Category Archive 'Real Estate'
03 Jun 2009

Not All States Are Equally Affected

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50 states’ changes in GDP, jobs, and home prices in 2008

The Atlantic
links a WSJ chart which it then graphs (above), showing the varied impact of the recession on all 50 states.

North Dakota, Wyoming, Alaska, Texas, Hawaii, and South Dakota all managed modest increases (1.9-.2%) in home prices, while California real estate insanity exacted a ferocious toll not only within its own borders (-25.5%), but also in the neighboring California refugee destinations of Nevada (-28.2%) and Arizona (-20.6). Florida, of course, traditionally always jumps on board any real estate collapse and also came in the top ranks of disaster (-24%).

09 May 2009

Obsessive Housing Disorder

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When I was a small child, my parents, member of the WWII generation, were buying ordinary working class houses in prosperous places like California for $10 or $12 thousand dollars. An executive’s house might cost $25 thousand. In provincial low income locations like the small Pennsylvania town I lived in, you could buy a house for $5 or $6 thousand dollars.

Recently, when I was living in the Bay Area in California, I was appalled to find 1500 sq. ft. two bedroom, one bathroom, ranch houses on postage stamp lots, needing complete renovations, selling for half a million. In some fashionable communities out there, the worst house in town was selling for well over a million dollars.

How did this happen?

In the old days, mortgages did not grown on trees. Banks lent money grudgingly and only successful people with very stable jobs could obtain long-term financing. Ordinary people had to save the money to pay all cash or find a motivated seller willing to hold a mortgage for a few years. Of course, that meant you might get a five year mortgage if you were very lucky. More likely, you’d get three years. Nobody was going to give you 30 years financing.

Then along came the government. The federal government supplied the leverage which allowed idiots all over America to bid up prices of houses, offering to pay major chunks of their income for 30 years. And Voila! people a bit older than me who bought nice homes in booming areas for a few tens of thousands found the value of their investment multiplied astonishingly over a couple of decades. I know one executive couple from Bedford, NY, who often told me ruefully that, though they had worked hard and saved and invested all their lives, the only thing that ever earned them serious money was the decision to buy their house.

Of course, the windfall avalanche of gold that came to the lucky homeowner who purchased in the old days was really just a wealth transfer from members of a younger generation facilitated by our obliging uncle.

Younger people didn’t really mind backing up the pickup trucks full of dollars in the driveways of that older generation and pitchforking out the money, because they all believed the party would continue. Real estate prices would just keep on growing to the sky, and their own turn would come. Some fine day, members of a generation still younger would come along, this time with box car loads of dollars.

Pity that the music recently stopped. No more growth to the sky. No generational wealth transfer for you.

Steven Malanga, of City Journal, says that government-sponsored housing booms have happened several times before, always followed by busts. We’ve just forgotten, and you know what Santayana said: Those who fail to learn from history are condemned to repeat it.

I don’t think that it is only a belief that home ownership inspires the bourgeois virtues that causes government to subsidize housing. Housing subsidies serve large, deeply interested constituencies and are inevitably popular.

24 Mar 2009

Chris Dodd’s Humble Irish “Cottage”

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The story starts in 1994, when the Senator became one-third owner of a 10-acre estate, then valued at $160,000, on the island of Inishnee on Galway Bay. The property is near the fashionable village of Roundstone, a well-known celebrity haunt. William Kessinger bought the other two-thirds share in the estate. Edward Downe, Jr., who has been a business partner of Mr. Kessinger, signed the deed as a witness. Senator Dodd and Mr. Downe are long-time friends, and in 1986 they had purchased a condominium together in Washington, D.C.

Mr. Downe is also quite the character. The year before the Galway deal, in 1993, he pleaded guilty to insider trading and securities fraud and in 1994 agreed to pay the SEC $11 million in a civil settlement. The crimes were felonies and in 2001, as President Clinton was getting ready to leave office, Mr. Dodd successfully lobbied the White House for a full pardon for Mr. Downe.

The next year — according to a transfer document at the Irish land registry… — Mr. Kessinger sold his two-thirds share to Mr. Dodd for $122,351. The Senator says he actually paid Mr. Kessinger $127,000, which he claims was based on an appraisal at the time. That means, at best, poor Mr. Kessinger earned less than 19% over eight years on the sale of his two-thirds share to Mr. Dodd. But according to Ireland’s Central Bank, prices of existing homes in Ireland quadrupled from 1994 to 2004. …

In his Senate financial disclosure documents from 2002-2007, Mr. Dodd reported that the Galway home was worth between $100,001 and $250,000. However, Mr. Rennie reports that in 2006 and 2007 the Senator added a footnote that reads: “value based on appraisal at time of purchase.”

Mr. Dodd had good reason to add the qualifier. Senate rules call for valuations to be current and anyone who looked into the estimate would immediately spot Mr. Dodd’s lowballing. A June 17, 2007 feature in Britain’s Sunday Times did just that. “Diary” observed that in Roundstone “a two-bed recently made E680,000 ($918,000) and a cottage is currently on offer for E800,000.” Noting Mr. Dodd’s estimate of his property — between E75,000 and E185,000.

Toby Harnden at the Telegraph:

19 Oct 2008

Shenanigans in Appraising Obama’s Yard

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Chicago developer Tony Rezko provided the bridge that made it possible for Barack Obama to buy his $1.65 million dream house by arranging for the price to be lowered by splitting the acreage and having his wife pay full price ($625,000) for a 9090 sq. ft. portion of the side yard accessible only through the main property now designated a “development lot.” Obama got $300,000 off the asking price for the rest.

Original story

Well, what do you know? It seems the side yard parcel purchased by Mrs. Rezko wouldn’t appraise, and the bank appraiser who rejected a $625,000 valuation was fired and a new reappraisal mysteriously substituted for his estimate of no more than $500,000.

They call that bank fraud.

The Washington Times has the story.

07 Oct 2008

Real Estate Nightmares


Duncraig Castle, built in the 1860s, sits on 40 wooded acres on the shores of Loch Carron.

The New York Times quarterly real estate magazine, Autumn edition, features a pair of cautionary tales in which two astonishingly different dream homes turn into war zones occupied by divided families.

The Dobsons of Duncraig Castle

The Taubs of Borough Park

The disputed Taub home in Borough Park

09 Sep 2008

Squatters Seize Bank-Owned California House

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The LA Times notes that the foreclosure market is working for some home-seekers.

A family of bobcats (Lynx rufus) has taken up occupancy in an empty (bank-owned) house in the Tuscany Hills development of Lake Elsinore, California.


Hat tip to Karen L. Myers.

11 Aug 2008

New Record House Price

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Villa Leopolda, Villefranche-sur-Mer

Charles Bremmer reports from Paris, in the London Times, that Russians are not only gobbling up real estate in the Republic of Georgia. Let’s hope they overpay just as much for that Caucasian real estate.

A mysterious Russian billionaire has trumped his big-spending rivals and broken a world record by splashing out €500 million (£392 million) on one of the most sumptuous villas on the French Riviera.

The price of the Villa Leopolda, a Belle Époque mansion on the heights of Villefrance, has amazed estate agents but fuelled local worries that the invasion of Russian money on the Côte d’Azur is getting out of hand.

Since the early 1990s, Russian oligarchs, drawn by memories of the Riviera-mad old Russian aristocracy, have been piling into seaside properties at Cap Ferrat, Cap d’Antibes, Saint-Tropez and the other great playgrounds.

None, however, has come near the price with which the unnamed Russian clinched the Leopolda deal with Lily Safra, the widow of Edmond Safra, a Lebanese banker who was killed by an arsonist’s fire in Switzerland in 2003.

Mrs Safra was said to have held out for months as the buyer raised his bid for the villa, between Nice and Monaco, which King Leopold II of Belgium acquired in 1902.

The previous record for a house was said to be the £57 (JDZ: reported as £117) million that Lakshmi Mittal, the steel tycoon, paid for a property in Kensington Palace Gardens in 2004. The macho spending contest by Russian oligarchs. …

Russian excess is feeding discontent among poorer people. Pierrette, a housekeeper for one Russian, said: “I attended a party where the guests had fun throwing burning €500 notes into the air while everyone split their sides laughing. The domestic staff were later told to collect the ashes. It was sickening.”

House photos.

09 Jun 2008

Montgomery County Considers Putting Homeless Family into $2.5 Million House

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Johns Hopkins Professor Phyllis Piotrow wanted to sell her brick five-bedroom house next to Hillmead Park in Bethesda, Maryland and retire to New Hampshire.

She had been hoping to sell her house with 1.3 acre lot to a developer, but Montgomery County fought development plans until the real estate market softened, then cajoled Piotrow into selling the property for a below-market price of $2.5 million to be incorporated into the neighboring park.

Then, somebody had an idea, as Marc Fisher reports in the Washington Post, 6/8:

The parks commission had planned to demolish Piotrow’s 1930s house, at a cost of about $65,000. Instead, staffers at Montgomery’s housing agency wondered, why not spend about twice the cost of demolition to renovate Piotrow’s five-bedroom place and use it to house a large (mother with 13 children -DZ) homeless family? After all, finding housing for large families is notoriously difficult, the county already shells out about $100,000 a year to keep a homeless family in a motel and at least six other houses in county parks are being used in similar fashion.

You will not be shocked to learn that the good people of Montgomery County thought this a very poor idea.


The same Marc Fisher recycles the same story into a blog editorial with a title which wonders indignantly: Is This House Too Nice for the Homeless?

(I mean, really, what kind of person could possibly think that?)


Residents of the Hillmead neighborhhood evidently could, and did, think un-PC, uncharitable thoughts.

Washington Post 3/23:

As the Montgomery County Council put the finishing touches on a $2.5 million plan to buy more land for a Bethesda park, council member Nancy Floreen lobbed what has turned out to be the equivalent of a neighborhood cluster bomb:

Why not house a needy family in the 1930s-era home on the property in the Hillmead neighborhood and expand the park at the same time? …

Residents of Hillmead, a leafy community about three miles from downtown Bethesda with small Cape Cods and large McMansions selling for more than $1 million, say they only recently learned of the county’s plans and think officials did a poor job of keeping them informed. …

The Hillmead residents insist that their opposition does not stem from antipathy to poor people. Those leading the fight say it’s a debate about how the county chooses to spend its $4 billion budget in tough economic times, and about due process for communities. …

“This really isn’t about having a homeless family living in a house that is bigger than probably 90 percent of the houses in the neighborhood,” said Brett Tularco, a developer who lives in the neighborhood and has offered to tear down the house to save the county the expense. “Our kids are going to school in trailers and then this homeless family would be living in a $3 million estate. That money could have been spent on housing tons of people instead of one family.”

He said he is also worried about public safety if the homeless family moves on and the county then uses the house to shelter mentally ill residents or drug abusers.

“That really isn’t who we want our kids playing next to,” he said.


Councilmember Nancy Floreen’s website

08 Apr 2008

Worse Than Gentrification

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Many of us living outside the urban communities of fashion have experienced mild astonishment at the capacity of mankind for complaint upon reading of protests stemming from the improvement and rehabilitation of formerly slum neighborhoods by new arrived upper middle-class residents, a process pejoratively termed “gentrification.”

The Onion reports that the a new upscale trend, fueled by increasing affluence and the limited supply of urban housing, has appeared, of even more alarming character.

Hat tip to Frank Dobbs.

29 Mar 2008

Larry Ellison Gets His Tax Assessment Reduced

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I recently got my home’s tax appraisal reduced, so did Larry Ellison. I argued that my appraisal was higher than the price we paid for the house and was then increased, although average county house prices had declined 12.5%. Larry made somewhat different arguments.

John Murrell explain:

You don’t get to be one of the richest men in the world by being a pushover, so it was no surprise to see Oracle CEO Larry Ellison bring his boardroom combativeness to bear when he felt the property tax assessment was too high on his 23-acre Japanese-style compound in Woodside. Ellison’s aptly named Octopus Holdings bought the property in 1995 for $12 million, and over the next nine years Ellison built it up in the style of a Japanese emperor’s 16th century country residence. The estate consists of a nearly 8,000-square-foot main house, a guest house, three cottages and a gym. The landscaping includes a 5-acre man-made lake, two waterfalls, two bridges and hundreds of cherry and maple trees, redwoods, pines and oaks. It’s the kind of place where a Zen monk would feel comfortable, assuming he won the Powerball.

Including the cost of delays, overruns and change orders, Ellison put about $200 million into the compound. Based on the reproduction cost — without those added expenses — the San Mateo County assessor’s office listed the value at $166.3 million in January 2005, and that’s where it’s stayed. Octopus Holdings, however, had the estate on the books at $64.7 million, and took its case to the appeals board, claiming the property’s unique nature would put it at a disadvantage on the open market. The appeals panel agreed — given the limited market for luxury homes, particularly in the 16th century Japanese style, the “overimprovements,” and the expense of keeping up the “excessive” landscaping, the board said the property is suffering from “significant functional obsolescence.” The board knocked $100 million off the valuation for the last three years and will pay Ellison a refund of about $3 million.

Unfortunately, Ellison’s gain is the rest of the community’s loss. Almost half of the refund comes out of Portola Valley School District funds, and the property’s lower valuation means the district will be short $250,000 to $300,000 in annual revenue starting next fiscal year. “It’s a significant chunk,” said Assistant Superintendent Tim Hanretty. “It’s a permanent, ongoing reduction.” Other losers are the county general fund and assorted cities and redevelopment agencies.

Hat tip to Karen Myers.

28 Mar 2008

Damn America!

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Poor Reverend Jeremiah Wright has led a life of constant victimization by White America’s racism and discrimination. Denied opportunity all his life, now he will be condemned to live in retirement in the above dreadfully tacky $1.6 million 10,340-square-foot, four-bedroom home in suburban Chicago, currently under construction in a gated community, with a $10 million line of credit, presumably intended for furniture and other incidentals.

Fox News

20 Mar 2008

Buying Wyoming

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Ian Frazier, in the New Yorker, satirizes conspicuous real estate consumption.

Typically, this New Yorker essay ridiculing the super-rich manages to combine with its satire a very characteristic note of complacent self-identification with the supposed target.

I feel sorry for people who still think of their places in terms of square feet. My partner, Scott, and I recently purchased Wyoming, which we are in the process of having renovated, and, yes, I do know the square footage (something like two trillion seven hundred and thirty billion square feet, give or take). But that’s just not a very practical type of measurement when we’re dealing with all the plumbers and contractors and security staff and reporters and other non-wealthy service personnel we have to give instructions to. …

Basically, we are looking at this purchase as a tear-down. There’s really not a lot here you’d want to keep, except one or two of the Wind River Mountains and some old nineteen-twenties Park Service structures in Yellowstone. Scott and I bought for the location—it’s convenient to anywhere, really, if you think about it—and for the simplicity of line. We wanted someplace rectangular, a much easier configuration from a design point of view, and we won’t have to fuss with panhandles and changeable riverine property lines where we’re going to get into disputes with the landowner next door. Spare us the headaches, please! We’ve had plenty already, with the former occupants (thank heavens they’re gone) and all the junk they left behind—the old broken-down pickup trucks, houses, eyesore water towers, uranium mines, the University of Wyoming, Yellowtail Dam, Casper. I’m a thrower-outer. I believe we must first clear everything away, then see what we’ve got. Scott is more sentimental. He thinks we should leave the North Platte River, for example, and work around it. I haven’t said yes or no. I’m secretly hoping he changes his mind.

Read the whole thing.

29 Aug 2007

Things Have Gotten Worse

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Lewis Mumford on The Plight of the Prosperous in the New Yorker, March 4, 1950.

I sometimes wonder what self-hypnosis has led the well-to-do citizens of New York, for the last seventy-five years, to accept the quarters that are offered them with the idea that they are doing well by themselves. Apparently those of them who have chosen to remain in New York instead of migrating to the suburbs have forgotten what a proper domestic environment is. Lest someone think that my notions are fancy ones, let me put down what seem to me the minimum requirements for anyone’s living quarters. Whether the structure is a single-family house or a thirty-story building, the first necessity is that every room have light and air. Rooms that are in fairly steady daytime use should be oriented to get the maximum amount of winter sunlight. In this latitude, that means that the major exposure should be a southern one, a fact that Socrates discovered twenty-four hundred years ago. To insure enough light and air, the distance between buildings should increase with their height. Our municipal setback regulations make a hypocritical acknowledgment of this principle, but since they were framed to keep land values high rather than buildings low or widely spaced, they have never come within shooting distance of achieving an ideal. The space between buildings should be dedicated to gardens and lawns, partly for beauty, partly to compensate for our tropical summer heat, partly to purify and sweeten the air. Bedrooms should have cross ventilation, or at least through ventilation, and should never face a street. …

The common row houses, such as those built in the Washington Square district before 1860, met most of these requirements, but the standards have been gradually whittled away…

31 Jan 2007

World’s Most Expensive House

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$155 million. Ouch! And I thought we paid too much for our new house.

Appropriately named “The Pinnacle,” it’s yours for $155 million…

So what justifies the “most expensive” asking price?

To begin with, the 10-bedroom, 53,000-square-foot, yes — 53,000-square-foot — home will sit on the most coveted piece of property in the resort. The 160 acres ought to provide ample elbow room for someone who has it all.

The home, which includes four guest cottages, will be built in the center of the ski resort and commands dramatic views in all directions…

Jerry Locati, the Bozeman, Mont., architect who heads up Locati Architects, spent the last year designing the home and gave an exclusive interview about what he calls “an incredibly unique, one-of-a-kind house.”

“It’s an adult, well, actually family-oriented home, a sort of Disneyland scale home for someone who is not afraid to spend money,” he begins as he searches for superlatives. “It will have the usual home theater but will also include a bowling alley, an indoor-outdoor pool and an amazing wine cellar.”

The house, which has a rustic exterior crafted out of stone, hand-hewn beams and ample floor-to-ceiling glass, includes a huge underground garage.

“You’ll be able to park 30 or 40 cars,” Locati says. “Perfect for someone with a car collection and of course the ideal service entrance for caterers.”

Locati says he was encouraged to “think outside the box” by timber and real estate billionaire Tim Blixseth, who is developing the property.

Blixseth is also the developer of the Yellowstone Club resort.

One of those “outside-the-box” ideas is three elevators.

“You enter as you would a lodge. There will be lockers for ski equipment and clothing,” says Locati.

“Every aspect has been incredibly well thought out,” he says. “We’ll have hand-carved fireplace mantles, and we have succeeded in bringing the outdoors indoors while still maintaining a warm feeling.”

Perhaps one of the more unusual features is a private-covered gondola that will whisk skiers from a ski run to the home.

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