Now that Alex Rodriguez has agreed to a new $275 million contract with the New York Yankees, the word in Manhattan real estate circles is that a $39 million East 80th Street townhouse may be in his future.
Any deal this year would be the country's sixth most expensive home sale of 2007. All of the top five have been in Manhattan.
It's been that kind of year for the luxury sector in New York. While home prices slid around the country, Manhattan set a new apartment sales record with developer Harry Macklowe's $60 million purchase of an entire Plaza Hotel floor (minus one rogue apartment), and a new price-per-square-foot benchmark ($6,287 per interior square foot) with former Citigroup chairman Sanford Weill's $42.4 million splash into 15 Central Park West.
"It's a record, and we'll see how long it lasts," says Gregory Heym, chief economist at Brown Harris Stevens, a New York-based real estate brokerage. "Even with all the development going on, there aren't a lot of Plazas and 15 Central Park Wests out there." Heym adds that, in a couple years, it might look like Macklowe "got it for cheap."
Behind The NumbersWe compiled our annual list of the most expensive United States home sales by tracking media reports, talking to real-estate brokers and consultants around the country and examining public property records. Prices come from published reports and brokers in the know. There are no doubt deals that would have made our list but were kept under wraps as many high-value sales are privately shopped and executed.
Our list did not include land sales like financier Ronald Baron's $103 million May buy of an East Hampton lot from Schlumberger heiress Alexis de Menil-Carpenter or properties in escrow like the $65 million Belvedere, Calif., estate overlooking the San Francisco Bay that is one of the most expensive homes in the West. What's more, though the Forbes family's approximately 171,400-acre Trinchera Ranch in Colorado, which was sold this month for $175 million to Louis Bacon, head of Moore Capital Management, was used as an executive retreat, for our purposes, it's considered a land purchase. All would have been the most expensive home sold in the country this year.
Big BuysNew York City dominated the list with whales of Wall Street and the mayor himself signing eight-figure purchase contracts. The first non-Gotham property to make the list was hedge fund manager Bruce Kovner's $35 million Mediterranean-style villa, overlooking the ocean from Carpinteria, Calif., outside Santa Barbara. To be fair, it comes as part of a bundled deal. Kovner accumulated $83.5 million worth of property in Carpinteria this year, adding 15 acres of land perched on bluffs overlooking the water. Because they are not contiguous, and Kovner hasn't said anything about combining them, we counted them as separate sales.
Though Tom Cruise's purchase of a $32.5 million Beverly Hills mansion cracked the top 10, celebrities generally are not the ones sitting on the buyer's side of the table at closing. Movie stars collect big checks for films, but once prices top $30 million, buyers tend to be those who can afford to write the kind of checks movie stars hope to receive.
That kind of wealth is heavily concentrated on Wall Street. Even though it's been a rough year for the banks, and write-downs related to mortgage-backed securities have wrought havoc on balance sheets, the big money spigot is still flowing to top executives.
"The five largest firms are going to pay more in bonuses than they did last year, and even if bonuses go down by 15% in total, as some people have suggested, they'd still be the second highest on record," says Heym.
Economists often debate how much bonus money makes it into the real estate market, but Heym says the money on hand right now is more than sufficient to fuel higher prices in the upper luxury sector. "Buyers can put the money down and pay in cash, or they might want to finance part of the sale to do other things with the money," says Heym. "For most of the people, it's not their first bonus."
Astronomical AssetsPrices in the top sector are not affected by general market trends because, quite simply, they exist outside the general market.
"In the high-end market, it's all about wealth and a lack of property," says Mauricio Umansky, a broker with Hilton & Hyland in Southern California. "A lot of people want to be in Los Angeles, people want to be Malibu, Aspen and New York ... there are trophy properties out there and enough billionaires out there that want to buy a trophy property."
Because all the buyers have multiple homes and often use trophy properties infrequently, it probably makes more sense to think of these properties in the same way experts speak of valuations in the high-end art market. Unique properties--like irreplaceable paintings--trade rarely. Valuing the penthouse at the Plaza can be as difficult as appraising a Picasso.
"If it's an outlier, the valuation, and getting your arms around the value is difficult because there aren't any true comparables," says Jonathan Miller, director of research at Radar Logic, a New York real estate analytics firm. "We're still looking at the fundamentals and property characteristics, and understanding how a property fits within a market. Chances are you may have had other properties further back in time and you can extrapolate."
Like the luxury real estate market, it was a banner year for the art market. David Geffen, for example, sold a Jackson Pollack for $143.5 million and a Jasper Johns for $80 million; Christie's moved $395 million and Sotheby's sold $270 million of art in November shows. While the hedge-fund millionaire's cash fuels both luxury markets, how much longer it can last is a question that haunts the Street.
Still, when it comes to America's most expensive properties, the slumping dollar should buoy sales for the foreseeable future.
"The one benefit to the credit crisis and a slowing economy is that the dollar isn't going to get stronger against these other currencies," says Heym. "Foreign buyers are essentially getting huge discounts."