BEVERLY HILLS, Calif., Nov. 27, 2007 -- The hills of Bel Air, Calif., is where the super rich move to get away from the merely rich down in Beverly Hills.
Kurt Rappaport, one of the co-founders of the Westside Estate Agency, gave "Nightline" a tour of one of the mansions.
"Never been lived in, took a little over two years to build, the owner started construction in 2005 and just finished," he said.
The 12,000 square feet of living space includes a wood-paneled library, massive living room and a kitchen with everything, including two dishwashers.
"The floors are all French limestone, all hand cut, each piece individually selected," Rappaport said.
And then came the closet, which was the size of about two large bedrooms. Or a New York City apartment.
The asking price is $18 million, and the final sales price is likely to be pretty much the same. Buyers in Bel Air won't find any deals as a result of the subprime crisis, or the mortgage foreclosures.
"We have no foreclosures, and in the high-end areas here, there are no foreclosures," Rappaport explained. "We have no subprime mortgages."
No Mortgage At All
Usually, he said, there is no mortgage.
Most people might think of high-end real estate as something that costs maybe $750,000, but the real high end is $10 million, $20 million, $100 million. It is a world apart from the kind of real estate that's in crisis. This market doesn't need to keep prices down.
"It used to be that 75 percent of the buyers on the high end were people you knew or people you'd heard of. Now it's the opposite," Rappaport said. "There's wealth coming from so many different sectors. From Europeans to Russians, Chinese, technology people, all coming into our marketplace, which we didn't have a few years ago."
In October 2006, in Rappaport's office alone, sales of homes priced $10 million or above amounted to $81 million.
And in October of this year, sales of homes $10 million or above totaled $161 million. Sometimes, unlike in Monopoly, the property is worth more with no house. Rappaport pointed out 12.5 vacant acres in the heart of Bel Air.
"The person who buys this isn't spending just $60 million for the land. They're going to spend another $40 or $50 million in building the house, so somebody will spend in excess of $100 million here," he explained. "But at the end of the day, they'll have something that's probably worth double that."
Cecilia Waeschle is a broker who keeps what's known in real estate circles as the list, a record of top-end real estate sales, some of which were never made public.
"When I first started, it was called the $3 million list. Now I think we should call it -- $10 million is the new $3 million," she said.
The numbers practically jump off the page: $16 million, $18.5 million, $22 million and a home that sold for $35 million, $2 million more than the asking price.
Right now she has a listing for a funky 1960's Malibu beach house: 80 feet of oceanfront, six bedrooms, an original kitchen and a green shag carpet. It's going for $17 million. Waeschle said the buyers will "redo" it rather than move in right away.
A few miles up the coast, real estate agent Chris Cortazo is offering a three-year-old house on an acre of land overlooking the Pacific. The asking price is $18 million.
According to Cortazo, anybody who wants to buy this house will show up with a checkbook, not a subprime mortgage.
Rappaport is currently marketing a Beverly Hills mansion once owned by publishing magnate William Randolph Hearst, a house with the highest asking price in the United States: $165 million.
"It may take a little while. We've already had a couple of offers. It's been on the market only for a very short period of time. There's a lot of interest -- a lot of people coming from all over the world and locally to see it," Rappaport said.
The mega-rich will continue to spend this kind of cash as long as real estate is viewed as profitable, according to Rappaport.
"I don't see any stop to it, because I think real estate is the most understandable asset to acquire," he said. "This is not like buying a position of a company that could be worthless in a couple of years. This is a piece of property, you can walk on it, you can feel it, you understand the location and the magnitude of the house, that's real value. That's why people perceive real estate as being the best long term investment."