The once-priciest property in the U.S., listed for $1 billion, has sold for a fraction of its original list price for $100,000 at a foreclosure auction this week. The $100,000 sale falls extremely short of the $200 million loan outstanding on the property, too.

“The Mountain” in Beverly Hills has long been known as one of the last prized undeveloped parcels of land in the Los Angeles area. At 157 acres, the mountaintop property is located at the highest point in the 90210 ZIP code.

But with a 99.99% markdown, the property sale comes with a lot of fine print, the Los Angeles Times reports.

The sole bid at the auction came from the Mark Hughes Trust, the estate of the late Herbalife founder, who previously owned the property. But in 2004, the Hughes estate sold the property to Atlanta investor Chip Dickens, which set off a complicated, intertwined story of how the property ended up at a foreclosure auction in the first place.

To purchase the property, Dickens borrowed about $45 million from the Hughes estate. The debt eventually surged to about $200 million, including interest and fees. Dickens then transferred ownership of the parcel to a limited liability company. That LLC was controlled by his partner on the project, Victor Franco Noval, who is the son of convicted felon Victorino Noval.

The LLC—Secured Capital Partners—failed to successfully declare Chapter 11 bankruptcy last month. That has ultimately forced the Hughes estate to sell the property at a foreclosure auction to try to recoup the losses or buy the property back. By repurchasing it, they would lose the $200 million they were owed in the process, however.

Any other buyer who bid at the auction would have been on the hook to pay the $200 million outstanding debt. No one else did. So after 15 years, the parcel of property returned to the Hughes family.

“This is the largest non-judicial foreclosure sale and the largest loss from a lender I’ve seen in 27 years,” says Ronald Richards, the attorney for Secured Capital. Secured Capital did make a last-minute offer prior to the auction for $150 million, but Richards says their proposal was ignored. “My $150 million offer was legit, and now they have a catastrophic loss,” he says.

Source:
Once Listed for $1 Billion. Sold for $100,000. What Just Happened?” The Los Angeles Times (Aug. 20, 2019)

October 2, 2019

That single-story home may be more desirable than it once was. The construction of single-story homes is increasing at a more rapid pace than two-story homes, according to new data from the U.S. Census Bureau.

While overall the share of starts of homes of two-plus stories was higher than single-story homes in 2018, the two-story percentage is shrinking while one-story construction is growing. The share of new homes started with two or more stories dropped from 55% in 2017 to 53% in 2018. However, the share of new homes with a single-story increased from 45% to 47%, the data shows.

The growth of single-story homes was most pronounced in the South, the National Association of Home Builders’ analysis of the data shows.

A map showing the popularity of single-story homes. Visit source link at the end of this article for more information.

© National Association of Home Builders

A separate report from the real estate brokerage Redfin showed single-story or ranch homes were the most popular home style of home sold last year. The style also tended to be more affordable, they noted.

The preference of a single-story home rises with age, a recent survey of home buyers by the NAHB shows. Eighty percent of baby boomers say they prefer a single-story home so that they can more easily age in place. However, only 35% of millennials say they want a single-story home.

“Homes with one story are more common in non-metro areas, while two or more stories homes are common in metro areas,” the NAHB notes on its blog, Eye on Housing. “However, we experienced an increasing share of one-story homes in both metro and non-metro areas from 2017 to 2018.”

Source:
Single-Story Home Construction Increased in 2018,” National Association of Home Builders’ Eye on Housing (Sept. 30, 2019)

September 25, 2019

A big culprit to the ongoing housing shortage: The dwindling number of new-home construction over the last several years. A new study from John Burns Real Estate Consulting is putting it into perspective at just how much new-home construction has been lagging: The top 10 housing markets in the country are building at a rate that is 54% lower than they were 14 years ago.

Markets like Chicago, Riverside-San Bernardino, Calif., and Las Vegas have been building just 18%, 21%, and 29% from their peak construction levels in 2005 and 2006 respectively, the research shows. Chicago has plunged from the seventh largest new single-family housing market to the 32nd largest. In Atlanta, builders are constructing 36,000 fewer homes than in 2005. Phoenix has built 37,000 fewer in that time.

Builders have pointed to ongoing labor and lot shortages and rising costs of materials to explain why they haven’t ramped up calls for more new homes, despite rising calls from the industry to do so.

“Cost increases at every step of the way have pushed home prices to a point where home builders find it very difficult to build homes priced $250,000 and below in places where most people want to live,” writes Erik Franks, senior vice president at John Burns Consulting, on the study’s findings. “There is plenty of total housing demand, but most of the demand is below today’s new home prices.”

In 2003, half of the new homes nationwide were priced below $191,000; today, half of new homes are priced above $313,000. Fifteen of the 18 largest publicly traded home builders boast an average sales price of $365,000 or more.

Builders are trying to respond to the urgent calls for more new homes to meet buyer demand. Some entry-level builders are building on smaller lots, using less costly materials, or moving further from job centers, Franks reports.

Source:
Home Building Less Than Half of What It Used to Be,” John Burns Real Estate Consulting (Sept. 24, 2019)

Fifty-five percent of prospective home buyers who were actively searching for a property to purchase in the second quarter of this year say their house hunts were unfruitful for three months or longer, according to a new survey from the National Association of Home Builders.

The survey respondents cite numerous reasons for their failed home searches, including being unable to find a home at a price they can afford (50%); not being able to find a home in their neighborhood of choice (43%); and not finding a home with the features they want (40%). The share of buyers who consider high prices their biggest barrier to homeownership has increased 5 percentage points from a year ago.

The good news is the majority of prospective buyers who report an unsuccessful home search say they plan to keep looking until they find their dream home, according to the NAHB survey.

  • 62% say they will continue looking for the “right” home in their preferred location.
  • 36% say they are expanding their search area.
  • 21% are willing to accept a smaller or older home.
  • 16% say they might consider buying a more expensive home.
  • Only 16% of respondents say they are putting off their house hunt until next year or later.
Source:
Unaffordable Prices Hold Back Prospective Home Buyers,” National Association of Home Builders’ Eye on Housing blog (Sept. 5, 2019)
Recent Stories in This Section

September 25, 2019

A 20,000-square-foot Beverly Hills mansion has lingered on the market for two years with several price cuts. But this month, the home sellers decided to do something different: Instead of reducing the price further, they raised it by $20 million.

The mansion, nicknamed the “Opus,” features seven bedrooms, 11 bathrooms, two pools, a car museum, two kitchens, and more. It was originally listed in 2017 for $100 million. In January, the price was cut to $68 million; four months later, it was reduced to just under $60 million.

The home is currently listed for $79.9 million.

The seller and his real estate agent have been quiet on the price jump, but realtor.com® recently asked real estate pros to weigh in on whether such price jumps can be a smart move for a listing.

Recent high-end sales in the area may have prompted the price increase. In July, a 56,500-square-foot mansion, known as the Spelling Manor, in Holmby Hills, Calif., sold for a Los Angeles county record of $120 million, realtor.com® reports. The estate had been listed for nearly four years, originally listed at $200 million in 2016. A few weeks later, a Bel Air 25,000-square-foot estate sold for $75 million; it had originally been listed last year for $88 million.

“They see the ultra-high-end buyer coming back,” Roger Perry, a real estate pro with Rodeo Realty and who has no connection to the Opus property, speculated on the price jump. “Or they want to give themselves a little more room for negotiation.”

Other real estate pros speculate that it could be a marketing ploy to get more attention back on the home. “They start out priced extremely high, knowing that’s not going to be the ultimate sales price,” says Scott Tamkin, a luxury real estate pro with Compass, also not affiliated with the sale. “Does it mater if it’s listed at $80 million or $65 million or $99 million? It doesn’t matter. The buyer is going to negotiate it.” Those who can afford such a home have pretty already seen the listing. The price bump is to entice them to take a second look, Tampkin speculates.

Source:

September 23, 2019

Homes selling for less than $100,000 still exist. “If you’re looking for affordability, you’ll find it in the South, Midwest, and [more remote] parts of the Northeast,” says Danielle Hale, realtor.com®’s chief economist.

Realtor.com®’s research team scoured single-family listings to find the metros offering the highest number of homes for sale under $100,000. Here are the seven metros that topped the list:

1. Pittsburgh

  • Median home sales price: $168,000
  • Number of homes under $100,000 (listed on realtor.com®): 2,452

2. Detroit

  • Median home sales price: $180,000
  • Number of homes under $100,000: 2,402

3. Chicago

  • Median home sales price: $252,000
  • Number of homes under $100,000: 2,070

4. St. Louis

  • Median home sales price: $185,000
  • Number of homes under $100,000: 1,900

5. Cleveland

  • Median home sales price: $146,000
  • Number of homes under $100,000: 1,587

6. Memphis, Tenn.

  • Median home sales price: $185,872
  • Number of homes under $100,000: 1,083

7. Philadelphia

  • Median home sales price: $250,000
  • Number of homes under $100,000: 1,004

Source:

Generation Z is growing up. Those born in 1995 or after are taking out more credit and increasingly eyeing homeownership. About 14 million of Gen Z consumers who are 18 or older are taking out credit, and that includes those who are taking on mortgages, according to the latest Q2 2019 Industry Insights Report from TransUnion.

“Both the newest and oldest members of the credit-eligible Gen Z generation are beginning to enter the credit market for the very first time,” says Matt Komos, vice president of research and consulting at TransUnion. “The rapid growth in Gen Z credit activity is occurring despite many of these individuals having grown up during the Great Recession. Though the recession itself landed less than two years, its impact was felt for several years afterward. As we see more members of this group come of age, we naturally expect continued growth in credit activity by Gen Z.”

While credit cards are the most popular forms of credit among Gen Z consumers, they are increasingly taking out mortgages. Mortgages had the largest year-over-year growth rate spike with Gen Z consumers, up 112%, according to TransUnion’s data. However, researchers confirm that was from a previous low base. Mortgages are still the credit product Gen Z consumers are least likely to have, with only 0.5% of mortgages held by this age group.

That said, this generation overall is showing an eagerness to get into homeownership, higher than their predecessors at that age. More than half of Gen Zers aged between 18 to 23 say they are already saving for a home, and 59% say they plan to buy a home within the next five years—before they reach the age of 30, according to a separate study by Bank of America released earlier this year. Seventy-one percent of the nearly 2,000 people surveyed also said they already know exactly what they want in their future home.

“It’s exciting to see Gen Z wanting to own a home for reasons like building their personal wealth over time,” says Steve Boland, head of consumer lending at Bank of America. “Despite their young age, this group is pragmatic and actively planning for their future. They recognize buying a home isn’t easy and have a clear vision not only about where they plan to get help but also how they are willing to help themselves in order to make it happen.”

Gen Z infographic. Visit source link at the end of this article for more information.

© Trans Union

September 12, 2019

A Chandler, Ariz., couple has been arrested after police say they found them and their two children living in a vacant home owned by the iBuying firm Opendoor. Police were alerted after a potential buyer visited to tour the property and reported finding people who appeared to be living inside.

iBuying firms are making instant cash offers to home sellers in select areas of the country. As these firms take possession of the home, they often stand vacant as they then try to resell them on the open market.

Police arrested Gary Lynn, 29, and Adriana Gamboa, 26, after finding them on the property. They are being held on charges of trespassing. Gamboa was also charged with possession of drug paraphernalia.

Gamboa was discovered by police inside the home’s master bathroom giving her children baths. She reportedly told police that she was touring the home and decided to give her children baths since they were sweaty from their walk to the home.

The children were taken into custody by the Department of Child Services.

Opendoor, which was selling the house, told police that it only gives interested parties one hour to tour homes. Potential buyers who wish to tour properties are instructed to download an application on their phones. They are then given a code to enter on the home’s door lock to tour on their own.

Police say Gamboa had the app on her phone.

Opendoor has its largest operations in Arizona. iBuyers comprise about 6% of the market share in Phoenix, which includes the Chandler area.

August 21, 2019

Fannie Mae economists are forecasting two more quarter-point interest rate cuts by the Federal Reserve this year, expecting that the Fed will move to cut rates in September and again in December. That could bode well for lowering mortgage rates for the remainder of the year. Even though the Fed’s short-term interest rate does not have a direct effect on mortgage rates, it does tend to influence them.

Consumer demand for housing remains strong, Fannie Mae’s Economic and Strategic Research Group notes in a recent report. However, limited inventory—notably at the affordable end—is inhibiting growth in the single-family housing market, the report notes.

Fannie Mae’s Home Purchase Sentiment Index surged to a record high in July as home buyers showed stronger interest in the real estate market. But even as mortgage rates near record lows, the limited availability of homes for sale is constraining growth, researchers note.

“Though the current expansion recently became the longest on record, reverberating trade tensions and general economic uncertainty continue to weigh on growth,” says Doug Duncan, Fannie Mae’s senior vice president and chief economist. “The persistent trade tensions between the U.S. and China threaten to further reduce business investment, disrupt equity markets, degrade household wealth, and diminish consumer spending, the country’s primary economic engine of late. To help shield financial markets, buoy consumers, and perhaps nudge inflation slightly higher, we now expect the Fed will cut interest rates by 25 basis points two more times in 2019, up from our previous prediction of one.”

Mortgage rates will likely respond if the Fed acts. Mortgage rates are currently near the lowest level in recent decades, Duncan notes. The 30-year fixed-rate mortgage averaged 3.60% last week, according to Freddie Mac. More homeowners are finding incentive to refinance.

“We estimate that 35 percent of outstanding mortgages are now ‘in the money,’ meaning borrowers may realize significant cost savings by refinancing; as such, we expect the share of refinance originations to grow through the remainder of the year,” Duncan says. “However, while existing homeowners may be able to enjoy the benefits of lower interest rates, many would-be homeowners, and the purchase mortgage market generally, remain unable to capitalize on the favorable rate environment due to the chronically limited supply of homes available for sale.”

Source:

The association says changes to FHA financing qualifications will bring more entry-level homes to the market, helping to meet buyer demand

The National Association of REALTORS®, after reviewing the Department of Housing and Urban Development’s new condominium financing rules, says the guidance affords property owners greater flexibility in the qualification process for loans insured by the Federal Housing Administration. Lenders will be able to issue FHA loans for single condo units, and buildings with a greater number of investor-owned units or greater percentage of commercial space can qualify for FHA financing, among other changes HUD released Wednesday. NAR expects the new rules, which will go into effect Oct. 15, to revive a condo market that has been stifled since the Great Recession.

NAR says the new condo rules, which will help more would-be buyers access affordable housing, satisfy many of the changes the association has backed for more than a decade. Specifically, the new rules will:

  • Extend FHA certifications on condo developments from two years to three years, with an additional six-month grace period to meet requirements. This will alleviate some of the cost and time burdens on condominium associations that intend to maintain FHA approval. Condo associations also may continue submitting updated recertification packages, rather than the full certification package each time. The National Association of REALTORS® expects the change to prompt more condominium properties to apply for FHA eligibility, making more affordable housing more accessible.
  • Allow for single-unit mortgage approvals—often known as spot approvals—that will enable FHA insurance of individual condo units, even if the entire property does not have FHA approval. The condo building in which the FHA buyer wants to purchase must meet certain requirements: The property must have at least five units, a limited concentration of FHA-insured units, at least 50% owner-occupancy, and a maximum of 35% commercial space.
  • Secure additional flexibility in the ratio of investors to owner-occupants allowed for FHA financing in a condo building. While the current owner-occupancy requirement is 50%, HUD may approve an owner-occupancy level as low as 35% for older properties with less than 10% of units in arrears. Individual investors can purchase no more than 10% of units in a property with more than 20 units and no more than one unit in properties with less than 20 units.

FHA approvals for condos prior to these changes have been heavily restricted. For example, the National Association of REALTORS® pointed to data earlier this year showing that in Florida’s Miami-Dade County, there were 5,683 condo projects—but only seven had FHA approval. NAR sent out an all-member email about the new condo rules Wednesday morning.

“It goes without saying that condominiums are often the most affordable option for first-time home buyers, small families, and those in urban areas,” NAR President John Smaby said in a statement. “This ruling, which culminates years of collaboration between HUD and NAR, will help reverse recent declines in condo sales and ensure the FHA is fulfilling its primary mission to the American people.”

The association’s most recent existing-home sales report, released in July, showed that sales of condos and co-ops dropped 6.5% year over year. Further, with more than 8.7 million condo units nationwide, only 17,792 FHA condo loans were originated in the past year. Down payments for single-family homes also have grown significantly more expensive in recent years in the absence of widely accessible FHA condo financing, NAR argues.

FHA restricted its condo approval process in 2009, which limited the number of properties that could receive FHA loans. In 2016, it moved to lift several of those restrictions, but the proposed rules were never finalized.