Housing Market Slump Not Hitting Most Expensive Homes
Call it quaint, but there was a time when a $75 million house made news. In 2005, that’s what happened after the Three Ponds Estate in Bridgehampton, N.Y., landed at the top of USA Today’s list of most expensive homes in the USA.
No more. That number is pocket change compared with what the market currently bears. This year, the country’s priciest properties include a $135 million Aspen, Colo., ranch and a $125 million Versailles-inspired estate in Beverly Hills.
Why such price acceleration in the top-flight housing market? The simple answer: a good mega-mansion is hard to find.
“Try to find eight or 10 acres in the middle of the Hollywood Hills,” says Mauricio Umansky, a broker at Hilton & Hyland. “God’s not making any more land. [Trophy properties] are a true microeconomy with much less supply than demand.”
In addition, the financial muscle of flush buyers with no need for a home mortgage loan allows for quite a bit of upward price flexibility.
Twenty percent of a household’s wealth consists of home equity, according to the National Association of Realtors. Using that logic, steel building magnate Lakshmi Mittal — worth a mere $32 billion — could easily afford $6.4 billion in housing.
“The net worth of the buyers and the sellers is such that they can do whatever they want,” says Joshua Saslove of Joshua & Co., an Aspen-based affiliate of Christie’s Great Estates.
“The rules of the regular real estate market don’t apply.”
Sellers who find themselves able to piece together huge pieces of land in desirable locations can expect large listings.
The latest addition to the $100 million-plus club is Suzanne Saperstein’s Los Angeles jewel aptly named the Fleur de Lys.
Listed at $125 million and built to look like Louis XIV’s palace at Versailles, the 45,000-square-foot home took five years to construct following the purchase of five acres in Beverly Hills during the 1990s by Saperstein and her now ex-husband, billionaire David Saperstein.
In the Florida housing market, beachfront land drives the high-end market.
“There’s nothing under $20 million that has 120 feet of ocean frontage in Palm Beach,” says Cristina Condon at Sotheby’s International Realty. “[Trump’s house] has 475 feet on the ocean.”
While it’s not news that private jets and telecommunications make the world smaller, an growing number of buyers for trophy properties are international.
This, says Peter Kozel, executive managing director of Newmark Knight Frank, an international real estate appraisal firm, “is easy to understand in light of the cheap dollar.”
What better place to develop a foothold in the U.S. than in the most desirable neighborhoods of Malibu, Aspen, Palm Beach or the Hamptons?
“Trophy properties can serve as a branding for big, new money,” says Dolly Lenz, a broker at Prudential Douglas Elliman.
“For a Russian oligarch, a trophy home in New York or Palm Beach is a way to brand themselves in the U.S.”
As a result, mortgage brokers and relators are ratcheting up their efforts to reach out to potential buyers all around the world.
“International marketing has been very good for our [Florida] properties,” says Condon. “We advertise in Russia, Asia and the Middle East.”
But problems can arise when it comes to verifying international buyers. In order to schedule a showing of a $65 million or $125 million home, brokers need to know you can afford to buy the house beforehand.
If you don’t appear on the Forbes billionaires list, a simple note from a Swiss banker will do.
“The hardest thing for me is to differentiate the people who contact me, to find out if they’re real,” says Lenz. “They can get very annoyed, but I need to know they can write the check.”
Ah, yes, the check. Sometimes there is no need. After all, when an international jet-setter pays $100 million for a third or fourth home, why take out a mortgage loan?
Many top-tier transactions are “done in cash,” says Condon.
As for which mega-mansion will sell first, it’s anyone’s guess.
The decision to purchase a home of such caliber comes down, more than anything, not to mortgage rates, but to personal preference.
“Think of it this way,” says Umansky.
“I could put three mega-yachts in a line — one contemporary, one traditional and one Mediterranean. I don’t know which one is going to sell because I don’t know which one Larry Ellison or Bill Gates is going to pick.”
SOURCE: USA Today