People love luxury real estate. The sprawling abodes of the ultra-rich are America’s version of the castles and palaces of the Old World. Television shows like “World’s Most Expensive Homes” and “Million Dollar Rooms” allow us to vicariously experience a level of decadence that is far out of reach for the average homebuyer. In-home IMAX theaters, heated pools on the balcony, and wine cellars bigger than the average house are par for the course among houses in the top price tier. But are the nation’s priciest homes all they’re cracked up to be? We’ll take a look at the ultra-luxury market, as well as some of the drawbacks to owning the most expensive house in America.
What’s the Most Expensive House in America?
In 2014, Beverly Hills made headlines as the location of the most expensive real estate listing in the nation. Palazzo di Amore, owned by real estate investor Jeff Greene, was initially listed at a record-breaking $195 million. Greene bought the home, unfinished and in bankruptcy, in 2007 for about $35 million, then spent the next seven years turning it into a mind-blowing estate. He added a pool, an “entertainment complex” complete with a theater and bowling alley, a parking garage, and operative vineyards. Despite holding out for a buyer that would appreciate the level of detail he had put into the home’s upgrades, Greene eventually knocked $46 million off the price tag. When it still failed to sell, he took the home off the market, citing plans to turn part of the property into an organic farm.
The record for most expensive home sale in the US was briefly held by Copper Beech Farm in Greenwich, Connecticut. The home and its 50 acres, including two offshore islands, was initially listed at $190 million. Within four months, the asking price dropped by $50 million, then was slashed twice more before selling for $120 million about 11 months after hitting the market. Two weeks after the sale, the record was broken when an East Hampton estate featuring 18 acres of oceanfront sold for $147 million. That record could shatter if La Palais Royal sells for its asking price. The 60,000-square foot whopper in Hillsboro Beach, Florida is listed at $159 million. The home entered the market in 2014 at $139 million. When it didn’t sell within a year, it was delisted, then returned to the market shortly afterward with a little more property and the extra $20 million tacked on to the price tag.
Where Are the Most Expensive Real Estate Markets?
The five most expensive housing markets among major cities in North America are all located in California and New York. California leads, with Los Angeles, San Jose, and San Francisco, the latter taking the top spot. In New York, Brooklyn and Manhattan dominate. San Francisco and Manhattan boast a median sale price exceeding a million dollars. Brooklyn’s most expensive home sold for $15 million in 2015. Some of the borough’s priciest real estate has been on the market for a while, like a $10.5 million penthouse that was listed in 2014 and the nearly $11 million “Gingerbread House,” which has stagnated since 2009.
How’s the Market for High-Dollar Homes?
Though nine-figure home prices have become the new benchmark for billionaire homebuyers, the market for top-tier real estate is shaky. A 2016 New York Times report revealed that, in the Big Apple at least, sellers consistently have to lower their asking price to move these properties. Homes in Manhattan are being promoted with price drops in the millions, including a Park Avenue address reduced by nearly $19 million. Real estate experts, like an analyst at the brokerage firm Compass, believe the primary cause is sellers’ unrealistic expectations. They hear about record-breaking sales in their area and assume they can accomplish the same, while the reality is that the market can’t support these figures. In 2015, the number of New York City home sales exceeding $10 million dropped 12 percent from the previous year.
A 2016 Forbes report supports those findings. Among more than 20 homes listed at nine figures, less than 20 percent actually sold for $100 million or more. A reasonable conclusion is that there isn’t actually a market at this price range, and the handful of well-publicized sales of mega-dollar estates have all been anomalies. Forbes confirms that even at the lower price tier of eight-figure homes, the market has dropped off significantly in the last year, noting that Manhattan and Miami saw these properties take an average of two months longer to sell in 2015 than in 2014. Even celebrities are feeling the pinch; Celine Dion’s home in Florida and Julia Roberts’s Hawaiian vacation home both saw multi-million dollar slashes in early 2016.
What Are the Drawbacks to Owning Super-Expensive Real Estate?
As our examples show, buying an ultra-pricey home might mean getting stuck with it indefinitely. The normal expenses of home ownership increase exponentially at eight- and nine-figure price points. If you mortgage the home rather than paying cash, that adds millions over the life of the loan. Insurance costs for these astronomically-priced homes are jaw-dropping – and that’s if you can get the home insured at all. For most companies, they pose too great a risk. In most localities, property taxes on a $100 million home would exceed a million dollars per year. Finally, there are upkeep costs to consider. La Palais Royal boasts more than three million dollars’ worth of gold leaf, so any damage to this purely cosmetic feature would cost as much as an average house in repairs alone. Bottom line? Dream big, buy practical.
2 Point Highlight
He added a pool, an “entertainment complex” complete with a theater and bowling alley, a parking garage, and operative vineyards.
The home and its 50 acres, including two offshore islands, was initially listed at $190 million.
