Luxury Home Defaults

Ed McMahon may have wondered what else in new in defaulted real estate with the pending default of his Beverly Hills home.  But yesterday, Standard & Poor’s Ratings Service reported that even prime jumbo loans are starting to buckle.

Over a period of just one month–from June to July, 2008–jumbo loans originated in 2006 saw mortgage delinquencies rise 13.2 percent, while 2007 delinquencies rose 7.3 percent. Overall, mortgage delinquencies in the luxury real estate market are relatively low, with prime jumbos originating in 2006 reporting a serious delinquency rate of just 2.48 percent. But luxury home defaults are on the rise.

(For a more detailed report, go to: Prime Jumbos Showing Strain: S&P : Housing Wire)

It also appears that originations in the luxury market may be tightening. Thursday evening, Billy Taylor with Villa Sotheby’s International Realty in Del Mar, whispered that Chase Mortgage is pulling out of jumbo loan originations (at least at the broker level).

My prediction? There will be much more discussion about creative and seller financing in the months ahead. If financing is required for the purchase of a luxury home, it may be the seller who provides it.

Finally, stay tuned for Bob Dyson’s radical mortgage rescue program that could stabilize the real estate market very quickly–and that is quickly gaining prominent political support….

The post Jumbo Loan Defaults in the Luxury Market appeared first on Luxury Home Digest.

Luxury real estate gossip the last few months has fluttered around topics like the sale of Donald Trump’s Palm Beach mansion at $100 million (when it had been listed for $125 million), the pending foreclosure of Ed McMahon’s Beverly Hills home, and the F-word in luxury real estate (foreclosures).

These days, recession is the hot topic as brokerage accounts have been bloodied, home equities have declined, and credit cards are filling up with gasoline charges. It’s no wonder that it’s now fashionable to talk about frugality. And these discussions are leading to real changes in lifestyle.

Some very random observations and sensible advice:

1. Hybrids are the cool cars. Gasoline guzzling Beamers and Mercedes are being traded in for fuel-sipping and leather-seated hybrids. In some areas, there are wait lists of months for the Toyota Prius.

2. Have adjustable rate mortgages on your home or other properties? You may want to consider financing that will carry you through the financial storms ahead. Values are slipping in many luxury real estate markets–and appraisals may become problematic in the year ahead. Just my opinion, of course.

3. Are fewer Americans traveling to Europe? We’ve known several who have canceled European holidays and are traveling locally–or to Asia instead. Nobody wants to spend decimated dollars in a in a Euro-pumped economy. US dollar exchange rates against the Chinese Yuan are far more attractive.

4. A bright note in the economy are the number of Europeans, Canadians and others who are coming to the United States to shop not only Neiman Marcus and Chanel, but to spend those Euros and Loonies on prime US real estate. Homes in San DIego, Palm Beach, Scottsdale and Las Vegas are phenomenal bargains when purchased with these foreign currencies.

5. A number of affluent baby boomers are scaling back. They are aiming to trade their large suburban homes for something smaller, something single level, and something that is in walking distance to beaches, golf, restaurants, and mass transit. Trains, in particular, have captured the fancy of many,

6. This is only buzz, but I am hearing that many are dropping and/or selling country club memberships–and that there are reportedly thousands for sale in golf heavens like the Palm Springs area. Any other information out there?

7. More people appear to be dining at home. In the La Costa area where we live, both Tommy V’s and Sushi on the Rock have shuttered their doors. These were bustling restaurants just a year ago. It is likely a scenario that repeats itself throughout the country. And is it just my imagination, or do the local farmer’s markets seem to be busier this year? Perhaps people are rediscovering the utility of their own lovely kitchens.

Somehow, I think there will be future articles and lots of discussion on frugality in our lifestyles.

After all, consider the real estate and stock market bargains that might be bought with the money saved….

The post The Luxury of Frugality appeared first on Luxury Home Digest.

Forecl—–

It’s a word softly whispered when luxury homeowners in luxe communities like Palm Beach (33480), Beverly Hills (90210), Greenwich (06831) and Rancho Santa Fe (92067) discuss their local real estate markets.

Real estate prices have been declining in many of these markets throughout the country, and some of the heavily mortgage homes are ending up as foreclosure sales. The most prominent foreclosure victim of late is Ed McMahon, whose $5 million Beverly Hills mansion was recently lost to foreclosure.

This morning, CNNMoney reports that three of the richest US zip codes saw nasty declines in home prices for the three-month period ending April 30, when compared with the prior three months. The three biggest losers?

1. Palm Beach, Fla saw a 38 percent decline in median home prices during that period, while

2. Wayzata, Minn (55391) slid 28 percent, and

3. Greenwich, Conn. dropped 15 percent.

Much of the price decline can be attributed to inflated mortgage fallout, but another transition is also contributing to the declines: Downsizing. Many of the large luxury residence owners are baby boomers who are seeking to downsize into a more convenient and connected urban lifestyle–and are doing so in growing numbers.

Not all luxury zip codes and communities are in the tank, though, according to the CNN article. For the 12 month period ending March 31, prices actually rose 18 percent in the upscale Kenilworth (60043) communiity, just outside Chicago. Other ritzy gainers included Medina, WA (home to Bill Gates just outside Seattle) with a 9 percent increase, and a 5 percent climb for Atherton, one of Silicon Valley’s suburban crown jewels.

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