The $100 Million Home: What’s Next?
The rich have always been subjects of fascination. We check the Forbes 400 each year to see who tops the list, avidly watch television shows like “Secret Lives of the Super Rich,” and flock to visit estates such as the Biltmore House, Miami’s Viscaya and Hearst Castle on the Pacific Coast.
What makes such places interesting? There’s a certain curiosity to see how the rich and famous really live. But beyond that, there’s always the question of what you or I might do with such vast fortunes. Would we build the next Versailles? Or would we be, to borrow a famous book title, the millionaire next door?
A New Gilded Age?
Such questions now have more immediacy because we seem to be entering a new gilded era.
“Trophy home sales worldwide saw a dramatic uptick in 2016,” reports Christie’s International Real Estate. “For the first time ever, the world’s top 10 reported residential property sales were all priced above $100 million, and sold for more than $1.3 billion in aggregate, with an average sales price of $132 million.”
The most expensive sale, said Christie’s, was a Hong Kong residence that sold for $270 million. Thirty-four homes sold for a meager $50 million or more.
The purpose of large homes—really large homes—has never been to assure that the owners have enough space. Instead, the idea has been to awe other people with one’s power, wealth and status.
Consider Versailles. It was the “seat of power” for an assortment of French kings and far more than a residence. Yes, it’s huge—721,206 square feet—but there’s a reason for its size. Even though it’s freezing in the winter, boiling in the summer and lacks indoor plumbing year-round, Versailles allowed a succession of French kings to gather the noble class in one place—and watch them carefully.
But another reason for the size of these homes was the times in which they were built. Jefferson’s Monticello, perhaps the most advanced structure of the colonial era, required an ice house where ice from a nearby river was stored in the winter and used later in the year. Today, we would just plug in a refrigerator.
To collect ice and perform many other chores, one needs lots of help: servants at Versailles and slaves at Monticello. All those helpers, voluntary or not, need to be fed and housed. As estates got bigger, the need for help increased, which in turn meant still-larger properties were required. In other words, much of the size of older homes and palaces, and much of their cost, was related to the need for staff and facilities.
I bring this up for two reasons.
First, the fact that someone can buy a $100 million home today is fine with me. It wouldn’t be my choice, but it’s not my money. It takes a lot of contractors and workers to construct and operate such properties, and they surely generate a lot of property taxes. So, in a sense, big homes are a form of public works.
Second, we should recognize that, at this time and place in history, we are enormously rich by past measures.
Go back to 1940. That’s not so long ago, and yet according to the Census Bureau, in that year 31% of all homes had no running water, 44% lacked a bathtub or shower, and 35% didn’t have a flush toilet.
“In 1940,” said the Census Bureau, “few households could get by without either a coal shovel or an ax. Coal was used to heat 55% of homes; another 23% used wood.”
Are More $100 Million Sales on the Way?
Back to those $100 million homes.
“Imagine that you buy with 20% down and get 30-year financing,” said Rick Sharga, executive vice president at Ten-X.com, an online real estate marketplace. “If you have an $80 million mortgage at 4% interest, your monthly payment is a modest $381,932.24 for principal and interest. That’s $1,527,729 a year.”
For some people, such costs are affordable. Wealth-X reports that in 2016 there were 2,397 billionaires worldwide. Investopia says that in 2015, there were 172,850 ultra-high-net-worth individuals—people worth at least $30 million—around the globe.
What does it mean? The market for $100 million homes is just beginning to blossom. The pool of potential buyers could theoretically support hundreds if not thousands of additional sales in the most upper of all brackets. Whether the rich will really want such huge homes is another question.
Peter Miller is a contributing writer for Ten-X and Auction.com as well as a nationally syndicated newspaper columnist. He is the author of the 2016 edition of The Common-Sense Mortgage.