Last week it was confirmed that hedge fund tycoonScott Bommer had flipped his Hampton spread for $110 million, New York state’s second-priciest residential trade ever. In doing so, Bommer appears to have pulled off a neat trick: despite a spate of $100 million residential listings over the past few years, there appear to be very few takers for property at such stratospheric prices.
By Forbes’ count, some two dozen mega-mansions, luxury penthouses, and speculative residences were priced to sell at $100 million or more during the housing recovery. But only a handful of these homes–four that we know of–have actually sold for a nine-figure sum. The remaining $100-million-plus listings have been price-chopped, pulled from the market, or left with ambitious price tags in place.
The quiet disappearance of many of these mega-priced listings from the market underscores what most brokers have known all along: there is no $100 million housing market. Instead, what felt like a steady beat of $100-million-plus trades—a $117.5 million deal in Woodside, Calif., in late 2013, followed by a $120 million sale in Greenwich, Conn., a $147 million trade East Hampton, N.Y., then a $100.5 million Manhattan apartment sale at the end of 2014—were in fact a series of closely spaced anomalies. “All those transactions were one-offs,” says appraiser Jonathan Miller of Miller Samuel. “It’s not that the market has physically changed, it’s that there’s more visibility. The word is out.”
Rising global wealth and unstable foreign markets have in recent years led foreign nationals to invest their cash in real estate in Manhattan, Miami, and to a lesser degree Los Angeles. With many of the deals hidden under the shield of limited liability companies, it was hard to know who was buying many of the highest-priced listings, or how deep the ultra-luxury market ran. In New York and Miami, developers rushed to create posh penthouses as Los Angeles speculators built modern mansions in an attempt to grab the cash.
Now there are plenty of signs that the luxury market has cooled off–and not just at the $100 million price point. In Manhattan, where so many luxury towers are in the pipeline that there is now a glut of supply, a total of 190 apartments priced at $10 million or higher sold in 2015, down from 214 in 2015, according to CityRealty, which tracks co-op and condominium sales in Manhattan. The number ofcontracts signed at $10 million and above dropped 16% in 2015, according to Oshan Realty, who tracks sales at $4 million and higher. It took two months longer to sell a luxury property in 2015 compared to 2014.
In Miami, sales slowed last year, according to Douglas Elliman’s latest market report, with the absorption rate (the number of months it would take to sell all listings) rising to 18.3 from 11.3 months a year earlier. The strong dollar is dissuading Latin American buyers just as 25,000 new condo units are in the pipeline (approved or already under construction), according to construction tracking site CraneSpotters.com. For big-ticket sales like the $60 million for the Faena House penthouse in Miami Beach, which closed in September, buyers actually committed two or three years ago. “I think the peak buying period has already passed us in South Florida,” says Peter Zalewski, who owns CraneSpotters, adding of the high-end market:”It’s effectively dead on arrival.”
Only Los Angeles, where the luxury market had its best year on record in 2015, seems immune from the high-end chill. There were 482 closed sales over $5 million last year on the west side of Los Angeles, compared to 442 in 2014. Thirty-seven were for $20 million or higher, more than double the 14 at that price point in 2014. Notably, most of the $20 million-plus sales were to Americans; four were to Chinese and six were to nationals of other countries.
“We had a wonderful year last year,” says Steve Frankel, an L.A.-based luxury broker with Coldwell Banker Previews International. “We’re not completely dependent on China taking a downturn. There’s plenty of high-end money in Los Angeles and also from people moving from New York.” This year is off to a slower start, with luxury sales volume slightly down in January 2016 compared to one year earlier.
With the luxury real estate market crashing back to Earth, at least some owners seem willing to price-chop their listings. Just last week Celine Dion cut the price of her Jupiter Island home in South Florida by $30 million to $45.5 million; this week the Wall Street Journalreported that Julia Roberts lowered the price tag on her Kauai retreat for the second time, from $26 million to $21.95 million. They are among several celeb-pedigreed properties, Variety reports, to undergo price chops.
Some developers of new projects are also getting more realistic with pricing. HFZ Capital Group’s paid one of New York City’s highest prices ever for a piece of land along the High Line, but the new Bjarke Ingels-designed tower to be built on the site reportedly won’t feature $10 million apartments. HFZ plans to build smaller luxury apartments at a lower price point, according to Bloomberg. There are signs of pricing easing in luxury resales as well.
Only in Los Angeles, where luxury is still booming, have speculative builders continued to introduce residences priced at $100 million or higher. In January Michael Palumbo and Jay Belson listed an unbuilt 29,600-square-foot Contemporary in Bel Air for $100 million, fully built. Alternatively, buyers can have the lot and fully-engineered plans for $32 million. At the Domvs London’s Park Bel Air development, a yet-to-be-built 42,500-square-foot main home and a 15,000-square-foot guest home costs $115 million. Alternatively, the empty lot plus plans can be purchased for $45 million.
Only one completed home has hit the market with a nine-figure price tag so far in 2016, and the Playboy Mansion (asking $200 million) is widely viewed to be overpriced. This year’s next-priciest listing for a completed home–a Manhattan townhome listed for $84.5 million–is far behind that nine-figure sum.
The new modesty is a dramatic shift from recent years, when it felt as though listing at a watermark price was a favored marketing strategy. There was billionaire investment manager Vincent Viola, who in December 2013 wrapped his Upper East Side townhome in a big red bow and a $114 million price tag. That listing was reduced to $98 million before being quietly pulled from the market. Million Dollar Listing’s Ryan Serhant didn’t even have a penthouse to sell, but that didn’t stop him from putting three units in Battery Park for sale at a combined price of $118.5 million in June 2014. Nine months later, the trio was reduced to a duo and the price tag lowered to $75 million.
June 2014 was a banner month, with three homes debuting north of $100 million: the 60,000-square-foot Le Palais Royal in Florida with a price tag of $139 million, a 238-acre Montecito ranch for $125 million, and the penthouse at Manhattan’s 520 Park Avenue for $130 million. The California and New York properties remain at those prices; the Florida home now includes more land and has a higher price, $159 million. Billionaire Jeff Greene’s ambitiously priced Palazzo di Amore, which debuted at $195 million in November 2014, was price-chopped to $149 million in September, while the $195 million Ziff family compound, which hit the market in April 2015, holds steady at its nine-figure price.
Of course, nothing can stop developers from being ambitious. Chetrit Group’s forthcoming Sony Building is slated to be priced at $150 million, though to be fair that decision was made before Manhattan’s softening luxury market became so glaring. And there could always be more one-off record prices. For example, in real estate circles there is currently the wild but unconfirmed rumor that $200 million was paid for multiple penthouses at Vornado’s rising 200 Central Park South tower.
*Our tally of the priciest home sales in the U.S. ever includes only residential estates. It therefore excludes the four separate purchases totaling $129.6 million that billionaire Ken Griffin made in 2013 for three homes on four lots in Palm Beach. It does not include billionaire Ron Baron’s $103 million purchase of 40 acres of undeveloped East Hampton land in 2007, nor billionaire Ron Kroenke’s recent acquisition of Texas’ Waggoner Ranch, listed for $725 million. We have also left off the list the sale of Los Angeles’ 50,000-square-foot Fleur de Lys, which traded hands for $88.3 million; a reported $102 million price likely also included furniture.
- Source: Forbes