How did The Brady Bunch do in The Real Estate Market

Remember The Brady Bunch the iconic television series of the late 1960’s. Well the famous house (the façade shown in the opening and closing credits) is up for sale; the first time since 1973.

Now I always questioned why Mike, an architect would design the children’s bedrooms to be triple occupancy and share a Jack-and-Jill or a Greg-and-Marcia bathroom. Mike and Carol’s bedroom had an en-suite and Alice had her room (see floor-plan link below). Yet the children ensconced in their shared bedroom until Greg had the brilliant idea to convert Mike’s study and later the attic to his own pad including beads and mood lighting. And those kids having to play in the yard with fake grass. I assume Mr. Phillip’s; Mike’s boss was paying him well.

Floorplan of the fictional Brady Residence

The Listing as presented on Zillow: 11222 Dilling Street, North Hollywood, CA 91602

Do to the popularity a low fence had been installed: Brady House Then and Now

Back to the real estate. While the home’s façade was famous the actual filming of the series was on a lot and not in the house. Now the house has not changed much since 1973 as the interior shots show via Zillow.

I was curious on how the fictional Brady’s would have done if they actually owned the house. Now realistically the kids would have moved on by now, or so I hope. Or Jan stayed at home with the parents to take care of them. Greg and Carol would probably be challenged to install a stair-lift on the contemporary staircase. And Alice’s room would probably now be the room of their live-in aid or Jan’s abode.

  • In 1973 the house was purchased for $61,000
  • Adjusted for inflation, that $61,000 would be $346,200 today.
  • The asking price is $1,885,000.

Thus not a bad windfall. The sad news is most likely the next owner may consider razing the home due to its 12,500 SF lot in Studio City, which is a geographically most attractive area of West Los Angeles. If one were to renovate to today’s code and tastes, most likely $400K or higher. Of note being the most photographed house in the United States only 2ndto The White House (the house is surrounded by mature shrubs which has not dissuaded visitors) you are guaranteed all day voyeurs.

Thus The Brady’s at asking will net over $1.5M in 2018 dollars before commissions.

If you may be interested my firm affiliation  Engel and Volkers does have shops in the Los Angeles area.

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Another Luxury Listing Shows Stress on the Upper End of Market

OK, I am the first to admit on occasion I drive down 7th Avenue from Cherry Creek to Corona Street so I can access the Safeway at 6th Avenue and Corona Street easily (yes I am still mourning the loss of my neighborhood Safeway). I drive at a leisurely pace taking in the majesty and prestige of one of Denver’s finest parkways. West of Williams Street when the Avenue becomes a standard width roadway the houses still continue to impress.

That is why I have been intrigued with 1433 East 7th Avenue. A home, which exudes gravitas. A nice corner lot, raised from the sidewalk coupled with mature landscaping can easily be at home in a many pre-war cities in the Northeast of for those who have relocated from the Bay Area, think Pacific Heights lite or if from Los Angeles, Beverly Grove.

With just shy of 6,000 SF finished including the basement and a manageable 7,250 SF lot (honestly I have mixed opinions concerning corners) larger than what I was and continue to search for but as mentioned from the exterior, gravitas. The stately yet manageable interior is perfect for many prospective buyers in this broker’s opinion from the center-hall plan to the upscale kitchen to the preservation of design details including wood beams and so forth. Updated yet respectful of its history.

I have kept my eye on this house since I first watched it come on the market in April 2011 as the Denver market was finally awakening from the reckoning of the Great Recession. At the time up-market listings continued to struggle to find a buyer however if priced correctly, they sold and some very astute buyers have probably done quite well on paper to date.

  • In April 2011 the home sold for $1,655,450 off an asking of $1,750,000.
  • In 2018 Dollars: $1,824,189

 

  • In August 2015 the home sold for $2,195,000, its asking price after being on the market for approximately two weeks and no seller concession! Many would argue that summer was the beginning of the major ascent of the market from realistic pricing to exuberant listing prices.
  • In 2018 Dollars: $2,295,481

Thus in a span of 4 years the sellers pre-commission made $539,550 not accounting for inflation. Even considering broker commissions (assume $130,000 at 6%), the sellers most likely netted approximately $400,000 of $100,000/yr concerning their residence.

I do not know if the sellers renovated or did other improvements, as I have not toured the home in years. However based on images and broker comments I am assuming any updates made were minimal.

Let’s fast forward to May 2017, just shy of 2 years later the home reappears on the market asking $2,500,000. Of note the home was purchased for $2,195,000 two years prior or asking for a $300,000 gain in 2 years of $150,000/year. In August the home is re-priced at $2,395,000 and the listing eventually expired.

As of January 2018 the house is back on the market with a revised asking price of $2,299,000, $96,000 less than the previous ask.

Let’s assume the seller does indeed get $2,299,000 for the sale price. When factoring a 6% commission ($137,940), their net is approximately $2,161,060.

 In my analysis a few issues arise as follows:

Seller paid $2,195,000 in August 2015. Assuming it sells for asking (doubtful as already 52 days on market), after commission their net is below their purchase price 2.5 years prior; a recap:

  • August 2015: Paid $2,195,000
  • January 2018: Asking $2,299,000
  • Commission 6% ($137,940)
  • Net at Asking: $2,161,060
  • Thus seller would walk away with a $34,000 Gain!

 Yet the gain of $34,000 assumes an at asking closing price. Again after almost two months on the market, doubtful but it could happen.

Now two additional issues:

Inflation: When purchased on 2015 for $2,195,000 based on 2018 Dollars that would translate to $2,295,481, thus based on inflation, already a real-dollar value loss even if sold at asking.

Real Estate Taxes: When the home first came on the market in 2011 the taxes on the house were listed at $8,127 or $677/month. At present the taxes in the house are listed at $13,779 or $1,148.25/month, a difference of $471.25/month. Granted at this price-point should not be an issue for the buyer (except the issue concerning tax deductibility of real estate taxes but will not go there in this blog post).

One of my friends from the East Coast is a stock trader and refuses to purchase a home in his suburban New York City community. His rationale; he can earn more money in the market versus his primary residence which he views as a money-losing proposition or at best matching inflation over the long-term and coupled with exorbant real estates taxes,he prefers to rent. So I asked him the following:

If one bought $2,195,000 of the Dow Jones ETF (basically a vehicle that tracks the DOW which I understand is not the best gauge of the stock market but is one of the most recognized) in August 2015 what would it be worth today?

  • In August 2015 the DJ ETF was trading at $166.35 / 13,195 Shares
  • On February 27th, 2018 the DJ ETF was trading at $255.33
  • The 13,195 Shares today would be worth $3,369,097
  • Total Gain: $1,174,097 or close to $42,000/average per month increase. Yes we are all aware of the gains over the past 12 months skewing the valuations.

My analysis tells me the follows:

  • The upper-end of the market is showing weakness and fatigue and thus slowing.
  • The belief that housing values can only increase is a fallacy as the upper-end is usually the first market segment to show signs of impending weakness.
  • The pinnacle of housing market values is behind us.

Now for my peer brokers who will advise but one needs a residence to live in; I cannot agree more both as a broker and one who is actively looking for a residence to purchase HOWEVER, let’s do the math:

The gain of $42,000 month is commendable yet most likely an anomaly as many argue the market is overheated and a respected wealth manager I know advises: “Trees do not grow in the sky” thus such oversized gains should be viewed within context.

However, that $42,000/monthly gain if generating 4.5% would equate to approximately $1,900 month. While one could not rent 1433 East 7th Avenue for $1,900/month. Yet when generating $42,000/month in gains, I assume one could dip into the monthly for a similar home in the $5,000-$7,500/month range and still have a nice return on investment.

Please know I am NOT a pessimist. However I have personally been through three (3) business cycles during my time in Denver and have watched real estate values rise and fall. While I do not except an across the board dramatic downtown of valuations; with the potential for rising interest rates for both mortgages and bonds, realignment of equity valuations to more traditional patterns, potential inflation and out-migration of population from Colorado, a 10%-20% downward valuation concerning housing valuations may not be out of the norm, it has happened before and history can repeat itself. Again, just one humble brokers opinion.

 

 

 

 

Your Budget is $1M to $2M. Here is What You Can Purchase in Denver and Beyond

It is no secret among my peer brokers the upper-level of our local Denver metro market is starting to show signs of stress. I am the first to admit inventory continues to be historically low and in the most desirable neighborhoods; a residence if priced correctly  will indeed go under contract in a matter of days.

However there have been some luxury properties that have sold at a loss including within the hot Denver Country Club neighborhood. 575 Circle Drive which sold in February 2013 for $6.8M ($7.15M in 2017 inflation adjusted dollars) was recently resold in December 2017 for $6.5M excluding broker commissions. In tony Cherry Hills 5500 E. Quincy just hit the market asking $4.97M. The seller purchased the property in 2002 for $4.5M or $6.16M in 2018 inflation adjusted dollars thus based on asking factoring in inflation, a loss.

Now luxury and price-point can vary widely. Around the world, a single square foot in a luxury home varies dramatically — from $200 in Monterrey, Mexico, to $4,500 in Monaco. The highest price paid for a home in 2015 was $194 million for the Barker Road Estate in Hong Kong purchased by Jack Ma founder of Alibaba and it needed work!

Recently I have been researching what one can purchase for $1M to $2M in various cities keeping in mind similar neighborhoods based on location to downtown, prestige, history and so forth. Not surprisingly even at the high-end Denver in both a square-foot basis and quality of life show a better value. Yet when average income for the neighborhood is factored in the value proposition erodes. In laymen terms the upper-end of Denver’s housing market is more costly when factoring in average incomes for the neighborhood. In addition percentage gain may be somewhat irrational even accounting for the Great Recession and continued low inflation and historically low-interest rates.

Please note I did not use average metro area household incomes instead opting for neighborhood specific as metropolitan demographics vary wildly. In addition both New York City and San Francisco have “rent-control” laws, which many economists argue inflates the value of free-market residences i.e. sans rental rate constraints.

Below at the findings:

Denver: 446 Lafayette St/ Denver Country Club Neighborhood

  • Size: Single-Family 3BD/2.5BA / 2,646 SF including a small basement
  • Asking: $1,200,000 (last sold in June 2013 for $875,000)
  • Median Income: West Country Club $54,417

A charming turn of the 20th Century Victorian including an expansion designed by locally well-respected architect David Tryba. A pretty block north of the Country Club Gates the block is mostly single-family homes of moderate size. A strong stable neighborhood demand is strong even during times of recession. Easy access to downtown to the northwest and Cherry Creek North to the east.

New York: 2 Beekman Place/ Beekman Neighborhood

  • Size: Cooperative Apartment 2BD/2BA / approx. 1,200 SF
  • Asking; $1.395,000 (last sold in January 2013 for $1,165,000)
  • Parking: available off-site at an additional charge
  • Median Income: Beekman/Sutton $136,300

Designed by one of the foremost pre-WWII architects in New York Rosario Candela buildings are in-demand as the apartments feature gracious proportions not usually found in more contemporary structures. Located in prestigious Beekman Place this enclave of a neighborhood is literally 3 square blocks dominated by pre-WWII apartments buildings and townhouses including a well-known Paul Rudolph creation all adjacent to the East River. Just north of the United Nations and an easy 4 crosstown block walk to Midtown Manhattan.

San Francisco: 2055 Bush Street/ Lower Pacific Heights

  • Size: Condominium Apartment 3BD/3BA / 2,532 SF
  • Asking: $1,198,000 (last sold in June 2001 for $747,000)
  • Parking: available off-site at an additional charge
  • Median Income: Pacific Heights $130,900

Considered one of San Francisco’s premier neighborhoods Lower Pacific Heights has easy access to the Central Business District as well as Fillmore Street, Japantown and neighborhood parks. A two-level condo this expansive unit, one of 4 in a 1904 building brings together classic design and spaciousness within a condominium yet feeling like a single-family home.

Los Angeles: 6747 Gill Way/ Hollywood Hills

  • Size: Townhouse 3BD/3.5 BA /1,718 SF
  • Asking: $1,225,000 (last sold in Nov 2016 for $1,125,000)
  • Parking: 2-Car Attached Garage Median Income:
  • Median Income: West Hollywood $67,500

Located in the Hollywood Hills this townhouse constructed in 2015 would feel right at home in Denver’s Cherry Creek North neighborhood. Similar in design to the townhouses on 4th Avenue between University and Josephine the layout includes a guest/office on the lower level and two master suites above. While close to a freeway highway impact is minimal. Newer construction, energy-efficient and close to Hollywood and easy access (by Los Angeles standards) to downtown as well as to the Valley.

Concerning the home pictured above, asking was $200M, sold for $100M. Curious about the location and provenance, send me a note.