Valerie Fitzgerald | Beverly Hills & West L.A. Real Estate

Though the housing market is displaying some signs of health, economists say they could be misleading.

Home prices in Los Angeles County edged up in October, while sales volume continued a slow downward drift after sizzling through the summer. The increasing prices represented the continuation of a trend that started in May after a slide of almost two years.

The median price of a home was $340,000, up $5,000 from the month before, according to data supplied to the Business Journal by HomeData of Hicksville, N.Y. Adjusting for the difference in the number of selling days per month, sales volume dipped slightly – about 1.2 percent – representing the second monthly decline in a row.

Experts viewed the rising prices as further evidence that the real estate market has stabilized, at least temporarily. But some cautioned that it may be falsely propped up by government stimulus programs that eventually will end.

“About 15 percent of the mortgages in California are not performing right now,” said Christopher Thornberg, principle analyst and founder of Beacon Economics, a West L.A. consulting firm specializing in real estate. “Eventually the properties that those mortgages represent will come on the market, and when they do all hell will break loose.”

According to Thornberg, the rising prices and sales volumes are indicative of an “artificial stability” in the housing market driven by, among other things, a logjam in the foreclosure process created by a state moratorium on foreclosures, the increasing reluctance of banks to move forward on foreclosures and the federal push for loan modification programs that allow homeowners to avoid foreclosure.

Additional factors, he said, include a temporary first-time buyer’s tax credit as well as “ridiculously low” mortgage interest rates created by the federal government’s massive purchase of bad loans.

“What I’m trying to point out is that the real estate market is not healthy,” Thornberg said. “This is a false bottom that will only get worse.”

The most dramatic change in the monthly data was in Palos Verdes Estates, where sales volume increased by 533 percent. Other notable spikes were seen in Maywood, Signal Hill, parts of Culver City and the Exposition Park area of Los Angeles.

Some experts attributed it to activity at both the high and low ends.

“We’re seeing an increase in low-end buyers benefiting from the one-time credit,” said Robert Foster, executive vice president and regional manager of Coldwell Banker Residential Brokerage in Los Angeles.

At the other end of the spectrum, he said, high-end buyers were still getting deals on what they previously couldn’t afford.

Los Angeles County’s most notable median price hikes occurred in South Park, up 213 percent, and Topanga, an increase of 138 percent.

By DAVID HALDANE

The Valerie Fitzgerald Group specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of Heart and Sold: How to Survive and Build a Recession-Proof Business.

In recent years, millions of Americans looked at their houses and saw big, fat piggy banks. And it occurred to them to take out big, fat new mortgages.

Few did it on the scale of Ronald Burkle.

Mr. Burkle, the grocery-store billionaire, has $56 million in loans against two houses, including $9 million added last year. One is his iconic Beverly Hills mansion, "Green Acres," a 44-room Italian Renaissance palazzo built in the 1920s by silent-film star Harold Lloyd that more recently was a favorite overnight rest stop for Mr. Burkle's buddy, Bill Clinton.

Mr. Burkle declined to say how he is using the money. There is no indication he needs it to pay the water bill.

Traditionally, the super-rich didn't really bother with mortgages. Home loans were for people who carry lunch buckets, not captains of industry.

That changed in the boom years -- and it is still going on. Recent big-time home borrowers include fashion entrepreneurs, hedge-fund titans and baseball-team magnates.

Home loans "are a really good source of cheap capital," says Robert Maguire, a real-estate tycoon who built some of the tallest officer towers in L.A. He has borrowed some $50 million against several properties, including his beach house, which features huge picture windows framing the Pacific near Santa Barbara, Calif.

He has been raising money with an eye toward regaining control of his property firm, Maguire Properties Inc., which he lost during the real-estate bust. Even as he borrows against his beach retreat, Mr. Maguire is trying to sell it for $29 million.

By hocking the house, so to speak, he and others say they are simply borrowing low in hopes of investing in something they believe will yield a high return.

And mortgage rates are near historic lows. In April, Mr. Burkle renegotiated his $56 million in adjustable-rate mortgages down to 3.25%, which was in line with adjustable home loans of a more mortal size. Recently, his rate adjusted down to about 2.25%, based on publicly available documents.

It puts Mr. Burkle's mortgage interest charge at $105,000 a month, give or take.

Like ordinary home loans, megamortgages flourished during the boom earlier in the decade. The number of home mortgages in the $3 million-and-up category soared to about 3,000 in 2007, from only 1,100 or so in 2004, according to LPS Applied Analytics, a unit of Lender Processing Services Inc.

Not surprisingly, mammoth home loans got scarce during last year's near-unraveling of the world economy. But now they are showing signs of coming back.

U.S. Trust, which is the private wealth-management arm of Bank of America Corp., has seen a 33% rise this year in home loans, compared to last year, with the average size over $3 million. Jan Reuter of U.S. Trust says clients are using the cash to buy stocks and other assets. Other major lenders tell a similar story.

The federal tax code doesn't smile upon giant mortgages. It allows mortgage interest to be deducted only on home borrowings of about $1 million or less.

But there are ways around that, says David Adamo of Luxury Mortgage Corp., a mortgage-banking firm in Stamford, Conn. If the cash is used for investment purposes, the loan interest could be used to reduce taxes on income from the investments, he says.

Of course, plenty of rich people still avoid home loans. Partly, it is an image thing. Maria Elena Lagomasino of GenSpring Family Offices LLC, a Palm Beach Gardens, Fla. wealth-management firm, says a mammoth mortgage implies to her that someone is "borrowing because they have to."

One rub for zillionaires who value their privacy: Mortgages are a matter of public record.

One of New York City's classiest new addresses is 15 Central Park West -- which along with the requisite pool, health club and movie-screening lounge, offers "30 climate-controlled wine rooms" with "solid oak cabinetry." Since the start of last year, five buyers there have taken out mortgages ranging from $10 million and $35 million, according to public information collected by First American Corps.' RealQuest data service.

Not all megamortgages have happy endings. Since mid-May, about a dozen home loans of $3 million to $9 million have been involved in default or foreclosure actions in Malibu, Beverly Hills and other fancy areas around Los Angeles, according to public data gathered by First American. None of the giant mortgages over $10 million examined in detail are in default.

Max Azria, chief executive of privately held BCBG Max Azria Group Inc. clothing company, took out a $25 million mortgage in April 2008 on a 12-bedroom, 13-bath West Los Angeles mansion, once home to the late TV producer and novelist Sidney Sheldon, according to public records. He bought the house in 2005 for about $16 million.

Last year, Moody's Investors Service, the credit-rating company, said BCBG could face a cash crunch without financial help from Mr. Azria. A BCBG spokesman said Mr. Azria used the mortgage money for renovations and "additional personal liquidity," and that the company restructured and improved its finances this year without funds from him.

Israel Englander, who runs the Millennium Management LLC hedge-fund operation in New York, last year pledged a home in a wooded, estate-filled section of Greenwich, Conn., as part of the collateral for a revolving credit line of up to $100 million.

Mr. Englander declined to comment. There is no indication he needed the money for anything other than investment purposes.

Besides signing multimillion-dollar baseball players, Frank and Jamie McCourt have accumulated homes with multimillion -- dollar mortgages since moving to Los Angeles in 2004 to run the Los Angeles Dodgers. They bought homes and adjacent properties in both West Los Angeles and Malibu.

Their 15,000-square-foot, 10-bath L.A. manse, located in the prestigious Holmby Hills neighborhood across the street from the Playboy Mansion, was purchased in 2004 for about $20 million. For good measure, the McCourts spent $14 million to upgrade the place, including tearing out the tennis courts to install an indoor, Olympic-size swimming pool.

All told, the homes carry some $28 million in mortgages. The houses, which are in Mrs. McCourt's name, are now part of a nasty divorce battle between the couple, who are fighting for control of the Dodgers.

The McCourts declined to comment.

Amid the acrimony, the estranged couple did agree on one housekeeping matter at a court hearing Thursday: Mrs. McCourt could have exclusive access to the indoor Olympic pool. Swim hours for her are between 6 a.m. and 2 p.m.

—Jonathan Karp contributed to this article.

Write to John R. Emshwiller at john.emshwiller@wsj.com

As strong market reports on manufacturing, construction and contracts to buy new homes show renewed optimism, The Carlyle Residences, a development of The Elad Group of New York’s Plaza Hotel, sees an influx of international buyers contributing to analysts’ reports.

From SeattlePI.com

Undoubtedly consumers have better access to information on real estate listings today than back in the days when they had to search through want-ads. No one can deny that. But I think that most consumers think that what they have is better than what it really is. They think that because they don't have access to professional tools. They don't know what they're missing.

Recently I did a quick review of five local websites aimed at consumers. All the sites were owned by members of the NWMLS. Thus, Zillow, Trulia, Google, etc. were not included. What I found was that no one site was clearly better than the others, and that all the sites have deficiencies. For example:

Of the five sites, only one allowed you to enter precise amounts for your price range. One site had starting predefined ranges in the lower price ranges as large as $50,000.

Of the five sites, one didn't even have a filter for building square footage, and one had a predefined range limit as high as 500 square feet. Same for lot square footage, where one site had no filter and another had half acre limits!

Only two of the five sites allowed consumers to enter a maximum number of bedrooms. None of the sites allowed someone to enter a maximum number of bathrooms (although admittedly that's not all that important). One site had no factional bathroom choices at all, and only one had 1/4 bathroom search options.

Some of the sites had useful choices like waterfront, new construction, view, parking, single story, and one even had a "walking score" which is something not even the NWMLS offers. Only a couple allowed searches of pendings and/or sold properties. One had a feature like the NWMLS's Locator program which allowed the user to create their own custom defined map area.

None of this comes close to what an agent can do searching the NWMLS system through Locator. There are probably well over 100 categories of "additional criteria" that an agent can use to include or exclude properties. Of course, consumers can search through more listings, which would merely require an investment of time, but I really have to wonder why they still have to do this? Is there some reason that the consumer sites cannot be better?

The Valerie Fitzgerald Group specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. Contact us at 310-285-7515 or email at info@valeriefitzgerald.com.

Valerie's also the author of the book from publisher Simon & Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.

U.S. home prices appear have to scraped a bottom, with a leading national index showing three consecutive months of gains this summer.

The Standard & Poor's/Case-Shiller index of home prices in 20 metropolitan areas showed a 1% increase in the seasonally adjusted median price of homes from July to August. The index has posted month-to-month gains since June.

"I think we have reached some kind of bottom," David Blitzer, chairman of S&P's Index Committee, said. U.S. home prices continued to decline in August, falling 11.3% when compared to the same month a year earlier, though not as steeply as past months, according to the data released this morning.

"This one looks real at this point," Blitzer said. "The question more to me is whether this is going to sort of flatten out or if it is going to go straight up; if you get a month that goes down [going forward], I don't think that it is much of a concern."

Looking at the seasonally adjusted monthly data, 17 of the metro areas tracked by the index showed improvements in August when compared to July. Meanwhile, 19 out of the 20 markets showed moderation in their year-over-year rates of decline.

As of August, home prices across the United States are at their pre-bubble levels of autumn 2003, according to the index.

Southern California cities -- San Diego and, in particular, Los Angeles -- have seen notable gains, separating themselves from other Sun Belt cities, including Las Vegas and Phoenix, Blitzer said.

Los Angeles area prices in August improved 1.3% over July on a seasonally adjusted basis. The median price was down 12% when compared to the same month a year earlier. Home prices in San Diego rose 1.5% on a seasonal basis from July but fell 8.9% when compared to August 2008.

San Francisco area homes gained 2.6% on a seasonally adjusted basis over the month of July, an increase second only to Minneapolis. On a year-over-year basis, San Francisco area homes declined 12.5% in August.

Only the cities of Las Vegas, Charlotte, N.C., and Cleveland reported monthly declines in August. August home prices in the Las Vegas area dropped 0.3% when compared to July. Las Vegas also had the biggest year-over-year drop, falling 29.9% in August.

Las Vegas is "reeling" from the drop in tourism, oversupply in housing, construction crash and high unemployment, Michael D. Larson, a housing analyst with Weiss Research said.

Phoenix fared better, posting a 1% median home price increase in August over July. It also saw the second largest drop in the year-over-year number, down 25.1%.

Housing market analysts cited the federal government's $8,000 federal tax credit for first-time buyers as an important factor in the housing market's recovery of late. The credit applies to home sales that close through Nov. 30 and is part of the $787-billion federal stimulus package enacted in February.

Larson of Weiss Research said that while the credit played an important role, the most significant factor driving the housing market was the relative affordability of homes.

"The real question is what happens now," he said. "You are going to see some give-back, you are probably going to see a pause in the recovery. But I think the fundamental story is that housing got way too expensive and now you could argue that housing is cheap again and that is what it boils down to in 50 words or less."

alejandro.lazo@latimes.com

The Valerie Fitzgerald Group specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of Heart and Sold: How to Survive and Build a Recession-Proof Business.