What a million bucks buys
The high end is the strongest part of today's real estate market.
NEW YORK (CNNMoney.com) -- We've heard for months now about the slump in housing, but, judging by the record prices luxury properties have commanded recently, it doesn't seem to have had much impact on the most expensive homes.
In early October, a townhouse on Manhattan's Upper East Side sold for a reported $53 million, a record price for a New York single-family property.
In July, rock mogul Tommy Mottola, paid $47 million for a 900-acre Montana ranch, the most ever paid for a single-family property in that state.
There's a listing in Lake Tahoe for a cool $100 million and an Aspen home that the owner is asking $135 million for. Donald Trump would like to exchange his Palm Beach playground for someone else's $125 million.
In the Los Angeles area, according to Steve Shapiro of Westside Estate Agency in Beverly Hills, "There have been more sales of $10 million or more this year than the past two or three years combined."
All this suggests that, even as the housing slump extends and deepens, the high end of the market - homes costing a million dollars or more - have maintained much of their strength.
Why so high?
"It's supply and demand," says Peter Gordenstein, a real estate agent with the Corcoran Group, one of New York City's largest real estate brokers. "Demand is still strong for these kinds of properties."
Gordenstein represents a $2 million brownstone in Park Slope, Brooklyn, a neighborhood where, a generation ago, houses sold for a song.
New York may not be a typical market. Wall Street has had a big year and much of the spike in luxury home sales comes courtesy of brokers and hedge fund managers rolling in dough. The average salary in the securities industry reached nearly $290,000 in 2005, according to the New York Times, a gain of 28 percent since 2003.
Pam Liebman, CEO of Corcoran, which also sells property in Florida and Long Isaland, says her company put a pair of $12 million Manhattan apartments on the market this month and, "Both had bidding wars and contracts within a few days."
But, according to Liebman, it's not just New York, it's all over.
"There's still a tremendous amount of wealth pouring into real estate," she says. "The high end is still strong across the board, except for certain parts of Florida and other areas that have had strong new construction."
Steve Shapiro says in places like Los Angeles, "We don't have any more space to expand into and there just aren't many luxury homes to choose from."
And high-end buyers are not affected by many of the factors that plague middle-income buyers, according to Jim Gillespie, CEO of Coldwell Banker, the big, national real estate broker.
"These buyers pay cash, for example. Interest rates don't matter to them."
And the net incomes of the affluent have benefited disproportionately from the tax cuts shepherded into law by the Bush administration. The wealthy now retain more of their earnings.
According to Gillespie, a lot of foreign money has been streaming into domestic real estate markets, especially in New York, California, Florida and other coastal states. Much is going to purchase luxury living spaces in expensive markets. That helps maintain demand in the high end.
"A lot of that is because of the dollar decline," says Hugh Bromma, author of "How to Invest in Real Estate and Pay Little or No Taxes."
Still, says Gillespie, "High end homes have always been a little more difficult to sell." These often spend many months on the market and inventories of luxury homes, judged against the number of potential buyers, are longer as well.
A little extra
House hunters know that they have to be courted, according to Gillespie. He says, "High-end buyers can afford to be picky. They have a lot to choose from. They're looking for amenities."
"They're looking for something special," says Paul Boomsma, an executive vice president with Luxury Portfolio, a network of brokers that represent million-dollar-plus properties.
That can include great finishes (marble baths, fruitwood cabinets, stainless steel appliance) and attention to detail or it can mean lots of features and amenities (infinity pool, media room, oversized garage).
Cindy Risch, an agent in the Chicago area, says, "Properties that are unique and well done are not as affected by market trends."
Or, as Liebman says. "It can be a great location or a wonderful history, but there's usually something special and hard to duplicate about these properties."