Fausta's Blog

No, not the shoes, this time it’s the condo:

At $25 Million, a Record Sale in Miami

A MEMBER of the family that controls the German shoe company Birkenstock has sold a triplex penthouse in the South Beach section of Miami Beach for $25 million, a record price for a Miami-area apartment, eclipsing the previous record of $21.5 million reached five months before.

The buyer of the 7,400-square-foot penthouse in the Continuum towers was an Italian who controls an investment company, said Pietro Belmonte, a broker at Prudential Douglas Elliman who has sold residences in the building. The seller was Alex Birkenstock, who withdrew from day-to-day operations of his family’s shoe company in 2008, according to one person familiar with the matter. He bought the apartment for $9.9 million in 2009.

The sale closed last Friday.

The penthouse, which is on the 40th to 42nd floors, has five bedrooms, seven and a half bathrooms and 6,000 square feet of outdoor space across six terraces, and includes a private pool and an internal elevator. The floor-to-ceiling windows reach as high as 26 feet in the living room, said Khashy Eyn, the chief executive of Platinum Properties of Manhattan and the broker who represented Mr. Birkenstock.

“It is a glass box in the sky,” Mr. Eyn said.

It has rented for $20,000/day, or approximately 200 pairs of Birkenstocks at retail.

It was not listed on the market.

Neither is casa de Fausta, but if you want it for $25 million, make me an offer!

A roundup of trivial news in the periphery of serious issues,

George Soros sued by ex-girlfriend for reneging on real estate promise to buy her a $2 million NYC apartment. George told her he’d given the apartment to another woman. Probably a younger woman, that is. No word on whether he had anything to do with the downgrade.
UPDATE:
Don Surber:

Dr. Evil had the same problem with Frau Farbissina.

Amy Winehouse’s home robbed, not by looters, but by someone looking for her unreleased songs, lyric books and letters.

One Place That Didn’t Get Looted In The UK. Situational Awareness: How Everyday Citizens Can Help Make a Nation Safe. Defend yourself and be a vigilante (h.t Instapundit).

Hugo Chavez’s hair fell off. Argentina Preps for World Tango Championships

Pivot to jobs, jobs, jobs getting to you? Vacay, vacay, vacay! But first, let us pray.

Felonious Monk is not happy at all (*LANGUAGE WARNING: DEFINITELY NOT SUITABLE FOR WORK*)

Here’s Thelonious Monk, not Felonious,

You cross the street from Charles Osgood’s apartment at the Osborne, my favorite Manhattan apartment building,

And you can buy it for $6.9 million.

Billary on the move:
Clintons dealing for $11M Westchester mansion

Looks like Bill and Hillary Rodham Clinton are moving on up — to a deluxe mansion away from prying eyes.

Sources told The Post the Clintons are planning to trade their almost-modest suburban Chappaqua home for a sprawling $10.9 million estate in the bucolic Westchester town of Bedford Hills, complete with 20 acres of gorgeous land surrounded by New York’s elite.

The massive compound — sweetly named Clover Hill Farm — comes with high fences, two guesthouses and a mansion fit for Bubba’s millionaire lifestyle.

Reminds me of Dickens’s Hard Times,

Bounderby’s retreat, where, notwithstanding her anchorite turn of mind based upon her becoming consciousness of her altered station, she resigned herself with noble fortitude to lodging, as one may say, in clover, and feeding on the fat of the land.

Fat indeed: Check out the slideshow at the NY Post. I wonder what the carbon footprint is on that spread:

* Sale price of $10.9M
* Built in 2000
* Being sold by Paul Wallace, former president of real-estate firm Broadstone Group
* 20 acres of gardens, horse trails and pastures on private road
* 7,000-square-foot house with five bedrooms, six baths, chef’s kitchen, multiple fireplaces, wood-paneled library, wine cellar
* Heated pool with pool house, stone patios and outdoor fireplace
* Two guesthouses, artist studio and stable

And a question, Will Hillary join Bill at Clover Hill, or is she staying in Washington?

Experts: Some foreclosed homes too damaged to sell

A “Washington-based group that supplies data to private mortgage industry analysts” is just finding out now that some foreclosed houses are heavily damaged and may not find a willing buyer. I was selling real estate twenty years ago and could have told them that.

Even back in the olden days you could find houses in such condition that they could not get a certificate of occupancy. The Husband and I even considered purchasing one such house.

There are homeowners out there who don’t give a damn about their homes. Even if their houses are fully paid and won’t be foreclosed, some people don’t mind (and I’ll even say, apparently enjoy) living in a pigsty. I showed houses where the sellers still lived where you wished you had worn a flea collar. These properties were not in blighted areas; they were in very desireable neighborhoods. Some were small and “affordable”, at least one qualified as a mansion.

Other homeowners who are about to be foreclosed will destroy what they can no longer have.

Here’s the situation:
Any given house will sell at the right price.
It may not qualify for a mortgage.
It may have to be bulldozed.
But any given property has a price at which it will sell.

The most dramatic example of this was a house one of my customers wanted to buy. The house had burned down to the foundation. My customer, who was a builder willing to pay cash and had no contingencies built into the purchase, was outbid by another buyer.

Why?

The house in question had lake rights.

The Obama campaign kerfuffle – a clear attempt to insert politics of envy in the picture – about McCain hesitating to answer how many houses does he own has backfired.

Power Line:

The truth is that McCain isn’t out of touch with “ordinary people” because he’s rich, he’s out of touch with his own domestic arrangements because he cares little about material things, and for many years has devoted his extraordinary energies not to enjoying his wife’s money, but to serving the American people. Given the number of nights he’s spent in hotels or on military bases over the last few years, it’s no wonder he hasn’t seen much of his wife’s condos.

As Anthony Trollope said, “being the husband of a rich woman is not the same as being a rich man”, especially when you don’t own a house, and the eight houses your family owns are owned by your wife, her dependent children and the trusts and companies they control.

Brian Rogers of the McCain campaign:

“The reality is that Barack Obama purchased his million-dollar mansion in a shady deal involving a convicted felon [Tony Rezko], and it raises questions about his ethics and judgment,” said Rogers.

Rezko is scheduled for sentencing on Oct. 28 — one week before the presidential election. More on Rezko at Rezkorama.

Red State asks, among other questions,

3. How many houses has Bill Ayers plotted to blow up?

Let’s go to the videotape:

Hugh Hewitt quotes Obama, who yesterday was saying that the Beijing infrastructure is “vastly superior” to ours. Hear him say it:

Now, of all the vastly ignorant statements the junior senator from Illinois has come out with, that one takes the cake, at least for now. China’s Communists have used the excuse of the Olympic games to level the medieval city built by the great Ming emperor.

In today’s podcast at 11AM Eastern we’ll be talking about those houses, and the Obama-Ayers connection. Don’t miss it!

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Yes, the Russians are in Georgia, but they are also going to the Riviera (the French Riviera, not the old Buick Riviera):

Russian oligarch ‘invader’ pays record £392m for Riviera villa

That’s more or less $800 million to us American peasants (give or take $10-20 million).

Villa Leopolda was built for Belgium’s King Leopold, who exploited what is now Congo as his own estate and used to party hearty at the Riviera and in Paris.

But I digress.

Villa Leopolda sits on 20 acres in Villefrance and is one magnificent place.

Its current owner, Lilly Safra, is the widow of billionaire Edmund Safra, who died in a fire in his Monaco penthouse.

The gardens of the house have been used in films,

Now an unnamed Russian billionaire who likes to party hearty is not the only one throwing his money around:

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.”

They may yet find out that easy come, easy go.

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David Leonhardt of The NYT has a clear article explaining the credit crunch: Can’t Grasp Credit Crisis? Join the Club

It really started in 1998, when large numbers of people decided that real estate, which still hadn’t recovered from the early 1990s slump, had become a bargain. At the same time, Wall Street was making it easier for buyers to get loans. It was transforming the mortgage business from a local one, centered around banks, to a global one, in which investors from almost anywhere could pool money to lend.

The new competition brought down mortgage fees and spurred some useful innovation. Why, after all, should someone who knows that she’s going to move after just a few years have no choice but to take out a 30-year fixed-rate mortgage?

As is often the case with innovations, though, there was soon too much of a good thing. Those same global investors, flush with cash from Asia’s boom or rising oil prices, demanded good returns. Wall Street had an answer: subprime mortgages.

Because these loans go to people stretching to afford a house, they come with higher interest rates – even if they’re disguised by low initial rates – and thus higher returns. The mortgages were then sliced into pieces and bundled into investments, often known as collateralized debt obligations, or C.D.O.’s (a term that appeared in this newspaper only three times before 2005, but almost every week since last summer). Once bundled, different types of mortgages could be sold to different groups of investors.

Investors then goosed their returns through leverage, the oldest strategy around. They made $100 million bets with only $1 million of their own money and $99 million in debt. If the value of the investment rose to just $101 million, the investors would double their money. Home buyers did the same thing, by putting little money down on new houses, notes Mark Zandi of Moody’s Economy.com. The Fed under Alan Greenspan helped make it all possible, sharply reducing interest rates, to prevent a double-dip recession after the technology bust of 2000, and then keeping them low for several years.

All these investments, of course, were highly risky. Higher returns almost always come with greater risk. But people – by “people,” I’m referring here to Mr. Greenspan, Mr. Bernanke, the top executives of almost every Wall Street firm and a majority of American homeowners – decided that the usual rules didn’t apply because home prices nationwide had never fallen before.

And that’s a faulty premise if there ever was one.

Home prices nationwide collapsed during the Great Depression.

Unfortunately only a few people know that: Some, because they remember their parents and grandparents talking about what happened then, others because they live in areas of the rust belt where housing prices never recovered after the steel industry left town.

When I lived in Convent Station housing prices plummeted when several of the major employers in the area (ATT, Henckles, Exxon, Allied Corporation) had major layoffs. Several homeowners defaulted on their mortagages.

I was working in real estate at the time, and several of my coworkers used to be amazed that I didn’t “make” my customers overstretch themselves to the max. A lot of my coworkers’ clients had overstretched themselves to the point where, once they closed on the houses they bought, they had zero money left to furnish the place.

Then those homeowners got laid off. Their houses (which had furniture only in the bedrooms, a table and chair in the kitchen, and a sofa and TV in the family room), when shown to prospective sellers, spelled one word in big neon letters:

But, as the article says, many people live under the illussion that house prices don’t come down:

Based on that idea, prices rose ever higher – so high, says Robert Barbera of ITG, an investment firm, that they were destined to fall. It was a self-defeating prophecy.

And it largely explains why the mortgage mess has had such ripple effects. The American home seemed like such a sure bet that a huge portion of the global financial system ended up owning a piece of it. Last summer, many policy makers were hoping that the crisis wouldn’t spread to traditional banks, like Citibank, because they had sold off the underlying mortgages to investors. But it turned out that many banks had also sold complex insurance policies on the mortgage debt. That left them on the hook when homeowners who had taken out a wishful-thinking mortgage could no longer get out of it by flipping their house for a profit.

Many of these bets were not huge, but were so highly leveraged that any losses became magnified. If that $100 million investment I described above were to lose just $1 million of its value, the investor who put up only $1 million would lose everything. That’s why a hedge fund associated with the prestigious Carlyle Group collapsed last week.

After seeing what happened in Morris County in the late 1980s, here’s what I would advise anyone buying a house:
Don’t think of your home as a speculative instrument; instead think of it as a secure roof over your head.

Since it’s not a speculative instrument, get a traditional mortgage. If you get a fixed-rate 15 yr mortgage and live in the house for only 5 years because you need to relocate, you have not subjected yourself to mortgage rate fluctuations and you are not dependent on real estate values appreciating in order to recover your investment. If you live 15 years in that house, you own the house free and clear. Real estate values may fluctuate but you won’t be losing your house.

The Husband and I have been extremely conservative and have bought the houses we have lived in where the mortgage payments could be met by only one salary – the lesser salary. This is because throughout the course of our carreers we have been laid off and we didn’t want to have to worry about “where is the mortgage money” coming from if one employer went bust.

Your job is secure, you say? Then think about the effect the loss of your spouse’s income, or a devastating illness (on yourself) would have on your ability to pay those bills.

As to thinking that real estate prices can not come down, or that big profits do not come from big risks, reality’s biting now.

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Via Maria, Victor Davis Hanson writes about The Moral Economy (also at Real Clear Politics) :

…despite the politicians’ rhetoric, it is not hard to understand why America is in trouble.

First, there has been too much madcap real estate speculation. In recent years, housing prices were driven sky-high on the expectation that almost anyone, often with little security, could profit by borrowing easy money to buy and sell property.

Too many investors lost the old pedestrian notion that the purpose of a house was to be a home in which to live, to raise a family and to take pride in ownership. Its acquisition used to be a multi-year, if not once-in-a-lifetime, investment — not quite comparable to the easy buying or selling of volatile paper stocks and bonds. Others did not have the means to afford the type of home they purchased, once risky variable interest rates climbed.

Back when I lived in Convent Station, Morris County, NJ, I used to sell houses.

I advised every single one of my two-salaried customers to buy the house they could afford with only one salary.

I always had the customer speak to a mortage rep and discuss not only the no-documentation, low-downpayment adjustable rate mortagages but also the fifteen-year 25% down mortages. Once the customers could make the numbers and see the difference, a surprising number opted for the 15-yr mortagage.

Each one of those customers is free of mortgage debt right now.

A lot of real estate agents (who rely on a commission to make a living, and the commission is paid by the seller most of the time) would insist that their buyers overstretch with the wildest possible financing. Obviously I have a different mindset from theirs.

The reason was simple: I started a carreer in real estate when my husband got laid off from his job at Allied Corporation, and I knew there were more layoffs coming. He was not in a unique situation: within two years, the major employers in the Morris County area, Allied, AT&T, Henkel and Exxon had major layoffs. I mean ALL of these employers, at the same time. I wasn’t psychic, I just had enough contacts that worked in managerial/supervisory jobs in those companies to know there was reason to be cautious.

People who had purchased the most expensive house they could – most frequently having only enough money left to buy a kitchen table and chairs, furnish the bedroom(s) they slept in, and purchasing a sofa and a TV for the family room – were left in desperate straits when one of the salaries disappeared.

There was a glut of ten-room houses on the market. Imagine hundreds of ten room houses with most of their rooms empty signalling to the buyers that the owners are hurting and have to sell. The ones that overstretched ended up owing money to the bank when the houses finally sold at a much lower price than they bought them.

Economies are cyclical. As a homeowner, it is your personal responsibility to you and your family to not gamble on your family’s basic need for shelter.

In the larger issue of the economy, VDH continues,

First, at this late date, Republicans shouldn’t vote for any candidate who promises another tax cut without first offering a matching slash in expenditures. And Democrats should reject any candidate who promises another multi-billion dollar entitlement without detailing how the additional revenue is to be raised.

Second, instead of demanding new billion-dollar programs for health care and education, we should take more responsibility for our own welfare.

Americans need to readjust their budget priorities. One might be able to believe that a $200 dollar a month private catastrophic health plan is out of the reach of most Americans — if we were also to hear that sales of video games, cell phones and plasma televisions have crashed.

Third, we need to ignore the alarmist hysteria, calm down and appreciate that life is better than at any time in the last 5,000 years of civilization. People are living longer; we’re healthier; and millions of Americans have the opportunities to travel, communicate and avoid physical drudgery that were once reserved only for a tiny aristocracy. There is plenty of excess in modern American life that can be shed without real hardship.

Finally, we must view our present economic challenges in a larger philosophical and ethical framework — and redefine success as being able to pay off what we owe, and spend only what we earn.

Amen to that!

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Two dear friends, Siggy and Dr Sanity, are now podcasting.

Yesterday I was Siggy‘s first guest and Dr. Sanity joined in. I had a wonderful time talking to both of them, and am sure you’re going to enjoy listening.

Today Siggy and Pat conversed about defense mechanisms in the new The Sanity Squad podcast.

While you listen, read my latest article at the Star Ledger, This Old New Jersey House.
Update: Those Were The Days, My Friend…

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