The Vanishing Market For $100 Million Homes

02/19/2016 at 9:54 | Forbes

Last week it was confirmed that hedge fund tycoon Scott 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 in 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 of contracts 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.”

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