U.S. Housing Cools, but Not High-End Manhattan

Dec. 8, 2006 — -- The rich really are different from the rest of us.

In New York City Thursday, the Kushners, a New Jersey real estate family, confirmed plans to buy a 41-story skyscraper on New York's fashionable Fifth Avenue.

The reported sale price? A whopping $1.8 billion, which would set the record for the highest price ever paid for an office building in the United States.

Then again, New York is also a city where a penthouse just up the street from the Kushners' new building is on the market for $70 million (cash only, please). There are some reports that this is the highest list price on record for a private residence in New York.

This record price, however, cuts against the grain of recent housing reports that indicate the market is actually slowing after years of phenomenal price increases.

In October, the median sales price of an existing home dropped 3.5 percent to $221,000, according to National Association of Realtors. That represented the largest year-to-year decline on record. Many analysts expect housing prices to continue to drop into the next year.

The news comes as Census Department data showed that new home sales in October dropped 3.2 percent, the largest one-month fall since last July.

Wait a second. Prices are dropping at the same time record high prices are being set?

"New York is the last to fall down and the first to recover, and the reason is that so much money is rushing to New York from so many different places," explained Barbara Corcoran, ABC News consultant and the founder of the New York City real estate firm The Corcoran Group.

While a slowing housing market has millions of homeowners worried about the biggest investment they will likely ever make, the super-rich are still in the market for mega-million dollar pied-a-terres in the nation's biggest cities.

"The higher ... the market is anywhere in the U.S., the less those places are feeling the effect of the real estate soft recession," explained Corcoran. "The rich are hit less and they have holding power."

That $70 million Fifth Avenue triplex penthouse features a 3,500-square-foot ballroom with 20-foot windows, a terrace, and views of New York's Central Park. That's in addition to the 16 rooms, the five fireplaces and a rich history of Depression-era celebrities and millionaires drinking and dancing the night away.

While today's billionaires might not be lifting a glass to toast the general condition of the housing market, they can weather the storm more easily than a typical homeowner.

"Most of their income isn't coming from an hourly average wage," said Gina Martin, an economist at Wachovia Bank. "The person who earns the median income might have a few stocks and a retirement account and relies on a monthly income to pay the mortgage. These folks have a much more diverse portfolio on which to draw."

In other words, wealthy Americans have more than just an IRA and a retirement account to back them up should the price of their home (or more likely, homes) drop in value.

As it is, in many of the more expensive regions of the country -- places like Malibu, Calif.; Aspen, Colo.; and Palm Beach, Fla. -- the most expensive homes are still fetching high prices.

"In the absolutely crème de la crème properties, in most of those market areas, there really is a tight supply," explained Lewis Goodkin, a real estate consultant in Miami. Fewer expensive homes for sale means those who can afford them are willing to pay more to get them.

Some have coined the phrase, "the billionaires are chasing out the millionaires."

And there's another factor that can drive up prices for affluent buyers, something that might not play such a big role for a typical homeowner.

Ego.

"Not only do people at the highest income levels have the ability to withstand and wait things out, they have their ego at stake," Corcoran said.

And in Manhattan, those egos can match the skyscrapers and the sky-high prices.

"There are bigger egos in New York than in most places in the U.S.," said Corcoran "And people like to make a statement and one sure way to make a statement, 'I'm rich, I'm accomplished, I'm top dog, and I got the money to prove it and now, I have the biggest castle to prove it.'"

That $70 million penthouse? It's still on the market. Offers welcome.