreal, giddy world of three years ago—before Lehman, before subprime, before AIG. Back to a period when everyone was either rich or on their way, either from flipping condos or running hedge funds, and the only direction was up.

But these prices are now, and they contain an ominous message: The London real estate bubble, arguably the biggest one of all, still hasn't popped...

California million dollar home sales “down, but not out”

In 2006, million dollar home sales in California were clicking along at a brisk rate – one home sale in every nine was at the million dollar or above price point.  In 2009, sales of California’s million dollar properties had skidded to just one sale in every 25, for a total of 18,621 million dollar sales in the Golden State for the year. 

Around 29% of the buyers in the upper tier paid all cash.  On the other side of the coin, in 2009, there were 4,925 notices of default (step one in a foreclosure) recorded on homes which had previously sold for at least a million dollars. 

This is all according to a new report from San Diego based MDA DataQuick.  

State wide, the company reports that of California’s million-dollar-plus sales: 

• 332 sales were for more than $5 million
• 228 sales were $4 million to just under $5 million
•  590 sales fell in the $3 million to just under $4 million
• 1,902 sales were $2 million to just under $3 million
• 15,569 sales were between $1 million and $2 million

Wondering what you got for your money last year?  DataQuick reports a median luxury home size of 2,646 with four bedrooms and three baths.  Median price for luxury homes for the year was $605 per square foot (down about 10% from 2008)

The most expensive confirmed purchase in California last year was a 22,721-square-foot, 9-bedroom, 10-bathroom Bel Air house built in 2008 which sold for $26,500,000 in July.

A new auction record and trends in big spending

8 minutes and $104,000,000 later...a new art auction record.

An Alberto Giacometti bronze brought £65,001,250 (about $104,000,000) at Sotheby's Impressionist and Modern Art Evening Sale yesterday in London. 

As Georgina Adam, editor-at-large of The Art Newspaper explains to the BBC, "There's a market which is sort of exceptional for exceptional things.  If something is a one in a lifetime opportunity, people will really step up to the plate and they will spend enormous amounts of money because it was a now or never opportunity."

Overall it was a stellar event for Sotheby's.  An oil painting by Gustav Klimt fetched over £26 million and the sale total for the evening auction was £146,828,350 (almost a quarter billion dollars) also a record.

On the London real estate front, The Knight Frank Prime Central London Index shows  a 1.1% increase in prime Central London real estate prices in January, with properties at the top of the market (the £10m+ segment) showing the greatest price appreciation.   Inventory is low and buyers are lining up.

Despite the continued global economic crisis and uncertainties in the banking and financial sectors, the very affluent are clearly still making choice investments and spending. There are other hints at a possible loosening of the wealthy's purse strings and reports to expect more private jets at the super  bowl this year...

What are you seeing in your luxury markets?

Collapsing Commercial Market in 2010 to Further Strain the Luxury Residential Market?

Yesterday DS News ran an article on the expected collapse of the commercial real estate market in 2010.  Here are some excerpts  (emphasis mine):

According to the Emerging Trends in Real Estate 2010 report, issued by the Urban Land Institute and PricewaterhouseCoopers, most investors will recognize massive losses in the commercial real estate market. Value declines will eventually total 40 to 50 percent of market highs, and surveys in the report indicate 2010 will be the worst time for investors to sell properties in the report’s 30-year history...

Richard Parkus, Deutsche Bank commercial real estate analyst, believes this is just the tip of the iceberg. He predicts enormous losses and a large number of banks failing as a result of the declining commercial real estate market.

As tenants go bankrupt, downsize, or invoke their escape clauses, commercial real estate property owners have begun to feel the serious effects of the economy. By the end of 2010, the national vacancy rate is expected to reach 18.5 to 19 percent, the highest recorded since 1986.

Of course if this comes to pass it will be more bad news for the luxury residential market.  As you know  the investors, brokers, developers, tenants (business owners), and other players in the commercial market are often potential buyers and sellers of luxury homes.   Even in markets that are generally stabilizing or improving in 2010 this could mean trouble in the upper tier.

Where does the sun set twice each day?

The new year is off and running with a new real estate milestone – the opening of the world’s tallest building, the Burj Khalifa in Dubai. 

Topping off at 2,717 feet, the multi-use building offers residences, office space and a luxury hotel.  Apparently the view from the top extends more than 60 miles.  This means you can watch the sun set from the ground floor, ride the elevator to the top and watch the sun set again!  

Due to the real estate challenges currently faced by Dubai, predictions are that the building will see quite a few sunsets before it obtains full occupancy. 

Here's a 12-minute (!) promo video of the launch extravaganza via ITM News:

And more press coverage and commentary:

Of Burj and Babel - Wall Street Journal
World's tallest building: Is the Burj Khalifa a herald of economic woe? -  Christian Science Monitor

Global Listing and Referral Platform

As you know, Members of the Institute receive free accounts on ProxioPro, an international MLS and referral platform.  It is about to get even better...

Proxio has some BIG NEWS.  They have announced a partnership with ICREA, the International Consortium of Real Estate Associations to roll out the Proxio Platform to associations around the world and integrate the Proxio platform with the www.worldproperties.com website. 

This will create great opportunities for you to market yourself and your properties to even more agents around the world.

Here's their Press Release:

INTERNATIONAL CONSORTIUM OF REAL ESTATE ASSOCIATIONS PARTNERS TO DELIVER
MULTILANGUAGE TECHNOLOGY SOLUTIONS TO AGENTS

ICREA selects Proxio to provide cross-border client referral and property listing exchange support in 11 languages for real estate brokers and agents in 40+ countries.

CHICAGO, IL, / CUPERTINO, CA, (Nov. 19, 2009) - ICREA, a consortium of the world’s leading real estate associations, and Proxio, Inc., the international marketing and networking platform for real estate, today announced a partnership to provide the “Global Listing and Referral Platform” a transnational referral platform and world listing exchange application on ICREA’s website Worldproperties.com.  The platform application will serve for 1.7 million ICREA agent/broker members throughout the world affiliated with one of more than 40 leading national and regional real estate associations affiliated with ICREA.

The partnership was presented to the annual Plenary of ICREA, held in San Diego, CA, last Friday, where ICREA association representatives viewed a prototype for a new design of WorldProperties.com, which includes the introduction of the Global Listing and Referral Platform. The site will be re-launched to take advantage of the Proxio technology and to better showcase to agents/brokers and to consumers over 4 million properties from ICREA member associations.

Property listings and agent/broker profiles will be searchable in 11 languages: English, Spanish, Italian, French, German, Portuguese, Russian, Japanese, traditional Chinese, simplified Chinese and Korean. Additional languages will be added as the project develops.

“We chose Proxio as our technology partner because they offer a unique set of networking services for real estate professionals, and because they provide all of their services in multiple languages and customizable formats,” said ICREA CEO Thijs Stoffer. “In today’s industry, agents who market themselves and their listings on a global scale are much more likely to do business. ICREA agents and brokers participating in ICREA’s Global Referral and Listing Platform can work in their own languages, and have the option of easily building personal referral networks and promoting listings to other agents worldwide, which helps them grow their businesses.“

ICREA member associations see the Proxio partnership as the foundation of an important member service. “During down markets, agents must be creative in marketing themselves and their listings,” said Stoffer. “While the market may slow in one part of the world, there are buyers elsewhere around the globe looking for distinctive properties for both personal and investment use and WorldProperties.com is the place to find these properties.”

“ICREA is an outstanding organization, promoting professional standards for international real estate transactions and working to provide the best possible information and services to international agents and consumers,” said Janet Case, Proxio’s CEO. “Our technology couldn’t have found a more appropriate application, and we are delighted to have been chosen to be ICREA’s partner.”

ICREA Board Chair Peter Bolton King agrees. “What is unique about WorldProperties.com is that 100 percent of the properties displayed are represented by a professional who abides by a national code of conduct. This gives consumers as well as other agents the assurance they are dealing with a professional,” said Bolton King, CEO of the UK’s National Association of Estate Agents. “The partnership with Proxio will provide enhanced services to our members, allowing them to easily connect with each other and initiate referral transactions—across borders and across languages.”

The newly designed WorldProperties.com site is expected to go live by the end of 1Q 2010.

About ICREA:
The International Consortium of Real Estate Associations (ICREA) is an alliance of the world’s leading real estate associations. The only organization of its kind, ICREA has dedicated itself to the international promotion of its members’ businesses and has had great success in building a partnership that is improving in the way real property is transacted across national borders and in advocating for industry on global issues. ICREA and its member associations are committed to high standards of professional conduct for member brokers. ICREA members include national real estate associations in Argentina, Brazil, Canada, China, Costa Rica, Czech Republic, Denmark, Finland, France, Greece, Hungary, Ireland, India, Italy, Latvia, Mexico, Netherlands, New Zealand, Norway, Paraguay, Peru, Poland, Portugal, Russia, South Africa, Spain, Sweden, Thailand, Turkey, Ukraine, United Kingdom, United States, and Venezuela, and also countries organized in regional associations representing Central America (El Salvador, Nicaragua, Dominican Republic, Honduras, Costa Rica and Guatemala) and the Arab Region including Egypt, the UAE, Saudi Arabia and Jordan. Learn more about ICREA at www.worldproperties.com or contact ICREA at icrea@worldproperties.com.

About Proxio, Inc.
Proxio internationalizes real estate professionals worldwide by providing property display technology and networking solutions in multiple languages. Proxio’s platform delivers white label marketing and networking applications under license to real estate organizations and enterprises. MLSs, associations, and brokerages use Proxio’s technology and services to extend their reach internationally—to enable their members to transact business across the globe, and to provide a greater value proposition for the clients they serve. Located in Silicon Valley, Proxio’s team of experienced real estate technology professionals is dedicated to creating borderless real estate markets and serving the needs of agents and their multicultural clients. For more information visit
www.proxio.com and follow us on twitter.com/ProxioPro or join our community on Facebook.

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Download Full Press Release (PDF 119k)

Luxury Market News: Canada & Hong Kong

The Wall Street Journal reports that the International Monetary Fund express concern yesterday about real estate prices in Hong Kong, which are up 30% this year.  Concern is that a bubble may be brewing.

Prices for luxury homes are at an all-time peak in Hong Kong despite a tightening of lending requirements increasing the required down payment on luxury homes to 40%. 

A little closer to home, a RE/MAX Ontario Atlantic Canada report released yesterday is showing some pretty strong numbers in the Canadian luxury market. 

"Twelve months of healthy home buying activity have clearly been crammed into five short months," Michael Polzler, executive vice president of RE/MAX Ontario-Atlantic Canada.

Toronto has seen a boost in sales of "entry-level" luxury homes in the $1M-$1.5M price range, driven primarily by Bay Street banking bonuses.  There have been over 1,700 sales at $1M+ this year in the Toronto area.

Reports from CTV and The Star have more details.

NYT: Hey, Big Spender, You Want Value?

Interesting article in the New York Times on the growing luxury concierge business.  Affluent clients are turning to concierges for convenience (of course) and also to help ensure that they are getting good value for their money spent.

...The economic downturn has not stopped the world’s wealthiest from spending, but it may have made them focus more on value. And as the market gets more crowded with luxury brands, products and services, the rich are increasingly turning to concierge companies for information, recommendations and what they hope will be better deals, because of partnerships with luxury suppliers the world over...

Perhaps less obvious, some of the newly affluent are turning to concierges for their knowledge of luxury products, services, and culture, knowledge which the client may lack.

“Twenty years ago, wealthy people typically inherited their wealth and grew up being surrounded by luxury brands,” Mr. Cohen said. They had well-connected family and friends to help them navigate through high society. But newly wealthy individuals today are less likely to have inherited these experiences and networks. Concierge services provide entry into the luxury world, as well as guidance and advice.

NYT: Market for Luxury Goods Shifts Further to the East

Interesting article in the New York Times a couple days ago about the growing importance of Asia as a luxury market. 

While this is  not a new trend, as the NYT notes, "Asia’s role in the market for super high-end luxury goods is mushrooming, reflecting an underlying shift in consumer spending power that has been creeping along for years, but which received a boost from the global economic crisis."

They go on to note some interesting facts (excerpted and listed below as bullet points):

• Christie’s and its rival Sotheby’s say that in the last few years Hong Kong has emerged as a top location for sales of expensive jewelry, gems and fine wines. Asians have also become major buyers of ultraluxury goods at their auctions in London, New York and Geneva.
• Christie’s said that in the spring season, Asian buyers accounted for 61 percent of the total sales value at its New York, London and Hong Kong wine auctions. Four years earlier, the figure was 7 percent.
• Rolls-Royce, which did not even have dealerships in Asia until 2003, immediately received 20 orders for its new $250,000 Ghost when it presented the car in Hong Kong last month — despite taxes that double the price.
• China, the world’s most populous nation, has already become the biggest global car market, having overtaken the United States earlier this year.
• The number of known billionaires in China has grown to 130 from 101 in 2008.
• China’s population of “high net worth individuals,” those worth $1 million or more, surpassed that of Britain for the first time last year
• Christie’s said that in the spring season, Asian buyers accounted for 61 percent of the total sales value at its New York, London and Hong Kong wine auctions. Four years earlier, the figure was 7 percent.

You can expect a continued and increased focus on Asia and affluent Asians from the purveyors of luxury goods and services.