The last time there were this many unsold $100M+ homes on the market, the economy imploded

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I know! Let’s have the government buy up all of the $100,000,000+ homes! That’ll make sure the housing crash never happens, right?


[sarcasm] Well, it’s good to see that we’ve returned to those good ol’ True Capitalist days of the 1800s, with the boom-and-bust cycle every ten or so years. All Hail The True Faith Of Deregulation And Unfettered Capitalism, with its promise of optimum outcomes for everyone! [/sarcasm]


I can picture someone looking at it and say “Hmmm… well we were really looking for a 32 car garage and a Macau-style casino.”


“Between 27 and 50 $100,000,000 homes” on the market means little for the economy as a whole.

Sure, it’s downturn for anyone selling mansions. But it was pre-2008 industry-wide mortgage fraud turned industry-wide investment fraud that imploded the economy. The 2008 downturn merely set it off.


Clearly what we should do get real estate appraisers to over-estimate the value of these properties, give mortgage for these homes to people who can’t possibly afford them, bundle up the mortgages as Mortgage Backed Securities, tranche them, get the ratings agencies to rate them AAA, then sell them off to cities and pension funds.


I’ve actually had an experience like this, albeit on a smaller scale. I used to work as a PA to a high-end real estate agent in Santa Barbara and I occasionally showed property for him. There was the wife of an Italian race car driver who said the 7-car garage was “far too small” and the master suite’s walk-in closet was the same. The closet, btw, was larger than my 500 sq foot apartment.

She also complained that the master bath lacked a bidet. “You know”, she said, “for after SEX!”

Anyway, how many Boingers want to go in on that second house? We can fit 3 of my current home in the master suite alone! We’ll make a commune!


If I had that kind of money I’d just build from scratch whatever I wanted where I wanted it.


I’ve always been amazed that houses like this move at all. Not so much because of the price – obviously, there are some who can afford it – but, look, if I ever have so much money that I could imagine spending $100MM on a house, I’m going to spend $100MM to have it done in my peculiar tastes, not those of someone else.


These houses were built on spec, for an imagined audience. This is more a sign that the builders of $100M+ houses are behaving stupidly, than it is a sign of the economy being ready to implode.


Makes sense, but then, building a house to one’s own tastes can take a hell of a lot of time, attention and effort. Not to defend these wealth-hoarders in any way, but a lot of people prefer instead to spend less time by finding something they pretty much like already, then further modifying it as needed (or I guess, as wanted).


We should stop calling Nile Niami a film producer, because he stopped making films ages ago. His wealth comes from, wait for it, real estate development (which his movie money kicked off.)

Wikipedia says “Niami launched Wolfpack, a mobile app for single men looking for friends.” That might tell you something.


I feel the same way.

Unless I’m buying a literal historic castle, with all of the beauty, workmanship, and character that implies, I’m going to go to an architect and say, “This is what I want; talk with my realtor about what kind of land I’ll need in order to build that,” followed by, “This is the land I’ve picked out, based on your recommendations; how can we make what I wanted a reality?”


Even Mad King Ludwig took a while to build his dream house.

I just bought a house. It was a little below market; I think I got a pretty good bargain. A glut of super-mansions is not going to lower the price of my little bungalow, nor is it going to make the bank call my mortgage in. If I get securitized and then fraudulently foreclosed, that would be a problem, but I can’t see how the far tail of the distribution has any effect on that.

It’s another angle on an old question: is a nation wealthy if its leaders are wealthy? Or is it wealthy if the poor are well-off?


To be more specific:

Step 1: It used to be that if you couldn’t pay your mortgage, the bank that loaned it to you had a problem. Then the barrier between personal banking and investment banking was removed in the 1990s. Which meant that mortgages could be bundled into securities, with investors taking the risk. Now there’s a complete disconnect between those handing out mortgages and those taking the risk. Leading to industry-wide mortgage fraud.

Step 2: The investment banking system created a demand for the riskiest subprime-backed bonds because they were worth betting against, so…

Just so. There weren’t enough investors willing to make such high-risk investments. No problem: The folks who should have warned the investors - bond rating companies like Standard & Poors - were instead in on the scam. (Just like Arthur Anderson was in on Enron’s scams rather than acting as an impartial outside auditor for investors.) High-risk, doomed bonds were rated as low risk.

Step 3: When there weren’t enough bad mortgages the investment banks created them - a hundred times over, out of thin air, by “cloning” those risky bonds. THAT was the main problem, and a big reason why the mortgage holders couldn’t be bailed out. Too many of them existed only on paper. And it wasn’t even illegal.

Step 4: Once it all collapsed, banks suddenly got really conservative with their lending practices. People who earlier were given mortgages, now couldn’t renew them. And now people couldn’t get car loans. Chrysler and GM, in bad shape to begin with, couldn’t sell cars. And that was the end for them.

A mere glut of mansions doesn’t scare me.


But what if you want to invest 100MM on high end real estate?

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Does it surprise you that a Italian race car driver would collect cars?


It’s trophy-hunting, not investing. I don’t begrudge anyone a 200’ yacht, but at that level – when the market is so thin, the buyers so few – anyone with an ounce of sense has to regard these things as expenses, not investments. I mean, yeah, if you’ve got $6 billion and you want a weekend home in London, yeah, I guess you can spend that sort of scratch. But it’s hard to think you can get out of it any time as an investment. If you want to invest in real estate, you’d do better with 40 $2.5MM properties than that.


Hopefully it’s that, and not the canary in the cage coughing.


Yup. Mansions were the good investment. Now it’s condos in London, New York, Toronto and elsewhere. They’re a more liquid asset - easier to sell as needed - and you can have them scattered across different markets.