Record $100 Million Home Sale: Luxury Real Estate Heats Up

The most expensive U.S. residential real estate sale ever was recently closed in Los Altos Hills, CA.  The $100 million home was sold to Yuri Milner, a Russian technology executive and investor.  The purchase, according to the Wall Street Journal, was a 50% cash down payment and 50% seller-financed.

Source:  Wall Street Journal

The home, finished in 2008, has over 30,000 sq ft  of space and is a limestone mansion inspired by an 18th-century French chateaux.  From its private location, it has views of the San Francisco bay, and is located near the Silicon Valley where the previous owners made their technology fortune.

This sale is another bellwether for the burgeoning luxury real estate market in the United States.  After recent years of dismal sales, 2010 and 2011 have shown striking increases in luxury home sales across the country.

Locally, sales of waterfront and luxury homes are up across the board.  We've seen sales of multi-million dollar homes double in 2010, and the trend seems to be strengthening in early 2011.  Prices have adjusted significantly in the past five years, and we're seeing real excitement from luxury buyers in recent months.

While marketing times for these unique luxury properties can many times be one to two years or more, the pace of sales has also quickened.  At the end of 2010, we saw a half-dozen waterfront homes on Mercer Island sell in less than two weeks on the market.  These are million-dollar-plus homes, and that pace of selling would have been unheard of in past years. 

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April 18 2011 - Denny - Blaine
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Profile picture for Pasadenan
We read that a month or two ago...  and "one sale" does not mean a heated up market.

Besides, the local paper printed that a 5 acre parcel in Pasadena (once owned by Imelda Marcos) sold to a Russian for $50 million about 4 years ago, but Zillow doesn't show that sales transaction, and the property was listed for sale for $52 million for quite some time recently, but is now not listed for sale, still doesn't seem to be occupied, and no recent sales seem to have been recorded.

Zillow does allow us to track the high end home sales, and I've been trying to do that for Pasadena and San Marino.  And though the values didn't substantially drop from the bubble correction yet, it is no where close to what I would call being "heated up".

And of course, the economy is becoming even more polarized, so one would expect some additional activity at the high end.  But speculation from out of the country foreigners that can't get permanent visas nor citizenship seems to be a bit foolish and a gamble on the way the currency exchange rates will move.  At that price, you can't expect to find many tenants, so it is not being purchased as an income producing property, even if movie industry filming is allowed frequently.

Yes, there are always "art collectors" that have cash that really don't care.  But if that is why it was purchased, I wouldn't even call it "housing".

And if one compares it to Randolph Hearst's house, Randoph's house is probably worth a lot more, and yet he just ended up giving it to the State.
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April 18 2011

it's really difficult for the average person to even imagine what it must cost to turn on the lights for a day or clean the floors, not to mention maintenance. 

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April 18 2011
Pasa,

I read a few months ago that San Marino was the only area in CA were property values did not decline. In fact they went up a little over 3%.

Happy funding, Rudi
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April 18 2011
Profile picture for Pasadenan
Rudi, someone was obviously a bit mistaken... here is the trend chart, comparing median San Marino value to Costa Mesa and to inflation:



Web address:
http://photos3.zillow.com/is/image/i0/i6/i1693/IS1j62iy8flwkv7.jpg

The bubble decline was simply "delayed" slightly, and also delayed by the 2009 and the two 2010 government interventions.  But no one can say that was not a "decline" in 2008 to 2009; nor can they say it is presently 3% above peak, nor can they say it has not been declining recently.

As most of the houses are in the "upper tier" range, Zillow's upper tier median trend looks the same as the median trend and they don't offer a lower tier trend.

Yes, San Marino is a bit more stable than other "high end" areas simply because it is "built out", and doesn't have high turn over and only has about 4400 units, of which about 3910 are "owner occupied".

Foreclosures per month averaged about 1 per 2 months.  Foreclosures peaked in July 2009 at about 1.3 foreclosures per month.

(I still haven't gotten an answer from Zillow how you can get a 0.3 foreclosure, but it appears they are getting quarterly data and distributing it by months?  Even that doesn't completely work.  They may be getting foreclosure data every other month.., July + August would have totaled 2 foreclosures).

One must also remember that most of the Chinese that buy in that city pay cash by pooling their resources and taking turns buying.
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April 18 2011
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Actually, a better measure may be the total number of Foreclosures that Zillow indicates in a given time period.  Zillow indicates 18 foreclosures since January 1998.  That is over a 13 year time span.  So, that is only about 1.4 foreclosures per year.

Again, as most of house purchases are not mortgage financed, they are not as susceptible to the correction for bad lending practices.
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April 18 2011
Well, I'm glad you got that clarified for me Pasa.

Happy funding, Rudi
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April 19 2011
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Here is a chart showing the "stability" of San Marino housing:



Web address for full size:
http://photos2.zillow.com/is/image/i0/i6/i4637/ISdy1asopxdokj.jpg

Based on % of total housing inventory sold in each 12 month period.
Prior to the "bubble" the "turn over" rate was approximately once every 16 to 18 years.  The bubble gradually increased the amount of time people were holding the property on average to 37 years.  There was slightly higher "turn-over" as the market bubble began to decline in values; reaching an average of 25 years before selling.  With the 2010 tax incentive to encourage buying, properties in San Marino again sold less frequently, reaching a present average of 32 before selling.

Proposition 13 already creates an incentive to hold properties instead of transitioning between them.  But any area that has the housing change hands less then every 20 years is a fairly "stable" neighborhood, where people are expected to know who their neighbors are.
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April 19 2011
 
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Record $100 Million Home Sale: Luxury Real Estate Heats Up
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April 19 2011 | 7 answers
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