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The $1-million home, from fixer to fabulous

Location makes a world of difference in the 7-figure market.

March 02, 2003|Diane Wedner | Times Staff Writer

If you had $1 million to spend, you could buy a 176-diamond Harry Winston necklace weighing in at 100 carats, a 48-foot high-performance sport-fishing boat or five entry-level homes in the Inland Empire.

But selecting a million-dollar home in Southern California is like choosing between a yacht and a dinghy. Or, more precisely, between a five-bedroom estate in Riverside and a tear-down in Pacific Palisades. Either way, $1 million doesn't buy the eye-popping mansion of the past.

Less than 10 years ago, a million-dollar home conjured an image straight out of the television show "Dallas": a 10-room mansion on several acres, with a pool, stables and guesthouse.

Not today. For those able to cash in on last year's equity bonanza, there now comes the realization that crossing the seven-figure threshold often means buying a modest house that's only a tad bigger than the one they're selling. No pool, no grounds, no stable.

"A million dollars isn't what it was in the mid-'90s," said Encino real estate agent Mike Glickman. "It really depends on where you buy."

If it's north Santa Monica, you might get a small tear-down on a small lot, or in parts of Sherman Oaks, a large tear-down on a large lot. In Manhattan Beach, according to Shorewood Realtors agent Phyllis Cohen-Edwards, you're looking at a small three-bedroom home with no yard whatsoever.

But about 60 miles east, you can buy a 6,000-square-foot home on an acre, with six bedrooms, four fireplaces, a pool, Jacuzzi and basketball court in the Royal Hunt Ridge area of Riverside. The house comes with a long commute, however.

The brisk pace of appreciation last year propelled a record number of home sales -- 13,828 statewide, or 45.5% more than the year before -- into the million-dollar-and-up range, allowing equity-rich owners to move up to a level they once would have thought unreachable.

In Southern California, where high-end sales were the strongest in the state during the second and third quarters last year, million-dollar-plus home sales surged 56.5% to 7,611 over the same period in 2001.

"We're selling modest homes, with just a touch of English or Spanish architecture and only about three bedrooms, for $1 million here in La Canada," said Dickson Realtors broker Michael Dilsaver. "We're selling fixers for $1 million; you need $2 million for a nice house on half an acre."

Robert and Jennifer Munakash fully understand the limited buying power of $1 million on the Westside. The couple recently bought their first home, a fixer with a view in Pacific Palisades, for a bit over that amount. Wanting to live within minutes of his businesses, Robert, 34, saved for the down payment while he and Jennifer lived rent-free in an apartment complex Robert managed for his father.

After being outbid on two Westside homes earlier in their search, the couple boosted their $750,000 budget to $1 million for the 2,500-square-foot Palisades home, which will require an additional $130,000 for a new kitchen, master bath, roof and other amenities.

Family helped the pair pull together a 20% down payment, putting their monthly payments at about $4,700. A three-year 5 1/8% fixed loan that switches to an adjustable-rate loan also helped keep their monthly payment a bit lower than most in their mortgage range, but the couple is dreading the $12,500 a year they'll have to come up with for property taxes.

"At first, I didn't think we'd get the loan approved, and I was worried," Robert said. "Then I almost hoped we wouldn't."

Although it's unusual for first-time buyers like the Munakashes to spend $1 million on a home, more move-up buyers are able to take the plunge today.

With prices surging across Southern California, move-up buyers are taking large chunks of home equity and sinking them into down payments on million-dollar homes, lenders say.

The median down payment on a $1-million home was 40%, or $400,000, according to DataQuick Information Services, a real estate research firm. Down payments typically are 20%. About 17% of the million-dollar-home buyers last year paid cash for their homes.

Best of all for many million-dollar-home buyers, the combination of big down payments and historically low mortgage interest rates has allowed them to move up to that end of the market and still make about the same monthly payments as those on their former houses, said Gregory Sayegh, Washington Mutual's sales manager for the southwestern United States.

With so-called hybrid adjustable-rate mortgages, buyers can get rates as low as 2% for five years, for example, then switch to adjustable rates.

Even as new million-dollar-home owners find ways to make their monthly mortgages, many are shocked by property tax bills and hefty maintenance tabs, said Jeff Hyland, of Hilton & Hyland in Beverly Hills.

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