Lists of Los Angeles foreclosed homes will soon include a lot of mansions if speculative builders and investors fail to pay their construction loans.
According to high-end realtors in the area, there are hundreds of multimillion-dollar houses in Southern California that are being offered for sale but are not being purchased because prospective buyers are taking their time. As speculative builders and investors continue to cut their prices, buyers are waiting for prices to go down further.
Prices of luxury homes are going down, according to California realtors, because of efforts by speculators to sell their properties even at a low cost to be able to pay their construction loans.
But as experienced by luxury property investor and builder Larry Igarashi, even cut-rate prices have not enticed the wealthy to buy.
Igarashi even held an auction for one of the mansions that he built, but even the highest bid was too low compared to his construction costs. The highest bid for the six-bedroom mansion he once listed for $5.7 million was only $3.1 million. Another mansion that he previously priced at $9 million will be auctioned off at a starting price of $3.9 million.
According to analysts, speculative mansions built with high-cost construction loans are the ones likely to enter lists of Los Angeles foreclosed homes. The ones owned by wealthy individuals who can afford to wait for months and years will likely be the ones left to weather the storm of sharply falling prices.
But as the number of palatial homes for sale increase and the number of wealthy buyers interested in buying decline, sellers have no other recourse but to cut their prices.
Esmael Adibi, economist at Chapman University, said that sellers need to reduce their prices in order to move their properties because of the rising number of houses priced at more than $3 million entering the market.
Aside from high-end homes in Los Angeles, there are plenty of multimillion-dollar homes in other parts of Southern California. As of date, there are about 39 luxury homes priced at more than $3 million in Newport Coast and Newport Beach and 27 mansions in Laguna Beach.
According to Pasadena architect Stefanos Polyzoides, an advocate of compact residences, speculative mansions that cannot be solved can be converted for other uses. He cited the mansions in Newport, Rhode Island which were converted into inns and condo complexes when they were not sold as luxury homes.
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