Dr. Phil Buys in Beverly Hills For $29.5 Million

Dr. Phil buys an estate in Beverly Hills, Calif., for $29.5 million. Plus, a Forbes family ranch in Wyoming hits the market.
By: CANDACE JACKSON: wsj.com
Phil McGraw, better known as Dr. Phil, has bought an estate in Beverly Hills, Calif., for $29.5 million. Earlier this month, he listed his Beverly Hills home for $16.5 million.

The estate he purchased, which was unlisted, is a Mediterranean-style villa on three acres that has a 14,000-square-foot main house with five bedrooms and 11 bathrooms. There's also a guesthouse and a pool. The house has sweeping views of Century City.

Mr. McGraw's current home is also a Mediterranean-style house on just under an acre. It has eight bedrooms and seven bathrooms as well as an in-home theater, gym, billiard room and an outdoor dining room. The property is walled and gated and has a two-bedroom detached guest house.

Known for his syndicated, daily advice talk show, Mr. McGraw first rose to fame when he appeared regularly on the "The Oprah Winfrey Show" in the late 1990s. He has also written several best-selling books. Through a representative, he declined to comment.

Jana Jones-Duffy and Fred Holley of Coldwell Banker Previews International represented the home Mr. McGraw purchased. Billy Dolan, a broker with Hilton & Hyland in Los Angeles, has Mr. McGraw's listing for the $16.5 million property that's currently on the market.

Forbes Wyoming Ranch Goes On the Market
A ranch owned by the family of Malcolm Forbes, the late chairman and editor in chief of Forbes magazine, has hit the market in Jackson Hole, Wyo., for $12 million.

The 85-acre ranch sits along the Snake River and borders Teton National Park. A 4,100-square-foot main lodge has a two-story great room, two kitchens, five bedrooms and four bathrooms. There are also six guest cabins and caretaker's quarters.

Malcolm and Roberta Forbes purchased a roughly 150-acre ranch in 1979. Mr. Forbes died in 1990 and Ms. Forbes in 1992. The 85 acres that are for sale are owned by Moira Mumma, their daughter. Ms. Mumma's brother Tim Forbes still owns his portion of the family's ranch, which is adjacent.

David Viehman, a co-owner of Jackson Hole Real Estate Associates, a Christie Great Estates affiliate, has the listing. He said Ms. Mumma and her husband are selling because they no longer use it enough to justify keeping it.

Real-estate investor Michele Hughes will auction off a seven-acre oceanfront estate on Kauai's Anini Beach next month. Also available is her 40-acre unlisted beachfront property in Kauai's Kilauea for $40 million.

The auction includes a property with a three-bedroom main home on 1.3 acres overlooking the ocean. It was previously listed for $9.8 million. The opening bid for the sale is $3.8 million. An adjacent 1.67-acre lot has an opening bid of $1.5 million.

Ms. Hughes's Kilauea estate, along Secret Beach, has about 40 acres of land, beachfront access and an organic farm and nursery. There is a 3,000-square-foot main house, a swimming pool and two guest houses. The property can be divided into four separate parcels.

Concierge Auctions is handling the sale, which will take place on site on Aug. 23, along with Neal Norman of Koa Properties. The Secret Beach estate is available from the Michele Hughes Company.
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Home Prices Gain in 100 U.S. Cities in Second Quarter

Home prices rose in 100 U.S. cities in the second quarter as a buyer tax credit boosted demand and distressed properties made up a smaller portion of sales.
By: Kathleen M. Howley: Bloomberg.com
The median price of a single-family home sold in Akron, Ohio, climbed 36 percent from a year earlier to $119,700, the biggest rise of 155 cities measured, the National Association of Realtors said in a report today. Prices in San Jose, California, gained 26 percent to $630,000 and San Francisco added 25 percent to $591,200. The median U.S. price rose 1.5 percent to $176,900.

A federal tax credit of as much as $8,000 underpinned second-quarter real estate demand, boosting sales to an annual pace of 5.61 million homes, according to the Realtors group. The effect is waning, said Richard DeKaser, chief economist at Woodley Park Research in Washington. Transactions probably will fall to a 4.55 million pace in the three months ending in September, the NAR said in a forecast posted on its website.

“Throwing a sale price on housing stimulated demand, but there is no doubt it’s been a largely temporary effect,” DeKaser said in a telephone interview. “The level of housing activity, whether one is talking about sales or construction activity, is abysmally low.”

The median price of a single-family home in the New York metropolitan area rose 3.7 percent to $393,900 in the second quarter. The Edison, New Jersey, region had a 4.3 percent gain to $345,800 and prices in the Boston metropolitan area increased 7.2 percent to $360,200.

Distressed Sales

Distressed homes, which typically sell at a discount, accounted for 32 percent of sales in the second quarter, down from 36 percent a year earlier, according to Chicago-based NAR. The category includes foreclosed homes, those where the owners have fallen behind on payments and so-called short sales, in which a lender agrees to sell a property for less than the value of its mortgage.

The worst-performing markets included Cumberland, Maryland, with a price decline of 15 percent; and Tucson, Arizona, down 14 percent. Prices in Lansing, Michigan; Ocala, Florida; Beaumont, Texas; and Boise City, Idaho, all fell 13 percent.

In a separate report today, NAR said U.S. sales rose 9.1 percent from the first quarter’s 5.14 million annual pace. North Dakota led the nation, with transactions climbing 52 percent. Sales increased 39 percent in Hawaii and 37 percent in Washington, D.C.

The average U.S. rate for a 30-year fixed mortgage tumbled to 4.49 percent this month, the lowest on record, after reaching a 2010 high of 5.21 percent in the week ended April 8, according to Freddie Mac, the McLean, Virginia-based mortgage buyer. The decline shaved about $130 off a monthly payment on a $300,000 home loan.

The federal homebuyer tax credit required people to sign contracts by the end of April. Those buyers had until June 30 to close their sales. Congress extended the deadline through September.
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L.A. Home Prices Stay Flat as Sales Inch Up in July

Figures seen as possible sign of strength after June decline.
By: David Haldane: labusinessjournal.com
Home prices in Los Angeles County held steady in July for the fourth consecutive month, as sales began creeping back from a dip early in the summer.

The median price of a home remained at $350,000, its high point since the market began recovering in spring 2009. Meanwhile, home sales rose 3 percent on a year-over-year basis to 4,498 units, according to data provided by HomeData of Hicksville, N.Y.

Year-over-year sales had dropped in June due largely, analysts said, to the expiration of an $8,000 federal tax credit requiring buyers to enter escrow by April 30.

The new figures suggest that the housing market, at least in the county, may be more robust than some economists believe. A survey in July of economists conducted by MacroMarkets LLC found that on average they project nationwide prices will drop more than 1 percent this year.

Christopher Thornberg, a principle of Beacon Economics, a West L.A. consulting firm specializing in real estate, warned against reading too much into the numbers.

“For a while they managed to get a bounce out of the market because of interest rates and tax credits, but that has come to an end,” he said. “As a result, things have gotten flat and I would expect them to remain soft for the rest of the year.”

Among the neighborhoods in which prices were flat was the 90049 ZIP code in Brentwood, where 16 homes sold for a median price of $1.53 million, virtually the same as last year.

But not every area shared in the flat trend, with some of the most dramatic shifts occurring at the higher end. For example, 32 homes were sold in Manhattan Beach’s 90266 ZIP code at a median price of $1.67 million, a 28 percent jump compared with last year.

Conversely, 21 homes were sold in the 90068 ZIP code in the Hollywood Hills at a median price of $698,000, a 34 percent drop from 2009.

The median price of a condo also remained flat countywide in July at $305,000 for the second month in a row. Sales volume was 1,634 units, a 1 percent increase over last year.
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Geithner Defends Plan to Let Tax Cuts for Wealthy Expire

US. Treasury Secretary Timothy Geithner will Wednesday continue to defend the White House plan to let tax cuts for the wealthiest Americans expire at the end of the year, arguing that extending them would imperil the fragile economic recovery.
By: VICTORIA MCGRANE: wsj.com
"Borrowing to finance tax cuts for the top 2% would be a $700 billion fiscal mistake. It's not the prescription the economy needs right now, and the country can't afford it," Mr. Geithner will say, according to an excerpt from his speech provided by Treasury. Mr. Geithner will deliver the remarks Wednesday afternoon at the left-leaning Center for American Progress.

Mr. Geithner's argument stands in direct contrast to Republicans and some congressional Democrats who argue that letting taxes increase even for the richest Americans will hurt the economy at this crucial time.

More broadly, Mr. Geithner's speech will focus on tax and fiscal policy. According to other excerpts from the speech, Mr. Geithner will say that "ultimately, fiscal policy is about getting the conditions right for economic growth, prosperity, and job creation.

Over the past two decades, Washington ran an experiment on that front. In the 1990s, the government put an end to budget deficits, and America enjoyed a period of growth led by the private sector where prosperity was widely shared and job creation was robust. Over the next decade, Washington tried a new path, running up huge debts, while incomes for most Americans stagnated and job creation was anemic. We are living today with the damage that misguided policy caused.

The speech continues: "So, as we look to a new decade, there's some empirical evidence around what works and what doesn't. Rather than recreating a false prosperity fueled by debt and passing the bills on to the next generation, we need to restore America to a pro-growth tax and fiscal policy, where the middle class once again has a chance to prosper."

After delivering his remarks, Mr. Geithner will participate in a debate with the center's president and CEO John Podesta, Douglas Holtz-Eakin, president of the right-leaning American Action Forum, and others.
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Homes will sell if priced right; foreclosures have impact

Emily Rennie's three-bedroom house in Oakland was a beauty in a sweet location. Walking distance to the lakeshore. Close to shops. A refurbished patio in the back. Inside, a modern kitchen with granite countertops.
By: Stephanie Armour: USA TODAY
Listed at $539,000 when she put it on the market, the Excelsior Avenue house was missing one crucial thing: The right price.
After a few weeks with no offers, she cut the price to $499,000 in May. Then she cut it to $475,000 in June. She is still hoping for an offer.

Rennie is discovering the cold reality of post-housing-bust prices: No matter what she thinks her house is worth, what matters is what buyers are willing to pay. That can be a lot less in areas where the supply of houses for sale is swollen by foreclosures and short sales, often priced 20% to 30% below the ones being sold by financially healthy owners. Nationally, such properties account for a third of all sales three years after a historic chill blew over an overheated housing market.

Foreclosures "do make it harder to sell," acknowledges Rennie, who works in marketing communications. "People can get a really good deal."

FORECLOSURES: They're booming among the most creditworthy
CHART: Drops in asking price in major cities
INTERACTIVE MAP: State-by-state look at the foreclosure problem in 2Q
HOME PRICES: Rise 1.3% in May, but don't expect it to last
HOUSING MARKET: Track the rise, fall and ... rebound?
CLOSE TO HOME: Real estate markets across the USA

Real estate professionals say Rennie is in good company. Nationally, 30% of the houses for sale were reduced in price in June, according to Zillow.com, an online real estate site. Plenty of sellers have trouble pricing their home against the foreclosed houses that lenders are trying to unload.

"It's one of the hardest things for sellers to do. They have an emotional attachment to their house," says Amy Bohutinsky, a spokeswoman for Zillow.com. "For sellers to understand how they should price, they should deeply understand their market and competition — what's on the market now, not just what's sold."

Those who do that successfully don't have a problem.

"People who price their homes to the market are selling them in a reasonable amount of time, but people who cling to 2004 or 2005 prices aren't," says Richard Smith, president and CEO of Realogy, the parent company of Century 21, ERA, Coldwell Banker and Sotheby's International Realty. "If you take into account (bank-owned property) pressures, you'll sell pretty quickly."

Competition for bargains

Oakland and nearby San Francisco are two markets where foreclosures have a strong influence

Nearly three of every 1,000 homeowners in Oakland lost their homes to foreclosure in May, according to Zillow. Foreclosure resales made up 36% of all sales in May, although that's down from a peak of 66% in March 2009.

Sellers have had to adjust. In June, 20% of the properties for sale in Oakland made price cuts, according to Zillow.com, compared with 15% in May. Drawn by falling prices, young professionals from San Francisco are coming across the bay to snap up homes in Oakland, and most of the stiffest competition for properties is in the top tier, around $808,000.

At that price, buyers in May paid 0.1% less than the asking price, according to Zillow. In all price ranges, they paid 0.3% less than asking price. Based on the median list price, that's $1,080 less than the last listing price.

But some agents are seeing bidding wars.

"We're seeing multiple offers; we're seeing above asking price," says David Kerr, a ZipRealty agent who represents buyers and sellers in Oakland. "People are buying foreclosures, fixing them up and selling them and getting offers."

Those who do take foreclosures into account and price their homes right cannot only find a buyer, but sometimes one who will pay well above what they're asking.

One such buyer was Rosa Verdin, 40, who bought a restored Victorian in north Oakland from a developer in May. The asking price was $450,000, which was well-priced, she says. She and her partner, Kelly Helms, 32, a nurse, offered $50,000 more, outbidding at least two other parties.

"We had been looking for six to eight months," says Verdin, 40, who works in graphic arts. "The location was centrally located to our work, the house was move-in ready and within our price points. Timing just seemed right, and the decision was relatively easy."

Not all offers go so smoothly. Even when owners find willing buyers, getting their price isn't a sure thing. Lenders generally require appraisals before giving a mortgage, and appraisers often take into account what foreclosed properties in the area sell for when determining how much a home is worth. If a home is being sold at too high a price, the sale can fall apart.

"Every day, sales fall apart," says Leslie Sellers, with the Appraisal Institute. "Smart sellers get appraisals done before they sell the home."

Even in markets where most sellers are getting just below asking price, some are taking a long time to find a buyer. Glen Cox put his sprawling, five-bedroom Oaklandhome with sweeping views of the bay and Golden Gate bridge up for sale at the end of 2008 for $1.8 million. He's selling it without a real estate agent. He took it off the market for a while after he got no offers. Today, he's offering it for $1.695 million.

The house features vaulted ceilings, nine rooms with French doors, travertine balconies and an oak-arbored entry corridor. "There're not many homes in the $1.5 (million) to $1.6 million range, and mine is nicer than most of them," Cox says. "If you don't have the one buyer right away, it can take awhile. It's a very tough market."

Neighborhoods buck trend

Other neighborhoods also show just how well good prices pull in successful offers.

In the heart of San Francisco, Noe Valley is home to dot-com millionaires and working professionals. The streets are lined with Edwardian and grand Victorian row houses built in the late 19th century, and the neighborhood, flanked by hills, features an eclectic array of coffee shops, sushi restaurants and lively bookshops.

The real estate market in San Francisco is struggling to regain its footing, with home prices down 0.7% from the third quarter of 2009 to the first quarter of this year. But in Noe Valley, most homes are going just above listing price. In May, homes sold for an average of 0.02% more than the last listing price, according to Zillow.com. Based on median list price, that translates into $218 more.

"It's crazy," says Brendon DeSimone, a Realtor with Paragon Real Estate in San Francisco, who represents buyers and sellers in Noe Valley. "I had one house with five offers, and it went from $1.4 million to $1.7 million. The valley has just popped. It's not uncommon for one open house to have 200 people come through."

Nationally, the average property takes eight to nine weeks to sell, down from 10 to 11 weeks a year ago, according to the National Association of Realtors. In Noe Valley in May, there were 25 listings that sold after averaging five weeks on the market.

But Paul McCickard, who put his home on the market in mid-March, is still waiting for a buyer. So far, he's had only one offer. His home, priced at $2.149 million, is a 3,400-square-foot Edwardian with four bedrooms, a two-car garage, marble fireplaces, stream showers and a view of the skyline. He says he had to price it at that amount in part because it was an investment property. He bought in 2005, demolished the home and rebuilt it; he needs to pay back the money he owes on the construction — and hopes to make a little profit.

"We've invested a lot of money into the house, so it's a matter of trying to recoup the money. Hopefully, it will sell," says McCickard, who sells heavy equipment. "There's been a lot of walk-throughs and a few interested parties, but we're still waiting."

Other homes have found buyers, and fast. Charlie Frisbie lost out on his first offer in Noe Valley, so he bid again last year on a two-bedroom Edwardian with an asking price of $998,000. There were a total of 11 offers; he got it at $1.1 million.

"You're getting the best the city has to offer — transportation, good weather, access to parks," says Frisbie, 48, an accountant. "Twice this year, homes came for sale on my block, but they didn't even go on the market — they just sold. Those that do go on the market go substantially over" asking price.

Noe Valley has taken a hit as the overall housing market has tumbled, with home values down 17% from their peak in June 2008, according to Zillow.com. In the neighborhood, about 5% of home sales in March were foreclosure resales.

But Noe Valley remains a hot neighborhood for several reasons. Other neighborhoods such as Pacific Heights and the Marina District have already been in such demand that prices are often out of reach for younger families, DeSimone says. Noe Valley remains more affordable but still has the kind of row houses desired by families.

It's also closer to Silicon Valley than other neighborhoods in northern San Francisco, which shaves off about 20 to 30 minutes of commuting time (Google and Apple both have bus stops in Noe Valley). And many buyers want historic Victorians, so demand for homes in the neighborhood is strong.

That's why, when homes are priced well, they can set off a bidding frenzy — even in an anemic real estate market.

LOWERING THE ASKING PRICE Story
How much houses in some cities listed on real estate site Trulia.com have been reduced in price since July 2009*.

City/state % of listings w/ price reductions - Average reduction

Minneapolis 40% - 9%

Milwaukee 39% - 9%

Dallas 38% - 9%

Boston 34% - 7%

Baltimore 34% - 11%

Phoenix 33% - 13%

Memphis 33% - 9%

Kansas City, Mo. 32% - 9%

Tucson 32% - 10%

Columbus, Ohio 32% - 8%

Mesa, Ariz. 32% - 12%

Jacksonville 32% - 11%

Virginia Beach 32% - 8%

Albuquerque 31% - 8%

Louisville 31% - 6%

Omaha 31% - 7%

Arlington, Texas 31% - 7%

Cleveland 30% - 12%

Chicago 30% - 8%

Atlanta 30% - 10%

Indianapolis 30% - 7%

Seattle 30% - 9%

Portland, Ore. 29% - 8%

Philadelphia 29% - 8%

Raleigh, N.C. 28% - 7%

Nashville 28% - 8%

Long Beach 27% - 9%

Fort Worth 27% - 8%

Houston 27% - 8%

Colorado Springs 27% - 7%

Tulsa 26% - 6%

Austin 26% - 7%

Washington, D.C. 25% - 10%

San Francisco 25% - 8%

Charlotte 25% - 9%

Oklahoma City 24% - 7%

San Antonio 23% - 8%

Los Angeles 23% - 11%

Honolulu 23% - 8%

Denver 22% - 8%

Miami 21% - 13%

Sacramento 20% - 9%

San Diego 20% - 8%

Fresno 19% - 11%

Detroit 19% - 26%

El Paso 18% - 7%

Oakland 18% - 10%

New York 17% - 10%

San Jose, Calif. 16% - 8%

Las Vegas 12% - 15%

* = foreclosure properties are not included; Source: Trulia.com
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Doubling Down on Housing

Record-Low Interest Rates and a Scary Stock Market Are Prompting Investors To Sink Even More Money Into Their Homes.
By M.P. MCQUEEN: wsj.com
The housing crash has left at least 11 million people in the unenviable position of owing more on their homes than they are worth—and many more millions with properties worth far less than they paid for them.

But some might not be as trapped as they think.

Record-low mortgage rates and a new slump in home prices are presenting unusual opportunities in the housing market these days—even for so-called underwater borrowers.


Larry and Mary Schuck paid about $29,000 to refinance into a 15-year mortgage at a rate of just 4.5%. That's like an investment return of about 10% a year over five years. They also reduced their total interest payment by more than $95,000.


Some intrepid homeowners are intentionally taking a loss on their current house—and writing a big check to retire their old mortgage—in order to buy twice the home for not much more money. Others, eschewing conventional personal-finance advice, are even opting for "cash-in" refinancings, paying thousands of dollars out of pocket to settle old loans—and then taking out new mortgages with lower payments, shorter durations or both.

Katie Everett, a real-estate broker in Denver, says none of her clients kicked in cash when selling their homes last year. This year, "about half are willing to bring money to closing, anywhere from $5,000 to $45,000," she says.

Are these people crazy to be tying up even more of their cash in their homes, in effect doubling down on what has been a losing bet thus far? After all, any number of variables, from the employment picture to the credit markets, could weigh on housing for years to come.

Yet economists say trading up to new homes or refinancing existing ones can be smart—even if it means plunking down more cash to get out of old mortgages. People living in less-desirable neighborhoods might be able to find better homes in tonier ones that offer better appreciation potential. And with mortgage rates so low, such buyers can keep their monthly payments manageable, even though the new homes are more expensive.

"If you are trading up, what better time than when interest rates are at record lows and the cost of the trade-up is much less than it used to be?" says Christopher J. Mayer, a Columbia Business School economist.

The refinancing equation is changing, too. Thanks to rock-bottom interest rates and liberal lending terms for Federal Housing Administration loans, a person who plunks down cash to retire a higher-rate mortgage might be able to reduce his monthly payments, even as he shortens his loan term to 20, 15 or 10 years.

In the past, financial planners typically recommended that homeowners devote as little cash to real estate as possible, and to invest it in the financial markets instead. But with stocks essentially where they were 11 years ago and market volatility seemingly on the rise, people are rethinking that wisdom. Devoting extra cash to repay a mortgage early is among the safest ways to produce an investment return.

"At this point," says Jay Brinkmann, chief economist of the Mortgage Bankers Association in Washington, "if they don't have anything else that is bringing a tremendous return, then they are buying themselves an annuity by paying their house off sooner than they needed to."

During the fourth quarter of 2009, 33% of refinancings were of the cash-in variety, the highest percentage since Freddie Mac began tracking the characteristics of refinance transactions in 1985. Figures for the second quarter are due next week.

"Historically high percentages of borrowers are paying down their principal when they refinance their mortgages," says Brad German, a Freddie Mac spokesman.

It helps that interest rates are lower than they have been in decades. The average rate on a 30-year fixed-rate loan was about 4.74% on July 21, according to Bankrate.com. That is down from 5.26% in January. Rates on 15-year loans averaged about 4.18%.

The Mortgage Bankers Association said Wednesday that low interest rates sent the volume of mortgage applications 7.6% higher during the week ended July 16. Purchase applications increased for just the second time since the expiration of a temporary federal tax break in May. Refinance applications grew 8.6%, to the highest level since May 2009.

The attractive terms are spurring people like Scott Ayler, 35 years old, into action. He and his wife, Jaclyn, 33, recently decided to trade up to a larger home in their native Denver, despite taking a loss on their current house. In 2004, they paid $234,000 for a three-bedroom, 2½-bath house builtthat same year in Green Valley Ranch, a subdivision that has among the highest foreclosure rates in the city and lacks upscale amenities. They are in contract to sell the home for about $204,000.

Their new home, built this year, cost about $323,000, comes with four bedrooms and three baths, and sits on a corner lot overlooking a reservoir. The house, which was initially listed at $379,000, is in Denver's desirable Cherry Creek area, known for excellent schools, plentiful amenities and few foreclosures.

With $195,000 remaining on their original 6.625%, 30-year fixed-rate loan, the Aylers estimate their total paper loss will be around $45,000. They are putting down only $11,500 on the new house. But because the new FHA loan carries a 4.5% rate, their monthly payment will rise by only $290 a month.

They say they expect better price appreciation in their new home. And with a young daughter and plans for another child, they need more space anyway.

"We don't want to wait for the market to come back," says Mr. Ayler, general counsel for an energy company. "We wanted a better quality of life now."

Of course, many homeowners in states like Arizona, Florida and Michigan are seriously underwater, having overpaid for houses now worth as little as half their value at the market's peak. Making up that yawning gap and scraping up additional cash for a new down payment is beyond their means.

Some of those people are going to extremes by engaging in "strategic defaults," a highly controversial strategy in which they stop paying their mortgages and go into foreclosure to get out of their obligations. But while cutting losses on a bad housing investment might seem liberating, it can stain a person's credit report for years.

The vast majority of homeowners remain reluctant to sell their primary residence at a loss, perhaps irrationally so. In a study of seller behavior in condominium transactions in downtown Boston from 1990 to 1997, economists David Genesove of Hebrew University in Jerusalem and Prof. Mayer of Columbia showed that sellers were so "averse to nominal losses" that it affected their behavior. Those who were selling their homes in down markets and faced the possibility of nominal losses kept their homes on the market for much longer than other sellers, in some cases to their detriment.

"Loss aversion is a very, very strong force," Prof. Mayer says. "People don't like to sell their homes for less than they paid for it."

But, he adds: "Why should it matter? If you sell a home for less than you pay for it, you would buy for less, too."

Others are coming around to that view. In Minneapolis, real-estate agent Jason Walgrave says he recently helped a couple buy a 2,800 square-foot home in nearby Plymouth, Minn., an affluent suburb, for $325,000. To get there, they sold for $175,000 a 1,500 square-foot house for which they had paid $190,000 in 2005. Their existing home is financed with a 7.5% mortgage; they will get 4.5% on the new one.

The couple is bringing $25,000 to the closing table to pay off the old loan and closing costs. "They want to take advantage of the bigger house at a lower price and the lower interest rate," Mr. Walgrave says. Now, for an extra $390 a month, they are getting almost twice as much house.

Just as old beliefs about selling houses are being upended, the conventional wisdom surrounding refinancing is changing, too. Time was when the only question about a refinance deal was how much money the homeowner could take out of the house. From the 1980s through the mid-2000s, the so-called cash-out refi became an easy way for homeowners to spend beyond their means.

Now, some homeowners are doing the opposite: writing big checks to pay off their old mortgages and taking out new ones with far lower interest rates, shorter repayment terms or both.


David Walter Banks for The Wall Street Journal

The Schucks, of Winston, Ga., recently refinanced to save money. .
Should You Invest Your Cash in a Refinance
Until recently, few homeowners were "underwater" on their mortgage, meaning they owe more on it than their house it is worth. Now millions of people are in that situation. But that doesn't mean they can't refinance—it simply means they must pay down the principal of their loan with cash.

Because that concept is relatively new, few online calculators help people run the numbers for themselves. Here, Jack Guttentag, professor emeritus of finance at the Wharton School and self-styled "Mortgage Professor," calculates the potential return on a hypothetical deal. He considers only the cash used to retire the mortgage; closing costs would affect results as well. And he assumes a five-year period because that's a typical length of time people hold a mortgage. (The returns are similar over 15 years, he says.)

In general, the rate of the return is larger when there is less cash required, or when there is a greater difference between the old and new mortgage rates.

 · Current loan balance: $809,000
(on a 30-year fixed mortgage at 6%)
 · Current monthly payment: $6,398
 · Cash paid at closing to retire current loan: $80,000
 · New loan terms: $729,000, 15-year fixed mortgage at 4.375%
 · New monthly payment: $5,530
 · Monthly payment savings: $868 per month
 · Return on the $80,000 investment: 10.4% annually for five years.*
 * Includes both the principal paid down on the new, shorter-term loan and the monthly savings in loan payments.

Source: Jack Guttentag, www.mtgprofessor.com

Anthony Hsieh, chief executive officer and founder of loan broker LoanDepot.com, says that because home values have fallen so much, many people have to bring cash to qualify for refinancing these days. "Surprisingly to us, they are willing to do it," he says.

Skeptics question why people would throw more cash at a depreciated asset. But according to Prof. Mayer, the Columbia economist, the decision centers on whether the homeowner thinks he or she can find better ways to invest the cash being sunk into housing.

During most of the 1980s and 1990s, the answer was unquestionably yes. The stock market was rising, and investing in housing seemed comparatively dull. During those years, personal-finance experts even argued against paying "points" on a mortgage to reduce the interest rate. With banks lending at 7% to 8% throughout much of the period and the stock market returning more, it was foolish to devote more cash to housing than was necessary.

But since 2000, stocks have essentially gone nowhere. Meanwhile, the recent recession gave new currency to the idea of living as close to debt-free as possible, a process economists call deleveraging. "Today, people are a lot more conservative," Mr. Hsieh says.

Larry Schuck, 60, a semiretired security consultant, is among them. Mr. Schuck is opting to pay money out of his own pocket to refinance into a shorter-term mortgage. The goal: to reduce his total interest payments over the life of the loan.

He and his wife, Mary, 56, like their Winston, Ga., community and plan to stay there. They bought their home in December 2008 for $246,000, and it appraised recently at $228,000.

Mr. Schuck this month paid $29,000 in principal and closing costs to refinance his 30-year fixed-rate mortgage, which carried a 5.87% interest rate, into a 20-year loan at 4.5%. The deal will save him more than $95,000 in interest charges over the life of the loan, he estimates, while lowering his monthly payment by $147. In investment terms, the deal produces a return of about 10% a year for five years, which about as long as most people keep a mortgage, according to Paul Habibi, professor of real estate at the UCLA Anderson School of Business.

"You are lucky if you get 1% interest in your savings account," he says. The average savings account pays interest of 0.21%, says Greg McBride of Bankrate.com.

Economist Laurence Kotlikoff, a professor at Boston University and president of Economic Security Planning, a financial-planning software company, calculates that by refinancing the mortgage to a lower rate and a shorter term, Mr. Schuck and his wife were able to increase the amount of money they can spend during retirement by about 3% each year. The short-term cost: a four-year period of belt-tightening resulting from their forgoing the ability to spend the $29,000 they paid for the new loan.

"Even though things will be a little bit tight for the next four years, on balance it was a good move," Prof. Kotlikoff says.

For scores of other homeowners, summoning the courage to take a loss now could lead to gains later on.

"People who have suffered losses and would like to refinance hesitate to do so because they have to acknowledge this loss and come up with money to get a decent rate," Prof. Kotlikoff says. "But it might still be in their interest to do it."
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Housing Market Holds Its Own: Life after the Tax Credit

The tax credit brought a lot of buyers out last fall and again this spring, which gave a real shot in the arm to real estate.
RISMedia.com
While that heightened volume cannot be sustained, home sales and prices still remain higher than last year due to interest rates at historically low levels and the lowest home prices seen in years. A monthly survey of 54 metropolitan areas reveals that closed transactions in June 2010 were 5.6% higher and prices 3.5% higher than during June 2009.

“There’s no question, the tax credit has had a significant impact on this market,” said RE/MAX CEO Margaret Kelly. “No one can predict the future, and we may still see a slight pull back, but for right now it appears that housing is holding its own, hopefully on the road to a sustainable recovery.”

Transactions – Year-Over-Year Change
Buyers trying to make the closing deadline for the tax credit may have pushed sales higher for June with a 7.2% rise from May in addition to the 5.6% gain over last year. Sales were especially strong in the Northeast—Boston and Hartford saw 23% more sales than last year, Providence was up 21% and Philadelphia was higher by 27%. An equal number of metro areas, 27, had increases and decreases in closed transactions year over year.

Median Sales Price – Year-Over-Year Change
Responding to demand, home prices appear to be stabilizing and slowly inching higher. In the survey’s 54 metro areas, the year-over-year change in median sales price was 3.5%, with 27 metros headed up, 25 lower and 2 unchanged. The weighted average of all median sales prices for June was $211, 530.

California experienced the most dramatic increase in prices—median prices in San Francisco rose almost 18% higher than June 2009 levels, Los Angeles prices were 10% higher and San Diego prices were 9% above the same time last year.

Days on Market – Average of 54 Metro Areas
Besides price, most home owners are concerned about how long it will take to sell their home. For the homes that sold in the survey’s 54 metro areas, the average number of days it took from listing to signed contract was 81, slightly lower than the 83 day average in May and the 89 day average in June 2009.

Months Supply of Inventory – Average of 54 Metro Areas
The inventory of homes on the market in June rose slightly from May, up only 1.2%, but down 5.8% from June 2009. In the survey’s 54 cities, the average months supply of Inventory was 8.5 months, which remains unchanged from May. This means that at the current rate of sales, the average metro would eliminate its inventory of homes for sale in eight and a half months. However, a six month supply is considered a market balanced equally between buyers and sellers.
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Need to Sell Your House? Cut the Price

Home sellers learned a painful lesson in June: if you want to sell right now, lower the price.
By: Nick Timiraos: wsj.com
June marked the second month with no more $8,000 tax credit for home buyers, and some 24% of all listings that were on the market as of July 1 had experienced at least one price reduction, up from 9% of all listings one month earlier.

The average price drop—at 10%—was unchanged from one month earlier. But more markets saw bigger price reductions, led by Minneapolis, where 40% of listings had been reduced in price since listing. One third of all homes in Phoenix and Tucson, Ariz., have had their prices cut.

So when does it make sense to lower the price? They offer the following five tips:

 · Multiple listing agents have recommended listing the home at a lower price.
 · Feedback from the buyers’ agents suggests the home is overpriced.
 · The home isn’t getting any showings, even though it’s marketed well.
 · The home has sat on the market far longer than other homes in the area.
 · There’s been multiple offers, but they’ve all been significantly under the list
   price.

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Indonesian Agrees to Buy Bel-Air Mansion for $50 Million

An Indonesian buyer is in contract to buy a 48,000-square-foot mansion in Los Angeles' Bel-Air neighborhood for around $50 million.
By: JULIET CHUNG and CANDACE JACKSON: wsj.com
If the deal closes, it would set what brokers believe to be a new record for the biggest residential real-estate sale in the U.S. to date this year. The previous record is thought to be set by Texas energy executive Kelcy Warren's $46.5 million buy in Colorado in April.

The 10-bedroom, 14-bathroom mansion, most recently listed for $72 million and originally listed for $85 million, sits on 2.2 acres. It has a ballroom seating more than 200, a music room and a 20-car motor court. There's a pond for swans, seven fountains, a Turkish hammam and a columned movie theater with a mural on the ceiling. The seller is Los Angeles developer Mohamed Hadid, who constructed Ritz-Carlton hotels in the 1980s and now builds massive homes in L.A., Mexico and elsewhere. Mr. Hadid has said he spent $59 million to build the home for his own use.

The buyer's identity could not be learned.

Financial Manager Lists Ranch
Former American Skandia chief executive Wade Dokken has listed his ranch in Montana for $29.95 million.

The property was once slated to become an ecology-minded luxury residential development with a cooking school run by Bay Area chef Alice Waters, known for pioneering the locally sourced organic food movement.

As head of American Skandia, Mr. Dokken led one of the largest sellers of variable annuities, a popular investment in recent decades. His 6,795-acre property, known as Bullis Creek Ranch, is about six miles south of Livingston and 45 minutes from an entrance to Yellowstone Park. The Yellowstone River runs next to the property.

Although construction on the development was canceled due to the economy, the property includes a fully furnished five-bedroom, three-bath Engelmann spruce log home, built in 1997, and two guest houses. Mr. Dokken paid $23 million for 11,000 acres of land in the area in 2005, including this ranch. He now runs financial-services company WealthVest.

Talent Manager's Price Cut
Talent manager Sandy Gallin, who has represented artists like Barbra Streisand and Michael Jackson, has put his Bridgehampton, N.Y. estate back on the market for $26.9 million. The home was listed for $32 million until November of last year.

Mr. Gallin, who is known for his home restoration projects, assembled the 14-acre property in 2001, by purchasing three adjacent lots. It includes a 6,500-square-foot shingled house, built in 2003, with seven bedrooms. There's a cedar plank guest cottage with a bedroom, bath and outdoor shower, and a 1.5-acre pond, home to several swans, with a heated swimming pool along one side. The home is also available as a summer rental for the months of July and August for $500,000.
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In Westside Los Angeles, a Rail Line Stirs a Revival

Los Angeles - Slowly, mass transit is taking hold in a city synonymous with the car. By: TERRY PRISTIN: The New York Times
Now a light-rail line is finally coming to the affluent and traffic-choked Westside after years of local resistance, and at least some urban-style development is likely to follow.

Derek Jones, chief operating officer of the Legado Company, said a mixed-use development would appeal to people who worked downtown.

When the $2.4 billion Exposition Line, currently under construction on an unused freight rail right-of-way, is completed, by 2015, its electric cars will travel all the way to Santa Monica, a few blocks from the Pacific Ocean.

The 8.6-mile first phase of the project, now about two-thirds finished, extends west from the University of Southern California, at the eastern end, to Culver City, the home of Sony Studios. Concrete columns that will support elevated train stops have sprouted near the busiest intersections along the route. (The two stops closest to the university will be underground and then will link to existing rail lines downtown.)

In addition to removing tens of thousands of cars from the road — 64,000 daily riders by 2030, according to transit authorities — the 15.6-mile Expo Line is expected to spawn a variety of mixed-use real estate projects, as some of the city’s previous rail lines have done. A project including more than 500 units of housing and a 300-room W hotel was recently completed at Hollywood Boulevard and Vine Street, and a rental and retail complex was built at Wilshire Boulevard and Vermont Avenue in 2007.

The Expo route has spurred development proposals from major companies, including Hines, an international firm based in Houston, and Casden Properties, a leading Los Angeles developer of multifamily properties. In Santa Monica, Eileen P. Fogarty, the city planning director, said there was tremendous demand for any site that was located no more than a quarter-mile from a station. “People will comfortably walk a quarter of a mile,” she said.

Since entertainment companies began migrating in large numbers to the Westside in the mid-1990s, residents have complained bitterly about the ever-worsening gridlock. Yet many fear that high-density development near transit stops will result in even more congestion and spoil the low-rise character of their communities. “Some of this is cultural,” said Mark Ridley-Thomas, a Los Angeles County supervisor whose sprawling district includes the Expo Line. “Space is important to the way Angelenos live and breathe. But you can’t do a rail line absent a certain level of density.” The projects are needed to drive ridership and make the rail line cost-effective, he said.

Much of the new line will run south of the Santa Monica Freeway, several miles from the densest population centers. But rail transit is expected eventually to have “huge economic development implications” that would bring jobs and badly needed services to people living in the Crenshaw district, a largely African-American neighborhood around the midpoint of the Expo Line, Mr. Ridley-Thomas said. Another light-rail line is planned from Exposition Boulevard south to Los Angeles International Airport along Crenshaw Boulevard.

Many proposed projects along the Expo Line, at Crenshaw and elsewhere, are still in the early stages. But farther to the west, Samitaur, a Los Angeles developer of innovative buildings, has won approval and $11 million in subsidies to build a 12-story office tower near the Expo station at La Cienega and Jefferson Boulevards, just outside Culver City, said John E. Molloy, the project manager. The building, designed by Eric Owen Moss, will offer ceiling heights up to 24 feet and an entrance that will be flush with the elevated train station. Despite its proximity to the station, the project will include a separate parking structure for 700 cars.

Samitaur, which has yet to break ground on the project because of the slow real estate market, is attracting interest from the types of entertainment-related tenants that have been flocking to Culver City in search of cheaper rents than they can find in Santa Monica, Mr. Molloy said. Another local developer, Jonathan Genton, recently transformed a group of industrial buildings along La Cienega Boulevard, about a quarter-mile north of the Expo Line (and within Los Angeles city limits), into Blackwelder, a stylish office park for media and postproduction companies.

Prospective Blackwelder tenants have made a point of asking about bicycle storage, but so far they have not paid a premium to be within walking distance of the rail station, Mr. Genton said. Mr. Molloy expressed confidence, however, that once the train is operating, “being right next to the station will be a big draw.”

The size of the Samitaur project did not prove an obstacle because it was located in an industrial neighborhood, Mr. Molloy said.

But scale is a big issue at the next station to the west, at Venice and Robertson Boulevards, which is also in an industrial neighborhood but is under the jurisdiction of Culver City, not Los Angeles. (Culver City’s newly rejuvenated pedestrian-friendly downtown is about half a mile away and not on the Expo Line.) Culver City has spent $23 million to assemble a 4.5-acre site at the station, which it intends to sell to private developers. But the city has decided to limit building heights on the site to five stories and require that the project include a park and a transit plaza. “The key would be to make this fitting for the neighborhood,” said Sol Blumenfeld, the community development director.

Roger Moliere, chief of Real Property Management and Development for the Metropolitan Transportation Authority, said Culver City’s plan was not dense enough to be practical, given the cost of the land. “They are going to find out they are not talking about something that works as a private development,” he said.

Further along in the pipeline is a mixed-use development planned by the Legado Companies of Beverly Hills, which owns land cater-corner to Culver City’s site. Legado’s project will include 115 residential units and a public plaza and will have an open look, “bringing eyes in from the street,” said Derek Jones, the chief operating officer. Mr. Jones said the development would appeal to people who worked in downtown Los Angeles but did not find it “green enough or clean enough” to live in.

For developers, it is the second phase of the Expo Line, which was approved in February but was not yet under way, that provides the juiciest opportunities. Santa Monica is reviewing a variety of proposals, including one from Hines, which owns a Papermate warehouse on Olympic Boulevard across from the 26th Street station and is seeking to build 970,000 square feet of office space and residential units on 7.5 acres. The city also owns land at Expo stations but has not yet decided what to do with it.

In Santa Monica, new development along the Expo Line will be limited to six or seven stories, Ms. Fogarty said. To compensate for the height, the city has tightened height restrictions in areas that are closer to the residential neighborhoods.

Too much bulk has also been an issue in West Los Angeles, where Casden Properties is seeking approval to replace a cement plant adjacent to the Sepulveda Boulevard station with one of the biggest developments on the Westside. The project would consist of four eight-story buildings containing 538 residential units and about 266,800 square feet of retail space, including a Target store. Despite opposition from some neighborhood residents, Alan I. Casden, the chief executive, said greater density was inevitable.

“Los Angeles is going to go vertical,” he said. “That’s the only way you can go. There’s no more land.”
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California Banks Pitch `Budget-Impasse Loans' to State Workers

Banks and credit unions will offer zero-interest loans and other assistance to the 200,000 California government employees who may see their pay reduced to the minimum wage as a result of the state’s budget stalemate.
By: Christopher Palmeri and Michael B. Marois: Bloomberg.com
The Golden 1 Credit Union, a lender that caters to state workers, will offer zero-interest loans to customers whose pay falls because of the stalled spending plan, according to a July 2 statement.
About 1,100 legislative aides and gubernatorial appointees whose pay was stopped on July 1 already have access to so-called budget-impasse loans, said Donna A. Bland, the company’s chief financial officer.

“We’re trying to show our support for our state-employee members,” Bland said in a telephone interview. Golden 1, based in Sacramento, the state capital, describes itself as the sixth- largest credit union in the nation with about $7 billion in assets.

Bank of America Corp., the biggest U.S. lender by assets, will waive fees and offer emergency credit-line increases and mortgage-payment help to customers whose California pay is cut, said Colleen Haggerty, a spokeswoman for the company, based in Charlotte, North Carolina.

“We could survive off our savings for a little while, but it would be a real burden on us,” said Chava Yniquez, a 49- year-old technician in the Senate printing office who has used Golden 1 budget-impasse loans in the past. “It’s a lifeline.”

California’s Republican governor, Arnold Schwarzenegger, and its Democrat-led Legislature are at odds over how to close a $19.1 billion deficit for the fiscal year that began July 1. The state has passed its budget by the start of the fiscal year only 10 times in the past 34 years.

Court Backs Governor

The Schwarzenegger administration won a Sacramento state appellate court decision on July 2 upholding an order compelling state Controller John Chiang to reduce employee pay until a budget is passed. That order affects about 200,000 state employees who work under civil-service contracts, according to the state Personnel Administration Department.

Reducing workers’ wages can’t be done until the state overhauls its payroll system, Chiang, a Democrat, said July 2 in a statement. He is running for re-election in November.

“I will move quickly to ask the courts to definitively resolve the issue of whether our current payroll system is capable of complying with the minimum-wage order,” he said.

Budget-impasse loans have been around since at least 1992, when Golden 1 first offered them. The credit union made the loans available to about 850 customers during the last budget stalemate, in 2008, Bland said.

55,000 Potential Borrowers

Golden 1 said as many as 55,000 of its customers may participate this year, if state-employee pay is cut to the federal minimum wage, currently $7.25 an hour. Flyers that tout the program are being distributed in its 84 offices, carrying a message that says “balancing the state’s budget doesn’t have to affect your own.”

Other institutions offering similar loans include San Francisco-based Wells Fargo & Co., the fourth-largest U.S. bank by deposits, and Sacramento’s Schools Financial Credit Union. The zero-interest loans are available only to current customers whose pay is deposited directly into their accounts, said Nathan Schmidt, vice president of marketing at Schools.

“It’s the philosophy of credit unions helping people,” Schmidt said in a telephone interview. “Eventually the state will pass a budget.”

Impasse lending isn’t limited to the Golden State. PSECU, a credit union based in Harrisburg, Pennsylvania, offered state workers the zero percent loans last year, according to its website. This year, the Pennsylvania Legislature passed its budget on time for the first time in eight years.

“California has a whole lot of experience in this, year in and year out,” Patrick Keefe, a spokesman for the Credit Union National Association in Washington, said in a telephone interview.
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Paul Allen's Malibu

Microsoft Corp. co-founder Paul Allen has bought a contemporary oceanfront home in Malibu, Calif., through a corporation, for more than $25 million.
By: JULIET CHUNG: wsj.com
The modular, white stucco-and-glass house is on Carbon Beach, the "Billionaire's Beach" where Hollywood moguls David Geffen and Jeffrey Katzenberg are owners. The roughly 5,800-square-foot home, listed for $29.5 million, has five bedrooms, a deck with a pool, a gym and a screening room, according to the listing.

Mr. Allen, who started Microsoft in 1975 with his childhood friend Bill Gates, owns the NFL's Seattle Seahawks and the NBA's Portland Trail Blazers, three yachts and significant real-estate holdings in Seattle. A spokesman for Mr. Allen said he has given away more than $1 billion and declined to comment on the house.

Kennedy Listing
Victoria Reggie Kennedy, the widow of Sen. Edward M. Kennedy, formally put their Washington home on the market last week for just under $8 million, after quietly shopping it around.

The couple paid $2.78 million for the home in 1998. "It's full of light, and there are a lot of fireplaces, which I love," Sen. Kennedy told Architectural Digest in 1999. The Massachusetts Democrat, who spent 47 years in the U.S. Senate, died in August at age 77 after battling brain cancer.

The six-bedroom, Colonial-style home is in Kalorama in the city's northwest section. The 8,900-square-foot home has a dining room that seats up to 50, a library, an office with a fireplace and an indoor exercise pool. All six bedrooms have en-suite baths and walk-in closets; the master suite also has a study and balconies looking over the home's gardens. The home has a sunroom, terraces and a wine cellar.

Bayfront, $27 Million
A bayfront mansion in Newport Beach, Calif., listed in 2008 at $38 million, has sold for $27 million, according to court records.

The 10-bedroom home is on Harbor Island, where Pimco's Bill Gross last year paid $23 million for a house, then tore it down. The seller in the recent transaction was DAKS, a limited-liability company majority-owned by apparel executive Arnold Simon, which paid $14 million in 2001 for the home. The 12,600-square-foot house has a subterranean garage for eight cars and more than 300 feet of bay frontage.
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Mortgage Rates on 30-Year U.S. Loans Fall to Record

Mortgage rates on 30-year U.S. loans slid to a record low for the second straight week, lowering borrowing costs for homebuyers as demand slumps.
By: Prashant Gopal: Bloomberg.com
Rates for 30-year fixed loans sank to 4.58 percent in the week ended today from 4.69 percent last week, Freddie Mac said in a statement. The average 15-year rate fell to 4.04 percent, also a new low, the McLean, Virginia-based company said.

The decline in mortgage rates, fueled by investor demand for government-supported bonds tied to housing loans, has failed to lift U.S. home sales after the April 30 end of a federal tax credit for buyers. Purchases are more dependent on consumer confidence and employment than rates, said Cameron Findlay, chief economist at Lendingtree.com in Irvine, California.

The housing market “is not a rate discussion these days,” he said. “If you have an improvement in jobs, people have more disposable income and that will improve home sales.”

Confidence among U.S. consumers fell in June more than forecast as Americans became distressed over the outlook for jobs. The Conference Board’s confidence index declined to 52.9 last month from a revised 62.7 in May, according to a June 29 report. The unemployment rate was at 9.7 percent in May, compared with a 26-year high of 10.1 percent in October.

Home Sales Drop

The number of contracts to buy previously owned homes plunged 30 percent in May from the prior month, the biggest decline in records dating to 2001, the National Association of Realtors said today. The report followed Commerce Department data last week showing a 33 percent slide in new home purchases.

The tax credit, worth as much as $8,000, helped fuel a rebound in demand last year and was extended and expanded in November. The credit required buyers to sign contracts by the end of April and close by June 30. The House of Representatives voted this week to push the deadline for closing to Sept. 30.

Mortgage rates have been declining since May as concern that a European debt crisis may spread pushed investors to the safety of Treasuries and government-supported bonds tied to home loans. Yields on Fannie Mae and Freddie Mac mortgage securities have fallen to the lowest level in more than a year.

The Mortgage Bankers Association’s index of U.S. mortgage applications jumped 8.8 percent for the week ended June 25. The Washington group’s refinancing gauge climbed 13 percent to the highest level since May 2009, and purchases declined 3.3 percent to the second-lowest level since 1997.
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Foreclosed Homes Sell at 27% Discount as Supply Grows

Homes in the foreclosure process sold at an average 27 percent discount in the first quarter as almost a third of all U.S. transactions involved properties in some stage of mortgage distress, according to RealtyTrac Inc.
By: Dan Levy: Bloomberg.com
A total of 232,959 homes sold in the period had received a default or auction notice or were seized by banks, RealtyTrac said in a report today. That’s down 14 percent from the fourth quarter and 33 percent from the peak a year earlier, the company said. The average price of a distressed property was $171,971, according to the Irvine, California-based data seller.

“The discount will probably stay between 25 percent and 30 percent as lenders carefully manage the number of new foreclosure actions in order to avoid flooding the market,” Rick Sharga, RealtyTrac’s senior vice president for marketing, said in an interview.

“We’re clearly creating more properties that will be sold at distressed prices than the market is absorbing,” Sharga said. There were more than 250,000 new bank seizures in the first quarter.

The discount reflects the average sales price of homes in the foreclosure process compared with the average sales price of properties not in distress. About 31 percent of all U.S. sales in the quarter were of homes in some stage of foreclosure, RealtyTrac said.

Rising Seizures

Home foreclosures set a record for the second straight month in May, with increases in every state, as lenders stepped up property seizures, RealtyTrac said earlier this month. Bank repossessions climbed 44 percent from a year earlier and will probably set a record in the second quarter, the company said.

Distressed sales totaled more than 1.2 million last year, a 25 percent increase from 2008 and a more than four-fold rise from 2007, according to RealtyTrac.

Such transactions accounted for 29 percent of all sales last year, up from 23 percent in 2008 and 6 percent in 2007. The average foreclosure discount was 25 percent in 2009, 22 percent in 2008 and 26 percent in 2007.

A “normal” market would show foreclosures accounting for less than 2 percent of sales, Sharga said.

Bank-owned properties sold for an average 34 percent discount in the first quarter, up from 32 percent both in the previous quarter and a year earlier. Such properties accounted for 19 percent of all U.S. home sales, up from almost 16 percent in the fourth quarter and down from 21 percent in the first quarter of 2009, RealtyTrac data show.

Short Sales

Properties in default or scheduled for auction sold for an average discount of almost 15 percent, up from almost 14 percent in the previous quarter and down from 16 percent a year earlier. These homes are often sold in short sales, where lenders accept less than the outstanding loan amount for the property, RealtyTrac said. Sales of properties either in default or headed for auction accounted for 12 percent of all sales.

The average price was $154,740 for bank-owned properties and $199,950 for homes in default or scheduled for auction, RealtyTrac said.

“The competing forces will be bank-owned properties and short sales,” Sharga said. “The more short sales, the lower the average discount is likely to be.”

Nevada had the highest proportion of distressed sales of any U.S. state, with 64 percent of all transactions involving properties in mortgage distress.

California ranked second, with such sales accounting for 51 percent of all sales and Arizona was third at 50 percent.

Discounts on distressed homes were highest in Ohio, Kentucky and Illinois, where they sold for an average of at least 39 percent less than non-foreclosures.

RealtyTrac sells default data from more than 2,200 counties representing 90 percent of the U.S.
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The End Is Near

And that’s a good thing – Macerich executives wondered if they’d ever complete the remodel of Santa Monica Place.
By: By Alexa Hyland: labusinessjournal.com
Macerich Co. traveled a long, hard road to renovate Santa Monica Place. But the mall is finally set to reopen in August.

Santa Monica Place is swarming with hundreds of plywood-toting construction workers feverishly working to complete the shopping mall for its August reopening.

And executives at Macerich Co., which owns the shopping mall, can’t wait for the dust to settle. That’s because it’s been a long – a very long – road to renovating the mall.

In fact, Macerich executives said there were moments when it seemed as if the project would never get done.

“You just didn’t know if there was a light at the end of the tunnel,” said Tracey Gotsis, executive vice president of marketing and development for Macerich. “But I can say it was well worth it all.”

The company first considered mall renovation plans in 2001. It spent several years on two plans – the last of which was so big it drew community outrage. So Macerich unveiled a scaled-down third proposal, which called for opening up the enclosed mall, removing its roof, and essentially making Santa Monica Place an extension of the Third Street Promenade next door. That plan received approval in late 2007.

But when construction finally started on the $265 million renovation in April 2008, the economy soon collapsed and consumer spending declined. That slowed things down again. The projected 2009 opening was put off.

The company found itself trying to pre-lease its 550,000 square feet of retail and restaurant space during a recession that has been hard on retailers.

“Timing wasn’t on our side,” Gotsis said.

Macerich finalized lease deals about a year later than planned. But the company has signed leases or received commitments for 70 of the more than 80 spaces at the mall. Retailers include Kitson L.A., Nike, Louis Vuitton and 7 For All Mankind.

Doug Roscoe, who became property manager of Santa Monica Place in 2008, said Macerich expects the reopening to make a big splash. But the real picture will become clear when the excitement dies down.

“After it is open a full year, we can start to get comparable sales and analyze were we are and what kind of benchmarks we’ve reached,” he said.

Santa Monica Place’s first year back in business still could be bumpy. Although the economy generally has improved, national retail sales dropped in May by the largest amount in eight months, suggesting that consumers still may not be in the mood to drop big bucks.

John Fransen, president of Newport Beach retail consultancy Fransen Co. Inc., said Santa Monica Place could fare better than other shopping malls because it will draw Westside residents tired of driving to less convenient shopping destinations.

“I would be ready for some impressive results,” he said.

Executives are enthused. At a conference held by the National Association of Real Estate Investment Trusts earlier this month, Macerich Chief Executive Art Coppola said the company is expecting Santa Monica Place to generate about $1,000 per square foot in sales. He said the company’s top 50 shopping malls generate about $500 per square foot.

“We think it will be one of the great centers in the United States,” Coppola said. “And one of the most exciting centers that will open for a several-year period.”

Macerich, the nation’s third largest mall owner and operator, purchased the Frank Gehry-designed Santa Monica Place in 1999 for $130 million. At the time, the mall had fallen out of favor with shoppers, too many of whom were only passing through on their way to the popular Third Street Promenade.

Soon after the acquisition, Macerich executives began thinking up ways to bring back the mall’s luster.

In its initial concept, Macerich wanted to extend Third Street Promenade through the building of the enclosed mall, construct the parking garages underground and add 14-story towers with residential and office space. But executives nixed the proposal because they didn’t think the design would bring foot traffic to the second-floor shops.

Macerich introduced a second and even more ambitious proposal in 2004, which called for tearing down the mall and replacing it with retail space, three 21-story residential towers, an office building, three underground parking levels and park space. But the plan sparked fierce opposition from Santa Monica residents and some city officials who were outraged by the highly dense design.

Kathleen Rawson, chief executive of the Bayside District Corp., a public-private management company that oversees downtown Santa Monica, said Macerich realized the mixed-use project was too much.

“I think the community spoke to Macerich directly about the plan,” Rawson said. “They had tried to be innovative. Santa Monica wasn’t ready for that kind of approach.”

Gotsis admits that Macerich misjudged the psychology of Santa Monica residents, who’ve historically opposed large-scale projects.

“So we had to take a breather and put the site plans away,” she said.

At the same time, Macerich had to wait for Federated Department Stores, which had acquired May Department Stores Co., to determine whether it would close Robinsons-May, one of two anchor tenants. That store was shuttered, which allowed Macerich to purchase the building in May 2006 and later lease the space to Nordstrom Inc.

Through 2007, Macerich was working with community members and city officials on a third plan.

“That was a year of reconciliation with the community,” Gotsis said. “We got feedback on what we could do.”

Macerich teamed up with Jerde Partnership, a Venice architecture firm, to design a scaled-down plan. The proposal called for removing the rooftop to create an open-air dining deck and connecting the mall to the Third Street Promenade. There was to be no residential units and no substantial office space, and the retail space, at 550,000 square feet, was about 20,000 square feet less than the old mall.

Community members and city officials endorsed the plans, and the California Coastal Commission and Santa Monica’s Architectural Review Board gave the project approval in December 2007.

Macerich also had to overcome resistance from restaurant owners, who were wary about setting up shop on the third-floor dining veranda. Although the veranda has ocean views, it is away from foot traffic.

Restaurateurs also were concerned by plans for seven upscale restaurants on the deck – more competition than usual for such a mall. What’s more, there has been a decline in the restaurant industry as consumers cut back spending.

Roundtable discussions

But Macerich assured restaurateurs that the Santa Monica market could support them. It held some roundtable discussions with them and helped develop a shared marketing plan. Macerich also pledged to hold regular events on the third floor to drive traffic.

So far, Macerich has leased six of the seven restaurant spaces.

“A lot of sweat equity was put into the mix and business planning with each individual restaurateur,” Gotsis said.

Macerich is now working to secure leases for the Market, on the third floor with the restaurants, set to open in late 2010. The section is comparable to San Francisco’s Ferry Building, which includes gourmet food stores and cafes.

Finally, Macerich now has to do some marketing to let consumers know that the mall soon will be open for business again.

“That’s a big challenge for us, to get out there and say Santa Monica Place is now open and it’s new and different and a place to hang out,” she said. “It will take us a year to get that new vibe out there.”
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One Palace, Never Used

Now shy of glitz, owner to sell mansion.
By: By Daniel Miller: labusinessjournal.com
C. Frederick Wehba Sr. spent $65 million to build a palatial home on Sunset Boulevard. Uncomfortable with the conspicuous show of extravagance, he wants to sell before he ever moves in.

Businessman C. Frederick Wehba Sr. has spent fours years and $65 million building perhaps the most conspicuous mega mansion in Los Angeles County.

And now that it’s almost finished, he doesn’t want to live there.

Wehba, founder of Century City real estate company Bentley Forbes Group LLC, earlier this month put his Beverly Hills house on the market for $68.5 million. At that price, it would be the biggest sale in that city’s history and one of the biggest ever for a home in the Los Angeles area.

The businessman said he and his wife, Suzi, have decided to sell the 36,000-square-foot home because such a prominent display of wealth no longer made sense during the protracted economic slump. The couple also planned to use the home for charity and political fundraising events, but the recession has put a damper on that sort of entertaining.

The couple is active at Bel Air Presbyterian Church, a large evangelical church on Mulholland Drive, as well as four others. The home was built with a large music room to accommodate church events; there is a relief of a cross above the front door.

“We were never trying to flaunt, but it looks like it now,” said Wehba, 63. “We were trying to have it as a house that is open for fundraising for our church so that people can enjoy it. Maybe times will come back like that, but times are recessionary.”

The nine-bedroom mansion at 9577 Sunset Blvd. was supposed to be completed last year but is still under construction; work is expected to be finished in the next 45 days. Unlike many mansions in Beverly Hills, hidden behind hedge walls, the Wehbas’ home opens up to Sunset on two acres between Rexford and Alpine drives, so passers-by have been able to chart its progress since construction began in late 2006.

These days, a crew of 40 to 50 workers is putting the finishing touches on the mansion, which is clad in Portuguese limestone and includes French gardens, a pool pavilion and tennis court. While many parts of the house are complete, some fixtures are still being installed, including a hand-carved marble fireplace in the library, an 11-foot by 9-foot crystal chandelier in the two-story circular foyer and 24-karat, gold-plated front door knobs that weigh 15 pounds apiece.

The Wehba mansion hit the market June 7, just days before news broke that businessman Mohamed Hadid had sold his 48,000-square-foot Bel Air estate for more than $49 million. That sale is believed to be the highest price for a home in the United States in 2010.

The Wehba residence joins a handful of other high-priced mega mansions on the market, including the Holmby Hills estate of Candy Spelling, priced at $150 million. There has already been interest from buyers in Asia and the Middle East.

The pool of prospective purchasers may be smaller than it was before the recession, but she said there are still plenty of buyers who could afford the asking price.

“This certain group of people is not really impacted by that,” .

The home

The French classical design of the home was inspired by Versailles, which the Wehbas visited 20 years ago.

The home was enlarged several times during construction and ultimately became something the couple no longer wanted or needed, Wehba said.

It was designed by architect Brian Biglin of Biglin Architectural Group in Beverly Hills, who refined an American beaux-arts design of a previous architect. As the home got bigger and more ornate, the cost ballooned from about $40 million to $65 million.

“We thought it would be a smaller house and it became, ‘Well, OK, why not?’” said Wehba, chairman of Bentley Forbes, a large, privately owned commercial real estate investment firm. “We kept on adding and adding and it got kind of out of hand. It’s just so big right now. It’s more than we really wanted. The times have changed a bit.”

The Wehbas bought the land on Sunset in 2004 for about $6.7 million. The lot is the larger piece of a bisected parcel once owned by Saudi Sheik Mohammed al Fassi. The mansion drew headlines and became a tourist attraction in the late 1970s when the sheik painted its nude classical statues in flesh tones. The mansion burned in 1980 and was demolished in 1985. The smaller, 1.6-acre portion of the sheik’s former property is also the site of a new mansion. That home, at 901 N. Alpine Drive, has also been under construction for several years and remains unfinished.

Eric Johnson, senior project manager for Finton Construction, which is building the Wehba home, said the project has in some ways been more akin to a commercial development. At times, the construction crew has numbered 100 people, and scheduling is organized using computer software; commercial-level contractors have been employed for some work. “It’s a ton of fun. It’s rewarding,” he said.

Even in the competitive playing field of opulent mansions, the home’s almost Old World craftsmanship sets it apart. The exterior is made of hand-carved limestone quarried in Portugal and sent to China for finishing. (Only about a half-dozen Los Angeles homes feature exteriors of hand-cut stone, including the 52,000-square-foot Spelling mansion.) The doorknobs were fabricated at the same French workshop that has maintained Versailles. A relief above the front doorway is so detailed that toenails of the angels in the carving can be clearly seen.

Other special touches include 24-karat, gold-plated door and window hardware throughout the house; an 800-square-foot master bedroom with a ceiling slot for a 60-inch descending television; and massive his-and-her master bathrooms clad in exotic stonework.

Wehba said he and his wife still plan to decorate the home with custom-built pieces and antiques from France that they’ve already purchased, which at least will make it more attractive when shown to potential buyers.

But Wehba admitted that some of the home’s flourishes were chosen during the housing boom “back when this concept was a little bit more accepted.”

The market

Wehba’s company, which owns marquee properties such as the infamous Watergate complex and the tallest office building in Atlanta, has not been immune from the bust. He acknowledged the last two and a half years have been “trying” but strongly denied financial troubles prompted the sale of the home.

And even if financial issues are in play, the sale wouldn’t do much to resolve them. If the home sells at its asking price, the profit will be slim – about $2.5 million, Wehba said, chuckling. “And we will probably pay it to the brokers.”

Some wonder if there is a market for the home.

First there is the attention-grabbing ornate design, which a prominent real estate broker termed “Fairfax rococo” in a 2008 Business Journal story about the property. Then there’s the location – visible from busy Sunset – which could be a turn-off for the ultra-rich who often prefer the security of isolated compounds.

“The high-end people want privacy, they don’t want a statement or exposure,”

A deal at list price would be a record for Beverly Hills but not for Los Angeles County. That was set when former Global Crossing Ltd. Chairman Gary Winnick bought an eight-acre Bel Air estate for about $95 million in 2000.

“Normally in this price range you don’t get multiple offers – but it could happen,”

It isn’t even the only house the Wehbas are trying to sell. They have also listed for sale the 10,000-square-foot Beverly Hills home that they’ve lived in for more than a decade, though Wehba said they don’t plan to leave Los Angeles. Instead, if they sell one home, the plan is to live in the other – though the goal is to unload the Sunset mansion.

He said he’d feel a tinge of sadness when the home sells, though he noted that he and his wife have built about a dozen homes before. This one may not be the last.

“We will probably do it again.”

Attention to Detail

The Wehbas’ 36,000-square-foot, nine-bedroom residence includes detailing and features fit for the Palace of Versailles. Among the appointments:

• All door and window hardware is plated in 24-karat gold. The front door knobs are intricately carved and weigh 15 pounds. One shower has a gold-plated fixture that weighs 35 pounds.

• Many of the marble columns are topped with capitals gilded in gold; one room includes recessed columns with capitals gilded in gold and platinum.

• Each room features different types of exotic stonework. A bathroom suite includes a large

shower made out of green onyx, while another room features red and purple Calacatta Viola marble.

• A 12-foot-tall bronze sculpture of angels, cherubs and minstrels is the centerpiece of a fountain that fronts the mansion.

• The home’s electrical and security systems are connected by about 30 miles of wiring. The 800-square-foot master bedroom has a slot in the ceiling from which a 60-inch television will descend.
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Hill and McGraw Sell Home for $9.55 Million

Singers Faith Hill and Tim McGraw have sold their Beverly Hills, Calif., home for $9.55 million. The home, in Beverly Park, was originally listed in 2008 for $14.8 million, and later cut to $10.8 million.
By: CANDACE JACKSON: wsj.com
The 11,000-square-foot house, on three acres, has six bedrooms and eight baths, and expansive views of downtown Los Angeles. The Mediterranean-style home has a large master suite with his and hers bathrooms and comes with a fitness center, gardens and a pool.

Ms. Hill's hit pop and country songs include "This Kiss." Her husband has sold more than 40 million albums, and his hits include "I Like It, I Love It." Both have also appeared in films.

Dennis Miller Lists
Comedian and television-radio personality Dennis Miller has listed his Montecito, Calif., estate for $17.5 million.

The home was designed in 1895 by Stanford White, who designed the Washington Square Arch in New York. The Millers' 3.76-acre property includes a 10,000-square-foot main house with nine bedrooms and a second, smaller house on the property, built in 1917, with two more bedrooms.

The estate, a five-minute drive from the ocean, includes a pool, a tree house, a sunken trampoline and a tennis court. Mr. Miller and his wife bought the main house in 1993, according to public records. It was restored in 1994 and renovated again in 2002. Mr. Miller hosts a three-hour daily radio show and appears as a commentator on Fox News.

James Patterson Sells
Thriller writer James Patterson has sold his Palm Beach, Fla., home for $10.3 million to Robert Greenhill, Greenwich, Conn.-based founder and chairman of Greenhill & Co., an investment banking advisory firm. Mr. Patterson originally listed the property for $14.95 million in November and bought it for $5.2 million in 1999.

The nearly 11,000-square-foot colonial plantation-style house has five bedrooms and 7½ baths. The house has a heated pool and a boat dock, along with 136 feet of waterfront on the Intercoastal Waterway. The 1955 home was expanded in 1993.

Mr. Patterson's more than 60 novels have sold 200 million copies world-wide; "Private," which he wrote with Maxine Paetro, is to be released later this month. Mr. Patterson says he decided to sell because he found a new place "with massive windows on the ocean," which he bought last summer for $17.45 million.
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Fed Chief Cautiously Optimistic about Economy

The U.S. economy is in a moderate recovery and should continue growing through next year, but the unemployment rate is expected to remain higher than usual, and it will take “a significant amount of time” to replace the jobs that have been lost in the recession, Federal Reserve Chairman Ben Bernanke said recently.
By: Kevin G. Hall: RISMEDIA
In testimony before the House Budget Committee, Bernanke offered a mix of optimism and reality check. He pointed to numerous signs of improvement in the economy, but cautioned that improvement in the vital housing sector has been shallow and remains vulnerable.

The Fed’s release of the Beige Book, a survey of economic conditions conducted by its district banks, later confirmed Bernanke’s views. The survey found all 12 Fed districts reporting economic growth, the first time that’s happened since a deep recession began in December 2007.
Private forecasters shared Bernanke’s growing optimism.

Mark Zandi, the chief economist for Moody’s Analytics, recently released a report on economic conditions in the nation’s largest metropolitan areas that was encouraging.

“The economic expansion is broadening out across the country, with nearly two-thirds of the nation’s metro areas now out of recession,” Zandi told McClatchy Newspapers. “The strongest areas are mostly in the South and Midwest, as the economy is benefiting from the strong turn in manufacturing activity, a solid farm economy and more stable housing markets.”

In another positive sign, the Labor Department reported that job openings leapt in April to their highest level in 16 months, signaling that the private sector is ripe for a return to hiring.

“We’re still expecting that the job machine gets cranked up and pushes the unemployment rate a few tenths of a percentage point lower by the end of the year,” said Chris Varvares, the president of Macroeconomic Advisers LLC, the influential St. Louis forecaster. The firm expects 3.7% growth this year and unemployment, now at 9.7%, to dip to the low 8% range next year.

The Fed expects the economy to grow in the range of 3.5% this year, Bernanke said, and faster next year as stimulus spending by the government gives way to business and consumer demand for goods and services.

“This pace of growth, were it to be realized, would probably be associated with only a slow reduction in the unemployment rate over time. In this environment, inflation is likely to remain subdued,” Bernanke said. He later added, “In all likelihood, however, a significant amount of time will be required to restore the nearly 8.5 million jobs that were lost over 2008 and 2009.”

The economy has been growing steadily, and the nation has added jobs in five of the last six months. There also have been less publicized improvements. “Real consumer spending has risen at an annual rate of nearly 3½% so far this year, with particular strength in the highly cyclical category of durable goods,” Bernanke testified. “Consumer spending is likely to increase at a moderate pace going forward, supported by a gradual pickup in employment and income, greater consumer confidence and some improvement in credit conditions.” That’s all likely to increase the demand for goods and services, fueling further economic growth in what economists call a virtuous cycle, he suggested.

“Looking forward, investment in new equipment and software is expected to be supported by healthy corporate balance sheets, relatively low costs of financing of new projects, increased confidence in the durability of the recovery, and the need of many businesses to replace aging equipment and expand capacity as sales prospects brighten,” Bernanke said. “More generally, U.S. manufacturing output, which has benefited from strong export demand, rose at an annual rate of 9% over the first four months of the year.”

For all the positive signs, however, a dark cloud remains over the real estate and construction industries. The temporary boost from a home buyer tax credit is likely to fade now that the April 15 deadline for the program has passed.

The Fed chairman said that “looking through these temporary movements, underlying housing activity appears to have firmed only a little since mid-2009, with activity being weighed down, in part, by a large inventory of distressed or vacant existing houses and by the difficulties of many builders in obtaining credit.”

As if to cement that point, the Mortgage Bankers Association reported that mortgage applications fell last week to their lowest level since 1997. It was a clear sign that the expiration of tax credits reduced incentives for home sales.

Things aren’t much better in commercial real estate, Bernanke suggested, as spending on nonresidential buildings has been curtailed because of high vacancy rates, low property prices and difficulty in obtaining loans.

“Meanwhile, pressures on state and local budgets, though tempered somewhat by ongoing federal support, have led these governments to make further cuts in employment and construction spending,” he said.

Bernanke expressed confidence that the growing debt crisis in Europe won’t slow growth in the United States and pitch the economy back into recession, suggesting that events in Europe will have only a modest impact so long as the U.S. economy continues to grow.

Mounting government and private-sector debt in Europe has led to concerns of default in several European Union countries, and, given the swelling U.S. federal budget deficit, Bernanke warned lawmakers to get U.S. borrowing under control.

Once economic conditions have returned to normal, Congress and the president must address the structural problems in the nation’s health and welfare programs as baby boomers, the 75 million Americans born from 1946 to 1964, enter retirement and strain government programs, Bernanke said.

The Fed chief also took a victory lap of sorts. When House Budget Committee Chairman John Spratt, D-S.C., asked him whether he thought that unpopular government spending and bailout programs helped speed a turnaround, Bernanke said, “Yes, Mr. Chairman, I do.”
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Jobs key to housing recovery

The U.S. labor market will hold the key to a recovery in the hard-hit housing sector, according to a Harvard University report released on Monday.
By: Al Yoon; Editing by Leslie Adler: reuters.com
Record high foreclosures and a high jobless rate both pose significant challenges to the housing market, but some recovery in labor markets and record low mortgage rates could partly overcome other pressures, said the study from the Joint Center for Housing Studies at Harvard.

"If history is a guide, what happens with jobs will matter the most to the strength of the housing rebound," Eric Belsky, executive director of the center, said in a statement.

"Right now, economists expect the unemployment rate to stay high, but if employment growth surprises on the upside or downside, housing numbers could too."

The researchers noted that homeowners would feel poorer with real household wealth declining on a per household basis to $486,600 from $503,500 over the past 10 years, in "the lost decade." Foreclosures have reduced some mortgage debt but the level of debt relative to equity still started 2010 at a record 163 percent, the report said.

Despite falling home prices, loan modifications, and softening rents, the share of borrowers with severe housing cost burdens climbed, it said.
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Wealthy homeowners seeking privacy are increasingly buying adjacent properties

Compounds are the hottest commodity in L.A.'s high-end real estate market, brokers say.
By: By Lauren Beale: latimes.com
A huge retaining wall stretches along Nimes Road in Bel-Air, one of the Westside communities where wealthy homeowners seeking privacy are buying adjacent properties to create their own residential compounds.

In the Middle Ages, moats were the thing. More recently, the rich have taken refuge behind tall hedges, view-obscuring walls and guarded gates.

But today's super-wealthy, seeking even greater privacy, are increasingly buying adjacent properties as a buffer zone around their mansions. And that's made the compound the hottest commodity on L.A.'s high-end market, real estate brokers say.

On the Westside, the growing list of compound owners includes movie industry titan Terry Semel, financier and producer Tom Gores and corporate housing kingpin Howard Ruby, founder of Oakwood Worldwide.

Divorcing Dodgers owners Frank and Jamie McCourt maintain two compounds, one in Holmby Hills and another in Malibu.

"If you don't have a neighbor anymore, you create more privacy," said Kurt Rappaport, co-founder of Westside Estate Agency, with offices in Beverly Hills and Malibu.

Not that the "buffer" homes are vacant. Some house family, friends, guests or staff. But these aren't mother-in-law cottages or little guesthouses like the one Kato Kaelin holed up in at O.J. Simpson's old place in Brentwood: Think multimillion-dollar mansions — next door, behind or even a few doors down.

The adjoining properties may be used during major fundraisers or large-scale entertaining, Rappaport said, to create more parking or as a place to stage the catering during lavish events. Some buyers have been known to tear down well-known homes for more elbow room.

Property records don't fully capture the trend. Owners typically want the flexibility of selling the parcels individually, and so they usually don't apply for a lot merger to create a formal compound. Still, veteran real estate agents say high-end buyers are increasingly looking to snap up adjoining properties.

"We've never seen this much activity going on," said Drew Mandile, who works as a team with Brooke Knapp at Sotheby's International Realty, specializing in Bel-Air.

Mandile and other agents said there were perhaps two or three compounds in Bel-Air 10 years ago. Today, there are at least nine.

"A decade ago, the idea of combining properties was extremely rare," Rappaport said. "Now in the ultra high end it's the norm to strategize about amassing multiple properties."

In part, the trend reflects an economic reality: The super-rich are getting super-richer, said Elizabeth Currid, an assistant professor at USC who studies cultural shifts among the wealthy. The average net worth of the world's billionaires increased $500 million in the last year to $3.5 billion, Forbes magazine reported in March.

"In a class-conscious society, people find new ways to demonstrate their status," Currid said. "The middle class may be able to buy Louis Vuitton bags and nice holidays, but they can't buy two mansions in Bel-Air. This is a way the global elite differentiate themselves."

The trend hasn't extended to other high-end Southern California areas such as Manhattan Beach, the Palos Verdes Peninsula and coastal Orange and San Diego counties, according to agents who specialize in luxury properties.

"We don't have as much of that type of wealth down here," said Greg Noonan, a veteran Prudential California Realty agent in La Jolla.

Along with more wealth, L.A.'s Westside also tends to have smaller lots, since many of the great old estates in the area were subdivided decades ago.

But it's not just billionaires who are buying the block. Among the new generation of L.A. compound-dwellers are actors and actresses yearning to live a paparazzi-free lifestyle, including Melanie Griffith and Antonio Banderas; Brad Pitt and Angelina Jolie; and Ben Stiller.

Baseball's McCourts are embroiled in a high-profile divorce, but in happier times they were among L.A.'s most active compound builders. The Bostonians were quick to assemble nearly five acres in Holmby Hills after their arrival in 2004. They purchased a Palladian-style villa of 20,000 square feet for about $25 million as a main residence and picked up the 8,400-square-foot mini-mansion next door before the year was out for $6.5 million.

They repeated their double play in Malibu three years later with the purchase of a John Lautner-designed architectural trophy home for more than $27 million, according to the Multiple Listing Service. The 5,500-square-foot Segel residence (yes, for that price it comes with a name) has about 80 feet of beachfront. The couple gained an additional 66 feet of sand months later by buying a smaller house next door for $19 million.

Agents to the elite such as Rappaport don't rely on luck to make these purchases possible.

"I have clients whose neighbors didn't have their homes on the market, and we turned them into sellers," he said, by paying substantially more than market value. One client in Malibu paid almost double for a lot next door that was valued at $6 million. The resulting compound is worth more than the separate properties were, Rappaport said.

Internet pioneer David Bohnett combined three lots to create his four-acre-plus island of privacy in Holmby Hills after he sold the GeoCities Web-hosting service to Yahoo Inc. in a $3.9-billion stock deal more than a decade ago. (Yahoo shut down GeoCities last year.)

First, Bohnett bought the late actor Gary Cooper's longtime home, then talent manager Ken Kragen's residence and, finally, the site of singer Barbra Streisand's former mansion, which had been razed by the seller. Combined price tag: roughly $17 million. Today a lush lawn and landscaping occupy the rise of land that was the former Streisand home site, ensuring that no one is looking down on Bohnett's house. The entire compound is for sale, priced at $18.9 million.

The estate compound has become such a sought-after commodity among the wealthy that some have been known to tear down historic homes in favor of a little more lawn.

One of the largest land grabs in Holmby Hills centered on Owlwood, whose previous owners have included early 20th Century Fox Chairman Joseph Schenck, actor Tony Curtis and 1960s singing sensations Sonny and Cher.

The Tuscan-style mansion, built in 1936, is the only mansion remaining of three that were combined in 2002 for a total of 10 acres by the late billionaire Roland Arnall, founder of Ameriquest Capital Corp., and his wife, Dawn. They tore down the Pink Palace, a sparkly Sunset Boulevard landmark owned by singer Engelbert Humperdinck and, earlier, actress Jayne Mansfield. They also bulldozed the house of film star and competitive swimmer Esther Williams. A temporary gate now closes off what used to be accessible South Carolwood Drive. Arnall's widow still owns the property.

Compound building isn't new. Before his days as California's governor, Arnold Schwarzenegger bought several adjoining houses to create his Pacific Palisades compound. Its four parcels contained five homes, a pool and a tennis court on more than five acres. He eventually sold the lots — separately — in favor of a Brentwood estate.

For those less inclined to the amass-your-own approach, there are a few sizable lots and estates available for purchase on the Westside.

A graded eight-acre site above the Bel-Air Country Club, with 360-degree views of the ocean, city and mountains, is on the market for $49.5 million. Encircled by retaining walls, about half the compound-ready knoll is flat.

Before it was developed, the site consisted of three hillside parcels, said Christine Martin, who shares the listing with Tiffany Martin at Hilton & Hyland, Beverly Hills. She envisions an owner-occupant buyer and has received inquiries locally and from abroad.

In the gated community of Beverly Park, a comparatively affordable two-dwelling compound with 18 bedrooms and 28 bathrooms, including staff quarters, is listed at $21.995 million. Sited on three acres, the double-your-pleasure, double-your-fun affair has two driveways, two garages, two two-story foyers, more than 29,000 square feet of living space, a swimming pool, a sundeck and a changing cabana.

The two-family site comes with architectural drawings to combine the houses into one, said listing agent David Kramer of Hilton & Hyland. It sits in a neighborhood where several residents own more than one home.

"There are always people looking to buy nearby properties in any market," Kramer said.

"I just had one call from someone in the flats of Beverly Hills wanting to buy the house across the street," he said, for when their kids get older.

Until then? "They will just rent it out," he said.
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