Most expensive home in the U.S. plans to stay that way

The list of the world's most expensive homes was published this week at Forbes.com, and Candy Spelling's Holmby Hills estate, dubbed the Manor, remains the leader among U.S. residential properties at $150 million. At only eight months on the market, it's still a youngster as listings in this price range go, so don't expect a $149-million discount any time soon. More details are included in my story at latimes.com.

One side note not included in the story is that the 56,500-square-foot French chateau was originally called  L'Oiseau (meaning the bird) for it's W or wing shape. Since it came on the market, owner Spelling has published a bestseller entitled "Stories From Candyland" about her life and the house and, for better or worse, Candyland seems to be sticking as its latest nickname.

-- Lauren Beale

Thoughts? Comments?

A second look at those housing starts

It’s Friday and it’s slow, so let’s dig a little deeper into those housing-starts numbers that got investors running scared this week.

If you will recall, the Commerce Department reported that housing starts unexpectedly fell 10.6% to a seasonally adjusted 529,000 annual rate in October compared with the previous month. That was a 30.7% drop from October 2008.

Analysts said the drop probably had to do with trepidation from the building industry in October as uncertainty remained over whether Congress would extend its $8,000 tax credit for first-time buyers beyond its Nov. 30 deadline. Congress this month extended that credit through April and expanded it to include people who already own a home.

Certainly, fear that the popular but controversial subsidy could end had a part to play in the pullback. Starts of single-family homes dropped off 6.8% from September to a seasonally adjusted rate of 476,000, not a pretty statistic by any stretch.

But multi-family units (apartments and other big buildings) saw a much bigger drop, falling 33.3% from September to a seasonally adjusted rate of 48,000.

“When you break it down, actual starts were bad on both sides," said Weiss Research analyst Michael Larson. But clearly multi-family units were hit harder, he said.

Though economists describe those multi-family numbers as highly volatile, the plunge probably reflects the woes of the commercial real estate market as financing for apartments and other such properties has dried up as a result of the credit crunch.

It’s also a bad time for the rental market, with family members doubling up to live with each other and potential renters with good credit and steady jobs now able to purchase an entry-level home at a discount.

-- Alejandro Lazo

Photo: An apartment building under construction in Hollywood. Credit: Reuters

San Francisco Bay Area home prices inch toward stability with fewer foreclosure sales

Home prices in the San Francisco Bay Area registered year-over-year gains last month for the first time in nearly two years.

The gains marked a move back toward stability for the region’s real estate as fewer distressed properties were sold and homes costing more than $500,000 accounted for a larger portion of sales.

The median price paid for all homes reached $390,000, up 6.8% from $365,000 in September and up 4% from $375,000 in October 2008, according to MDA DataQuick of San Diego. The last time the nine-county area  booked a year-over-year gain was in November 2007.

Last month’s median was the highest since hitting $395,000 in July this year. But the October median was still 41.4% below the $665,000 peak reached during the height of the Bay Area’s boom in June and July of 2007. The median is the point at which half the homes sold for more and half sold for less.

A total of 7,933 homes were sold last month, up 0.7% from 7,879 in September and 4.2% from 7,613 in October 2008. Sales in the region’s pricier areas – Marin, San Francisco, Santa Clara and San Mateo – made up 42.2% of October sales, up from 35.3% in October 2008.

Sales of homes that cost more than $500,000 constituted 36% of sales in October, up from 34.9% in October 2008 and well up from a low of 22.7% in January.

Last month’s increase in the median sales price also came as foreclosure properties made up a smaller portion of the resale market. Sales of homes that had been foreclosed upon in the prior 12 months made up 31.9% of all previously owned homes sold in October, DataQuick said.

That was down from 32.3% in September and 44% in October 2008. Foreclosure sales peaked at 52% of the resale market in February.

The drop in foreclosure sales came as banks and loan servicers increasingly pursued alternatives to the foreclosure process such as loan modifications and short sales -- where a lender agrees to sell a home for less than the value of a mortgage, DataQuick said.

-- Alejandro Lazo

Photo: A house for sale in San Francisco. Credit: Associated Press

Real estate roundup: New construction falls; troubled borrowers fare well with counseling; FDIC selling real estate; commercial real estate slump hits Fannie and Freddie

The big news today in real estate is the unexpected decline in new residential construction. The Commerce Department reported that housing starts in October dropped 10.6% to a seasonally adjusted 529,000 annual rate compared with the prior month and a 30.7% drop from October 2008.

Analysts attributed the drop to builders’ trepidation over whether Congress would extend a popular tax credit for first-time buyers ahead of a Nov. 30 expiration. Just as Southern California home prices and sales received a boost from buyers taking advantage of the credit, builders worried that without an extension the recovery would slow.

Dean Baker, at the Washington-based Center for Economic and Policy Research, has a good analysis this morning that delves a little deeper into the effect the tax credit had on the housing market. His take is that the extension of the credit will not have nearly as big of an effect as the first credit and that the housing market is looking at a sharp drop-off in coming months.

Baker writes:

Given the lead time between contracting and closing, September was the last full month in which homebuyers could have signed a contract and been confident of closing in time to meet the deadline for the tax credit passed in February. While this led to a rush of buyers wanting to get in before the deadline, it also meant that there would be a sharp falloff in sales in subsequent months.

A little more follows here:

The extension and expansion of the homebuyer tax credit by Congress should give a modest boost to sales, but it is unlikely to have nearly as large an impact as the original credit. Most potential first-time buyers will have already purchased their homes. The extension of the credit to existing homeowners will provide some additional incentive for homeowners to buy a new home now (it also provides serious opportunities for gaming), but this will have little net effect on the market. Most current homeowners who opt to take advantage of the tax credit will put their home on the market, leaving no net change in the balance between supply and demand.

In other housing news out of the nation’s capital, the Washington Post had an interesting story based on an Urban Institute study set to be released this morning. The study finds that troubled homeowners who receive housing counseling are 60% more likely to avoid foreclosure and have their mortgage payments lowered significantly than those who try to figure it out themselves.

And the Federal Deposit Insurance Corp., the bank regulator, has gotten into the real estate business big time this year. Bloomberg News reports this morning that the FDIC has sold the most real estate this year since 1994 as it takes over properties on the books of failed banks.

Finally, the Wall Street Journal writes today that the tanking commercial real-estate market is beginning to hit mortgage titans Fannie Mae and Freddie Mac. The firms are facing losses on the loans they made to apartment buildings, according to the Journal.

-- Alejandro Lazo

Hot Property: Actor Robert Loggia sells Bel-Air home for $2.95 million

Veteran actor Robert Loggia has sold his longtime Bel-Air home for $2.95 million, the Multiple Listing Service shows.

The French Country-style home, with five bedrooms and four bathrooms in 4,620 square feet, sits on half an acre. The gated house, built in 1968, was recently remodeled and has a flexible floor plan with two second-story master suites. There are two-story windows, high ceilings and four fireplaces.

The property came on the market in March at $3.65 million. That's an 80.82% sales-price-to-list-price ratio. Bearing in mind that anybody can list at any price, ZIPRealty runs quarterly data on the sales-to-list-price ratio that offers some perspective for specific markets (not individual houses). Rancho Bernardo 92127, in San Diego County, had the highest sales-to-list-price ratio at 125% for sold homes during the third quarter in ZIPRealty's latest report. You can find the full ZIPRealty report online to see how other Southern California cities stack up.

Public records show Loggia's ownership of the Bel-Air house began in 1992 but do not include the purchase price.

As for his 90049 ZIP Code, there were 175 single-family-home sales in the first three quarters of 2009 at a median of $1,766,000, according to MDA DataQuick. That's a 17.9% price drop from the first three quarters of 2008.

Loggia, 79, has been a familiar face on TV and movies for decades. His scores of credits include "The Sopranos" (2004), "Independence Day" (1996), "Prizzi’s Honor" (1985) and "The Rockford Files" (1976-78). He starred in "T.H.E. Cat" (1966-67).

-- Lauren Beale

Thoughts? Comments?

Photo: More photos can be viewed at latimes.com. Tania Ferris of Coldwell Banker’s Beverly Hills South office had the listing on Robert Loggia's house. Charles Pence of Coldwell Banker’s Santa Monica Montana office represented the buyer. Credit: Jeff Ong / PostRAIN Productions

 

Southern California home prices, sales rise in October

Southern California's housing market showed more signs of life in October, according to a report this morning by MDA DataQuick, a San Diego research firm.

The median price paid for all homes in six Southland counties in October was $280,000, up 1.8% from $275,000 in September but down 6.7% from $300,000 in October, 2008. MDA DataQuick said.

October home sales hit 22,132, up 2.8% from the 21,539 sold in September and also up 2.8% from the 21,532 sold in October, 2008.

To read more about it, click here.

-- Alejandro Lazo

Photo: Ken Hively / Los Angeles Times

Bernanke on bubbles: Nothing 'obvious' at the moment

Federal Reserve Chairman Ben S. Bernanke reiterated Monday that the central bank now knows enough to be worried about asset bubbles.

He just doesn't see any in the U.S. at the moment despite some investors' concerns about stock market valuations and the still-ravenous global appetite for Treasury securities.

In a Q&A session after a speech in New York, Bernanke at first channeled his predecessor, Alan Greenspan, on the subject of bubbles: Bernanke said it was "inherently, extraordinarily difficult to know whether an asset’s price is in line with its fundamental value or not."

And he added: "It’s not obvious to me in any case that there’s any large misalignments currently in the U.S. financial system."

The Greenspan Doctrine was that it was too difficult for the Fed to know if a particular market was in a bubble (say, like housing in the mid-2000s) and that it was better for the central bank to leave markets to their own devices. We all know how that turned out.

Bernanke has made clear that the Greenspan Doctrine doesn’t rule the Bernanke Fed. Given the disaster wrought by the housing bubble, the Fed chief on Monday said that the central bank recognized the need to address the question of bubbles "in a serious way."

He said policymakers were "looking at various models of valuation for stocks, bonds and other kinds of assets" to judge their levels relative to the fundamentals.

As to whether the Fed would use higher interest rates specifically to prick a presumed bubble, Bernanke said that decision would have to be made in the context of the Fed’s two principal policy mandates -- promoting full employment and price stability.

If addressing "major misalignments of the financial markets" would further those policy goals, "We’d have to think about it very seriously," he said.

-- Tom Petruno

Photo: Fed Chairman Ben S. Bernanke speaking Monday at the Economic Club of New York. Credit: Mark Lennihan / Associated Press

Falling T-bond yields leave Wall St. guessing about the message

Continued strong investor demand for long-term Treasury securities pushed benchmark yields down on Monday to their lowest levels since spring.

That may help put more downward pressure on mortgage rates, which tend to take their cues from Treasuries.

The annualized yield on the 10-year T-note, charted below, fell to 3.29%, the lowest since May 20 and down from 3.32% on Friday.

The 30-year T-bond yield, meanwhile, is testing the 4% level for the first time since April: It ended at 4.03% on Monday, down from 4.09% on Friday. The yield was 4.6% as recently as early August.

Investors' appetite for long-term Treasuries could be a bad sign for the economy, if it's based on buyers' desire to lock in safe fixed returns because they believe the economic recovery will be cut short.

Tony Crescenzi, a bond portfolio manager at Pimco in Newport Beach, says that a slide through the 4% level on the 30-year T-bond would suggest a "breakdown" of faith that the economy can sustain its attempt to rebound.

But he said investors looking for a haven may have had other motivations in recent days, including Iran's announcement that it successfully test-fired medium-range missiles.

Quarter-end "window dressing" by portfolio managers also may be temporarily magnifying demand for Treasuries.

Still, Crescenzi noted that low inflation expectations make U.S. bonds fundamentally attractive to many investors even at current reduced yield levels.

If annualized inflation stays at 1.5% or less in the near term, a 10-year T-note paying 3.29% would produce a real (after inflation) yield of at least 1.79%. That would be about on par with the T-note's average annualized real yield of 1.85% over the last 10 years, Crescenzi said.

Some analysts think investors are making a mistake to buy bonds here. Mike Kastner, head of fixed income at money manager Sterling Stamos in New York, said he doubted that long-term Treasury yields would stay at current levels for long.

Given the ongoing mammoth issuance of new debt by the Treasury to fund the budget deficit, "I think it's going to be hard to maintain these levels" on yields, he said. In theory, investors should demand higher returns to take the debt from Uncle Sam if the market is glutted with supply.

But that was the concern a month ago, too. Yet buyers absorbed record sales of Treasury debt in September with ease.

A Bloomberg News survey of 18 major bond dealers this week found them split on where they expect the 10-year T-note yield to end this year. Ten predict a year-end yield above current levels, while eight predict a further drop in the yield.

On the high end: Bank of America, which predicts the yield will rise to 4%. On the low end: Credit Suisse, which forecasts a plunge to 2.5%.

-- Tom Petruno

Geithner mulls whether to push extension of first-time home buyer credit

Treasury Secretary Timothy Geithner said today he hasn’t "made a judgment yet" on whether to recommend extending the tax credit for first-time home buyers.

"Obviously that's something that I'm going to take a careful look at," he told reporters in Washington.

The heat is on to keep the credit (worth up to $8,000) alive, as the Associated Press reports:

There have been more than a dozen bills introduced in Congress to prolong the life of the tax credit past the Nov. 30 deadline.

The credit is helping stabilize the housing market, but there are conflicting views about the practicality and cost of an extension. The National Assn. of Realtors and the National Assn. of Home Builders have launched marketing campaigns touting the credit and have pushed Congress to keep it going.

But some lawmakers are balking at the cost, which may hit an estimated $15 billion -- more than double the amount projected in February's economic stimulus bill.

As long as the Treasury is having no trouble selling debt (and it isn’t having any trouble at all), Congress and the administration may figure the incremental cost of the tax credit is no big deal. When you’re already running an annual deficit of $1.6 trillion, what’s another $15 billion?

But gems like this from the AP story may give some in Congress pause:

Critics . . . see the credit as a subsidy for people who don't need one.

Charles Curtis and his wife weren't even aware of the tax credit until they put a $895,000 all-cash offer in July on a two-bedroom apartment in New York City. "It was a wow moment," said Curtis, 27, a freelance writer and researcher.

Not surprisingly, builders see extension of the credit as critical. The National Assn. of Home Builders, lamenting the 3% drop reported today in single-family housing starts in August, put out a release pleading for action on the credit.

"With the $8,000 first-time home buyer tax credit set to expire at the end of November, the window is now basically closed for being able to start a new home that can be completed in time for purchasers to take advantage of that," said Joe Robson, the group’s chairman. "Builders are therefore pulling back on new construction at this time. Clearly Congress must act now to extend the tax credit if we are to keep the market moving toward a recovery."

-- Tom Petruno

Is Bernanke a White House sop to stock market bulls?

It may not have been a rousing "welcome back," but Wall Street’s reaction to Ben S. Bernanke's  renomination as Federal Reserve chairman shows the White House got the job done -- if the job was to help keep the bulls in control of financial markets.

The Dow Jones industrial average rallied as much as 110 points, or 1.1%, in the first hour of trading, after President Obama announced his decision to leave Bernanke at the helm of the central bank.

But the market seemed to be reacting more to the surprising jump in consumer confidence this month, and to a report showing that home prices rose in June from May.

Major stock indexes faded by day’s end but still ended in the black and at their highest levels in at least nine months. The Dow closed up 30.01 points, or 0.3%, to 9,539.29, the highest since Nov. 4.

The Standard & Poor’s 500 index added 2.43 points, or 0.2%, to 1,028.00, its highest close since Oct. 6.

Bernanke’s renomination had been widely expected, so the timing seemed a bit peculiar. Why would Obama feel the need to interrupt his family vacation to make the announcement?

One theory is that the White House figured the news was what Wall Street wanted -- and that by announcing it now, the administration would help underpin the stock market’s stunning summer gains.

The Dow is up 17% since July 10, lifted by economic data that have generally been better than expected.

Obama’s decision removes a potential element of uncertainty that could have given nervous investors an excuse to sell as we near September, which historically has been the stock market’s worst month of the year.

The last thing the administration and the Fed need is a market meltdown next month. Rightly or wrongly, a plunge in stock prices could destroy faith that the economy is on the cusp of a sustained turnaround, and make a slide back into recession a fait accompli.

Investors may well find other excuses to sell soon, but they won’t be able to cite confusion about who’ll be in charge at the Fed.

-- Tom Petruno

Photo: Fed Chairman Ben S. Bernanke and President Obama at the announcement today. Credit: Alex Brandon / Associated Press