More Americans looking for vacation homes in Europe

Those with means and resources can purchase real estate around the globe. This is essential for development in many locations, including major cities as well as vacation destinations in Europe:

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From Lisbon to the Greek islands, the Americans are back, ready to take advantage of the buyer’s market in many of Europe’s leading resort areas. There are bargains to be had at the entry and mid-levels, with prices buoyant at the top end…

Knight Frank last week released its Global Residential Cities Index for the first quarter of 2021, giving a view of price changes from the year-earlier period, when lockdowns began to take hold world-wide. It shows double-digit increases clustered in the Nordic countries and Eastern Europe, while prime European second-home destinations that had been inching toward the top in previous years—including Lisbon and Malaga on Spain’s Costa del Sol—are seeing declines…

Americans typically play a niche role in Southern Europe’s luxury second-home markets, which tend to be dominated by sun-hungry Northern Europeans. But they have traditionally made themselves more conspicuous at the very top of those markets.

This is different than Americans looking for relatively inexpensive places to retire; this is about finding real estate to invest in and profit from in the long term in desirable locations. This is an opportunity to make money in locations where prices have decreased, in contrast to numerous markets in and around big cities where prices have increased for years. Homes are places to enjoy and to invest in, as sociologist Brian McCabe argues. Being wealthy and staying wealthy can depend, in part, on buying real estate when it is available and then profiting later.

All of this is an opportunity that most Americans do not have or could not even dream about. A second home in a foreign country? The ability to travel there regularly? Being able to sell this property later and/or pass down profits to heirs? Just as those featured on HGTV’s International House Hunters are a select group, those who can take advantage of a European buyer’s market are limited.

Out with vacation McMansions but keep going with pricey, exclusive, luxurious homes

An article about a popular new development in Park City, Utah suggests millennials do not want McMansions but the rest of the text suggests they are not giving up on having nice homes:

https://www.benlochranch.com/

What Benloch Ranch represents is a collision of trends in real estate and demographics. Millennials of homebuying age are rejecting the sizes of their parents’ homes, so-called cookie-cutter McMansions. And the second-home market, hastened by COVID and the same millennial-buying population, is booming. The pandemic has forced buyers to value outdoor spaces and activities more than ever before. Benloch Ranch currently has a waitlist of 175 for its single-family lots…

The development’s amenities include more than 20 miles of trails, a ski hill, a skeet shooting range, an ice skating pond and 900 acres of open space…

A lot of millenials don’t want these big houses anymore. We’re redefining the size and scale of the house and altering the price point so it’s more affordable.”

According to data released by the Park City Board of REALTORS, the median price  single-family home rose roughly 26% year-over-year to $2.5 million. Benloch Ranch offers single-family homes starting at $695,000.

The pitch is an attractive one: lean into the terrain and the idea of sustainability, feature interesting architecture, provide amenities, be close to an exciting scene and in at the start of a new development. This is a shift to new preferences of millennial buyers. The vacation homes of today and the future may look different and there is money to be made.

At the same time, this is about vacation homes in a wealthy community. This development has potential because millennials with resources can afford a vacation home starting at $700k. Sure, there are no more McMansions with all of that wasted space and tacky design but this kind of life is only available to those who can buy into it. The price for these homes would be beyond the reach of many residents of the Salt Lake City region, let alone many residents of the United States.

Does this mean the McMansion vacation homes of an older generation will not find buyers? This will be worth watching, both for vacation homes and regular homes. If McMansions go out of style, this could be reflected in lower prices or modifications – imagine multiple units – or even redevelopment.

Touring the most expensive American homes on YouTube

There is an appetite for seeing the homes of the rich and famous. See the popularity of showing these homes on YouTube:

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Mr. Yilmazer, 31, isn’t a wealthy buyer, nor is he currently a real-estate agent. Rather, he is one of a handful of real-estate YouTubers, amateur video hosts and producers, who are bringing regular people, via their laptops or cellphones, inside the mansions of the megarich. With more than 820,000 subscribers on his YouTube channel, Mr. Yilmazer’s videos rack up millions of views and inspire tens of thousands of comments…

In some ways, real-estate YouTubers like Mr. Yilmazer are providing today’s answer to the MTV Cribs phenomenon of the early 2000s, offering the masses a rare glimpse at how the 0.1% really live. But rather than getting a peak through the eyes of a movie star or a suave celebrity real-estate agent, like on shows such as Bravo’s “Million Dollar Listing,” they’re seeing these houses through the eyes of a regular guy just like them…

Mr. Yilmazer said he is bringing in between $50,000 and $100,000 a month in revenue from his YouTube channel in ad revenue alone, putting him on track to bring in more than $1 million this year if the growth of his channel continues at its current pace. Those are just the revenues provided by YouTube for allowing their automated ads to stream on the channel without any effort from Mr. Yilmazer’s own small team. On top of that, he and his team can make money from dedicated sponsorships—Mr. Yilmazer will personally feature a particular company’s brand in his videos for a fee that runs in the tens of thousands of dollars—and the money real-estate agents offer him to feature their listings on his channel. He said he often won’t charge if a property is particularly spectacular and will drive viewership to his channel. If a property is less impressive, he charges a fee, which typically runs into the five figures…

Still, not everyone is sold on letting YouTubers have free rein in their properties, since some agents believe that prospective buyers would prefer that their future homes not be splashed all over the internet.

It is the Internet, expensive real estate, and making money all in one. What could more American than that in 2021?

The money angle is very interesting to consider. The owner of the big expensive home could benefit from more exposure (though the article notes that not all big home owners think the YouTube views benefits them). YouTube gets original content that plenty of viewers want and they can monetize the content through advertising. The presenter can develop a brand and bring in a good income. Does anyone lose here?

One potential downside: how Americans view homes. If people consistently see large luxurious homes on television, as sociologist Juliet Schor argues in The Overspent American, or on social media, does this ratchet up their expectations about what they should be able to acquire? The biggest homes are out of the reach of almost everyone yet some of the individual pieces or features might find their way to a more attainable range.

How a fictional psychiatrist turned radio host lives in a swanky Seattle condo

Television residents do not always match reality. One writer set out to find how Frasier Crane lived in such a large and well-appointed residence in Seattle:

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While characters living in unrealistically spacious apartments is a sitcom mainstay, the extravagance of Frasier’s apartment is central to the show, rather than an incidental. Frasier, ever class-conscious, takes great pride in furnishing his condo in the Elliott Bay Towers because it’s how he expresses his refined sensibilities. What better way to show off his yuppie bona fides than an Eames chair and a Wassily, a Le Corbusier lamp, a Chihuly vase, many questionable global artifacts, and, as he brags in the pilot, a couch that is “an exact replica of the one Coco Chanel had in her Paris atelier”? As a 1994 Chicago Tribune article points out, the decor choices were extremely deliberate—and extremely pricey…

From the available numbers, I learned that in 1989, the average salary for a psychiatrist was $117,700. Though Frasier likely would have made less starting out and more by the end of his tenure, for the sake of simplifying things, let’s say he worked that job at that salary from 1983 through 1993. If he saved the recommended 20% of his income during this period, he would have $235,400 stashed away at the end of that 10-year period—of course, this is before taxes…

“We talked about, ‘If anybody wonders how he can afford this it’s because Frasier has an investment income,’” Keenan told me. “He made a fair amount of money in Boston as a private therapist and he lectured and he wrote articles and he just invested very well. And at one point somebody said, ‘He’s from Seattle, maybe he got in on the ground floor of Microsoft.’ Little dividends arrived to augment what he was making in the station.”…

Keenan also pointed out that Frasier wouldn’t have seemed as wealthy compared to Niles, who lived in a “preposterously baronial house” thanks to Maris’s money. Plus, to an unfamiliar audience, “radio host” would have probably seemed like a pretty impressive and well-paying job.

In other words, the viewer should not ask so many questions. Just enjoy the show.

Seriously though, I could imagine a few additional points of explanation:

  1. Perhaps there was some unusual circumstance around the acquisition of the condo. Given the strange circumstances Frasier could get himself into, this is not hard to imagine. A short sale. Some gift or reduced price from a thankful client. He used his dad’s pension money from working as a cop. There could be lots of ways to explain this given the hijinks of the show.
  2. Frasier might have saved some money from good investments or had some extra earnings. At the same time, his character is not exactly one who makes wise long-term decisions. Was he smart enough to employ a good investment fund manager? Did he fall into some money (such as Microsoft stock as hinted above)?
  3. Frasier needs this condo as part of who he is. The expensive items, the preening tastes, the haughtiness are all tied to a pattern of conspicuous consumption. He likes to show off and does so with what he owns, including his residence. And the running gag with his father’s old chair does not work without everything attesting to Frasier’s acquisition habits.
  4. What other residence would suit Frasier? A single-family home in the suburbs? A tacky show of impressiveness like the home of his brother? A smaller city bachelor pad?

Naperville at #1 on several Niche.com Best Cities lists

Naperville adds to its rankings accolades with the new 2021 Niche.com lists:

Naperville was also ranked #1 for Cities with the Best Public Schools and #3 for Best Cities to Live in America. See previous posts about Naperville’s rankings: “wealthiest city in the Midwest” and “safest city over 100,000 residents.”

This ongoing praise for Naperville makes sense both for knowing the suburb as well as what sorts of communities make it to the top of these kinds of lists. Naperville grew tremendously in the final decades of the twentieth century but it also developed a high quality of life: vibrant downtown, highly-rated schools, local recreation opportunities, wealthy, and safe. The accolades have changed to some degree because the size of the community changed; for example, Naperville is the list of “cities” for Niche.com while the Best Places to Live in America tend to be smaller communities.

If you browse the Niche.com rankings just a little bit, you see wealthy suburbs from certain metro areas in the United States. That the same communities keep popping up on these lists year after year suggests they have an ongoing high quality of life but also it hints at what Americans – and people who make these rankings – think are desirable communities. Is the goal of American life to ascend to one of these well-off communities, most of them relatively white and wealthy suburbs?

To get richer, get the right job and then “buy a home in a neighborhood with a lot of zoning restrictions”

David Brooks looks at which professions provide a higher likelihood of getting into the 1% and then how to get even richer once you are there:

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Once you’ve made some money, there’s one more way to get richer. Buy a home in a neighborhood with a lot of zoning restrictions. For example, 84 percent of the land in Charlotte, N.C., and 94 percent of the land in San Jose, Calif., is zoned for detached single- family homes. These restrictions keep the supply of housing low and jack up the value of homes for people wealthy enough to already own one.

My main message is that if you want to get rich, don’t invent a new and useful product, start a company and try to sell it. That seems risky. Put the effort into entering a clubby line of work in which legislators and professional associations are working to make you rich. It’s easier!

While the majority of the argument is about particular professions, I think the connection between jobs and exclusive homes is this: in both cases, the structures are set up to enrich those that can participate. Just as regulations and structures may privilege particular careers, zoning in the United States is often meant to protect single-family homes. If a homeowner can purchase a residence with particular features and in a specific setting, the zoning helps ensure that the property will be worth more in the future. The homeowner is responsible for some upkeep and updating – and may even go so far as to pursue a teardown – but the protections for the property are almost enough in themselves to let the investment grow in worth just be sitting there.

Connected to this, the zoning for single-family homes restricts the number of residences in that immediate area. More density does not necessarily mean lower property values; numerous urban centers – such as Chicago and New York – are home to new tall buildings whose units are only available to the super-wealthy. At the same time, proximity to amenities and particular neighborhoods are desirable and fewer residences there can help drive up the value of existing properties.

To some degree, many Americans are hoping for this to work for them. Go to college and get a good degree from a good school to gain the right skills, qualifications, and access to social networks. This leads to a better job with higher pay. Then, purchase a home in a reputable community where prices will continue to rise. Wait a few decades and let the pay, home investment, and other benefits accrue. This may not lead to being rich but it reduces anxiety about later decades in life.

Of course, the system could be set up in other ways. Do Americans want homes to be investment vehicles? Should there be such differences in pay and compensation across fields or job positions? Is zoning about the good of the community as a whole or about particular land owners? Combating existing patterns is no easy task, particularly in times when any discussion of inequality can quickly get heated.

The “world’s most expensive home” – $340 million! – about to go on sale

Architectural Digest displays and summarizes the features of what is a very expensive property in Los Angeles:

After nearly a decade of design and development work, what is being billed as “the world’s most expensive home” is finally ready for its close-up. Set on a five-acre parcel in the posh Los Angeles enclave of Bel Air—and aptly named The One—the 105,000-square-foot property’s interiors have remained a closely guarded secret. Until now. AD has been an exclusive look at what’s inside this record-setting property—and the design and aesthetic minds that made it happen.

Surrounded on three sides by a moat and a 400-foot-long jogging track, the estate appears to float above the city. Completed over eight years—and requiring 600 works to build—the home was designed by architect Paul McClean, who was enlisted by owner and developer Nile Niami to help it live up to its reported $340 million price tag…

Beyond the eye-catching design are the home’s equally jaw-dropping stats. There are 42 bathrooms, 21 bedrooms, a 5,500-square-foot master suite, a 30-car garage gallery with two car-display turntables, a four-lane bowling alley, a spa level, a 30-seat movie theater, a “philanthropy wing (with a capacity of 200) for charity galas with floating pods overlooking Los Angeles, a 10,000-square-foot sky deck, and five swimming pools…

Due to recently approved city ordinances, a house of this magnitude will never again be built in Los Angeles, which means The One will truly remain one of a kind. “This project has been such a long and educational journey for us all,” McClean notes. “It was approached with excitement and was thrilling to create, but I don’t think any of us realized just how much effort and time it would take to complete the project.”

What a house – and at a particular time. With concerns about mansionization in Los Angeles plus COVID-19 and its effects exacerbating inequality in capital and housing and shedding light on how much space people have, here is an incredibly large and expensive home. Given the limited pool of actors with the resources to purchase this home, these larger patterns might not matter much.

Down the road, because of its size and price alone does this become a local or international landmark? Or, because it is a single-family home in an exclusive location, will this house rarely be seen? Some of this might depend on who the owner is. The next step in the news coverage is to figure out who purchases the home and what they do with it and then the legacy of the property will come later.

It would be interesting to compare this home to previous properties that claimed to be the most expensive or the largest. I recall an effort in Florida to construct a 75,000 foot home; a documentary about the home detailed some of the process and issues that arose.

“NYC isn’t dead”…for the wealthiest

A look at the ten most expensive properties sold in the United States in 2020 highlights the presence of New York City properties on the list:

Google Street View image of 220 Central Park South (September 2020)

By the end of September, the volume of Manhattan co-op and condo sales was down 43% year over year, according to a report by Douglas Elliman, as sellers held back from listing their apartments and buyers increasingly gravitated toward the suburbs

Of the top 10 national sales compiled by Jonathan Miller, president and chief executive officer of Miller Samuel appraisers, five were in 220 Central Park South, a new luxury tower on Central Park designed by architects at Robert A.M. Stern

Another trend from this year, namely rich people “fleeing” New York for Florida, didn’t manage to trickle up to the highest tier. Only two of this year’s top 10 sales were in Palm Beach; last year there were three…

Even the three Los Angeles entries diverge slightly from conventional 2020 narratives. Yes, the L.A. market is one of the few urban bright lights this year, with sales soaring and inventory hard to come by. But numbers at the very top are down from last year, when it notched four entries in the top 10, totaling $463 million. This year there were three, totaling $293 million.

The actions of the wealthiest homeowners matters not only because people often have an interest in what those who have lots of money do with all that money; it matters because these are people with clout and influence. If they are continuing to purchase in New York City – it is less clear how much time the owners would necessarily spend in the city – it is a sign of the importance of the city and the prospects for future development.

The optics of 2020 might not be favorable to the list above but the project and the trends were underway far ahead of COVID-19. In a very expensive land and housing market, purchasing a residence in one of the newest buildings and in such a location within Manhattan is an object of desire for some who have the resources to purchase such places. While a figure later in the article notes that the total price for the properties on this list is lower than the price for the properties the year before, this may only allow the wealthiest to get into hot markets even more.

It may (or may not) be worth noting that five of the ten properties are in a tower in New York City while the other five properties are large homes on some land. On the whole, Americans as a whole tend to prefer or idealize single-family homes but the wealthiest in the United States and elsewhere may be more inclined to purchase large units in multi-unit buildings.

The new residential skyscrapers in Chicago continue to highlight capital flows and disparities

While reading reporting about skyscrapers going up in Chicago even during COVID-19, I continue to wonder: who is purchasing all of the residential units in times like these? Here is one example involving Chicago’s new third-tallest building.

Part of the Chicago skyline from East Jackson Drive – Google Maps

Located on a multilevel riverfront site at 363 E. Wacker Drive that belongs to the same Lakeshore East development as Aqua, Vista will house a 191-room hotel and 393 condominiums once it’s complete in the third quarter of next year.

For now, as COVID-19 rages and office cubicles remain empty, the tower sends the upbeat message that downtown has a future, and it’s not just for the 1%. Vista’s ground-level amenities will benefit ordinary citizens as well as those who can afford the tower’s condos, which start at around $1 million.

The entry point of $1 million means that the clientele for such a building is pretty restricted. The Chicago area is not a superheated real estate market like San Francisco or Manhattan or several other coastal cities yet tall residential buildings are meant for a select few.

On the other hand, another skyscraper project in Chicago might move to make their residential units available for rent rather than purchase:

The biggest Chicago skyscraper to have construction halted by the coronavirus pandemic could be revived in 2021 — as apartments instead of condos.

Unit layouts are being redesigned at 1000M, the Helmut Jahn-designed condo tower on South Michigan Avenue, in an effort to refinance the project and resume construction next year, “primarily as a rental project.”…

It was the largest condo development by unit count, at 421 units, launched in Chicago since the Great Recession all but shut down construction of condos in the city for several years. At 832 feet, it also would be the tallest Jahn-designed building in Chicago, where the German-born architect is based.

With rentals being in demand, this makes some sense in order to help get the project started again. At the same time, these rental units will not come cheap.

All of this residential construction suggests there is a lot of capital continuing to flow for prestigious building projects in desirable locations. COVID-19 might be a bit of a speed bump – whose impact will continue to be determined by its length – but big lenders, developers, and buyers still have an appetite for these prestigious residential units.

Focusing on the construction of these units can both help the public pay attention to where the money is really going as well as continue to highlight the disparities in development money by location. It is hard not to report on these new tall structures; they require a lot of effort and resources and will be part of a celebrated skyline for decades. Yet, within Chicago, as the skyscrapers continue to rise for the corporations and residents with plenty of resources, needs for housing and other development are very present elsewhere.

Example of rent drop in San Francisco: one bedroom down from $4,300 to $3,150

After hearing of rent drops in Manhattan, I read about one example of rent dropping in San Francisco:

Until the pandemic hit, the city’s housing market was so tight that would-be renters lined up for viewings and arrived with thousands of dollars in cash, ready to sign a lease on the spot.

But now landlords are hard-up for tenants and some are offering several months free, said Coldwell Banker realtor Nick Chen, who recently rented out a one-bedroom for $3,150 that before would have easily gone for $4,300.

“San Francisco rents have been really inflated over the past couple years,” Chen said. “It will come back, but I think the question is: Will it come back to the level it was at previously? Maybe not.”

This is a sizable drop in rent, roughly 25% in a short time frame. Yet, that is still a price that few Americans across the country could meet. Even with significant changes in social life in cities like San Francisco and New York, this does not mean these places are now accessible to many.

Presumably, there is a bottom floor below which rents will not drop. The person who owns the property has their own bills to pay. Some people will see this as an opportunity to get a place in San Francisco at a lower rent and jump at lower prices.

Or, does COVID-19 shift housing prices in high-priced markets for a longer time? If businesses decide to continue work from home and employees are skittish about being around a lot of people in a dense city, do rents drop even further? Is there an opportunity for developers, buildings owners, housing groups, and local governments to jump in and acquire and/or offer cheaper housing? I would not guess expensive housing markets like San Francisco, Seattle, or Manhattan will soon become reasonable but perhaps there will be some opportunities for more people in the region to take advantage.