Bidding Wars Are Back for Los Angeles Luxury Homes

A week after Christine Lynch listed her five-bedroom, six-bathroom house in the Brentwood neighborhood of Los Angeles for $3.625 million, she had seven offers. Within 10 days, she had a deal—for $225,000 more than the asking price. The all-cash transaction was completed on April 23. “My first reaction was, ‘Wow, I guess we’re really doing this,’ ” says Lynch. “I was really surprised by this level of interest and how quickly it sold.”

Bidding wars are breaking out for luxury homes in such wealthy enclaves as Brentwood, Beverly Hills, and Bel Air as an increasing number of buyers bet on rising home prices and investors return to the market. Even properties in need of extensive renovation are being fought over by shoppers who expect to resell them for more after a remodel or rebuild. “The percentage of people who think prices are only going to go up is the greatest I have ever seen in my career,” says Syd Leibovitch, president of Rodeo Realty in Beverly Hills.

The number of sales of Beverly Hills homes priced at $2 million and higher climbed 11 percent in the first quarter from a year earlier, to 39, according to DataQuick, a provider of property information. In Brentwood they increased 56 percent, to 25, and in Malibu they gained 64 percent, to 23.

U.S. residential property sales of $1 million and higher rose 7.2 percent in March, the most recent month for which figures are available, from a year earlier, according to the National Association of Realtors. Demand has been rising for high-end homes in the northeastern U.S., including Boston and New York; on the California coast; and in parts of the southern U.S. amid a recovery in financial markets, according to Paul Bishop, vice president of research at the Realtors group.

In Brentwood and Beverly Hills, homes on smaller plots in low-lying areas usually start at $2.8 million to $3.2 million. Houses with larger plots can sell for as much as $20 million, according to John Gould, manager of Rodeo Realty’s Beverly Hills office. Properties in the hillier areas, which usually are larger and boast views, can range anywhere from $5 million to $75 million.

As late as last year, many luxury properties in the Los Angeles area lingered on the market for weeks or months, according to Stephen Shapiro, co-founder of Westside Estate Agency in Beverly Hills. Now, he says, offers come in on the day of the first showing, a phenomenon that was common during the 2007 buying frenzy. “In recent history, buyers would look at homes and return six months later to find the same home was still on the market,” he says. “Now if buyers hesitate, the house is often sold by the time they come back. And each time one sells, the next one comes on at a higher price.”

Sales of homes priced $5 million and higher at all of Coldwell Banker Previews International’s West Los Angeles offices were up 35 percent this year through May 8 from a year earlier, according to Joyce Rey, head of the company’s estates division. “There’s an added degree of confidence in the future and that prices are likely going to go up,” Rey says. “There is a definite change in consumer attitude.”

Some of the fresh demand for high-end properties is coming from investors looking to make a profit, a buyer pool that’s been almost nonexistent for the past couple of years, according to Rey. Since the beginning of the year, she says, investors have grown to about 20 percent of the shoppers she represents. Throughout Southern California, the portion of investor purchases was close to a record last month, and the share of buyers who paid cash was double the historical average, according to DataQuick. “This is the first time since 2007 that I have investor clients again,” says Rey. “The speculative buyer is back.”

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Kvetch in May: Why Market Timing Isn't Everything

All hail Memorial Day weekend. In the tradition of my Miami childhood, ‘tis the season to don Crockett & Tubbs white pants and flaunt the right to bare arms. Hedgies and traders clad in Sperry Docksiders bolt Gotham for the leafy, saltwater-sprayed indolence of the Hamptons. The market’s volume dips to a trickle.

And so “Sell in May and Go Away” becomes the mantra of choice. Indeed, this strategy has been especially useful over the past two years, with markets rallying to start the year and plunging between the onset of summer and autumn. One minute, the world’s not so bad, come to think of it, and stocks are hitting new highs. Then, with complacency all the rage, another PIIGS-led panic ripples across the pond. Maybe Europe’s denial about the urgency of its financial crisis is directly proportional to the temperature outside. Plus every man, woman, and baguette on the continent gets 30 weeks a year of paid vacation, I’m told, complete with a government-issued spa stay. But I digress.

Point is: Can you time the market?

The folks at Leuthold Group did a surprising analysis of the merits of going defensive in May—a strategy they call “Sell in May … without actually selling.” (After all, portfolio managers cannot just liquidate their portfolios and sit on cash for several months.) But they could sell volatility to go long the fuddy-duddy.

Leuthold calculated that if you had owned cyclical sectors (say tech and financials) from November through April and then switched into defensive sectors (utilities and health care, for example) from May through October, you’d have posted an annual return of 15.5 percent since 1989, compared with the S&P 500’s 8.6 percent annual gain. While 23 years of data does not prove an immutable market fact, this is a huge differential, making an original $10,000 investment compound into $275,000, vs. $67,000.

But anyone who’s taken college-level finance is supposed to know that timing the market is a fool’s game. “A look at the actual data shows that the intense focus on this seasonal trend might be yet another case of investors placing too much weight on the most recent events,” writes Daniel Putnam of InvestorPlace, who analyzed the past 40 years of performance for the S&P 500 Index during the May 1-Sept. 30 interval. He found that stocks are as likely to rise through most or all of the period as they are to fall. True, the S&P 500 hit its high in May on nine occasions. But it peaked in September on 13 occasions, in June three times, July eight times, and seven times in August.

“The lesson,” Putnam writes, “is that more often than not, an investor who took the saying literally and sold on May 1 almost invariably gave up some upside.”

So why the endurance of the “Sell in May” meme? Maybe it’s summer’s recent knack for hosting market disasters, from 2001 and 2002′s tech wrecks to 2008′s mortgage meltdown and last year’s renewed kvetching over Europe and the U.S. credit rating. The mid-section of 1974, a brutish time for the American psyche, saw a 30 percent plunge. But back out these calamitous episodes and the S&P 500′s average May-September price return has been 3.55 percent over the past four decades. Putnam says investors should resist the urge to indulge their recency bias.

Read more: http://www.businessweek.com/articles/2012-05-25/kvetch-in-may-why-market-timing-isnt-everything

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The 'Fifty Shades of Grey' Stimulus

In early May, at a suburban home in Chattanooga, Cindy Faulkner began unpacking one of several boxes, removing lingerie, blindfolds, massage oils, and dildos to display for the half dozen women gathered. Faulkner is a sales consultant with Ohio-based Pure Romance, the Amway of vibrators, and she was the guest of honor at a party of the sort one might normally associate with Tupperware. Before Faulkner could even finish unpacking, two of the guests began asking her about the Fifty Shades of Grey books, the bestselling erotic romance trilogy written by overnight British sensation E.L. James. Did she have any of the toys featured in their favorite scene, including a tickle and whip (a leather riding crop with a feather on one end), blindfolds, and a set of Ben Wa balls (a vaginal exercise device)? Yes. “It’s like waking a sleeping giant for some of these women,” says Faulkner, whose sales and party bookings have increased 15 to 20 percent in the past two months, helping Pure Romance’s 75,000 consultants set a pace for $120 million in 2012 sales. “My business is about to explode.”

Originally written as Twilight fan fiction in 2011, with explicit sex scenes featuring bondage and submission, they were converted by James into a series of books first released by a small Australian outfit called The Writer’s Coffee Shop Publishing House. They gained traction by word of mouth and were republished in April by Vintage Books. In less than two months the story of Anastasia Steele and Christian Grey—virginal student meets troubled older billionaire, who turns her into his sex slave and rocks her world through a dizzying array of scenarios—has already sold over 10 million copies in the U.S. alone, split evenly between digital and print, according to Vintage spokesperson Paul Bogaards. In late March, Universal Pictures secured the film rights for an estimated $5 million, according to the Hollywood Reporter.

Aside from making millions for Random House, Vintage’s parent company, and James, the books have provided a tremendous boost to the adult entertainment industry, as readers attempt to replicate the characters’ intricate bedroom scenes. Sherri Shaulis, senior editor of pleasure products at the adult industry news network AVN, sees the book’s success as a transformational opportunity for the sector, specifically the BDSM (bondage, discipline, sadism, and masochism) market. “There’s a lot of people who never considered buying handcuffs or a riding crop, and now they all want to do their little version of Red Rooms of Pain,” says Saulis, referring to what Mr. Grey calls his apartment dungeon.

While the sex toy industry has seen individual products spike in the past—Vibratex sold millions of its Rabbit Pearl vibrators after it appeared on Sex and the City—the difference with Fifty Shades is that it specifically references an entire category of products. That’s a boon for companies like Sportsheets International, a California-based manufacturer and distributor of entry-level bondage gear, with more than 500 products well suited for the book’s adventurous fans. “It really hit our industry in the past four to six weeks,” says Julie Stewart, Sportsheets’ vice president and co-owner, who claims the company does $10 million in sales annually and will see growth this year of 20 percent to 30 percent, double the average. Much of that growth is expected to come from the company’s Sex & Mischief bondage line, which Sportsheets plans to pair with a copy of the book as part of a promotion.

Retailers have been quick to jump on the Fifty Shades bandwagon, sensing a rare opportunity to attract mainstream customers. Babeland, a sex toy retailer based in Seattle, has launched a mini-site “inspired by” Fifty Shades of Grey that suggests dozens of items, from a scented massage candle to a set of vibrating nipple clamps. Claire Cavanah, Babeland’s co-founder, says the books have breathed life into the moribund BDSM category, noting that sales of bondage gear jumped 375 percent in April. “Now we have an event called Fifty Shades of Hot Sex,” Cavanah says, offering practical demonstrations on spanking and bondage. “About 150 people have responded in the SoHo store [in Manhattan], maxing out capacity. We had to add another section to take overflow.”

read more: http://www.businessweek.com/articles/2012-05-24/the-fifty-shades-of-grey-stimulus

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