Rising interest rates. Natural disasters. There are many reasons not to buy a home in today’s real estate market, especially in certain areas. But the ultra-rich remain unfazed.
As most of the market recovers from his hangover linked to the COVID-19 pandemicmegamansions in some cities have been immune to the downturn. Across the country, billionaires are still spending tens of millions of dollars on housing, despite traditional logic telling them to put their money elsewhere.
A new report from Realtor.com, six cities have become elite favorites this year, and two of them are in California. The tops of the big cat crew are Malibu, San Francisco, Aspen, New York, Miami and Palm Beach, Florida.
All six saw sales above $50 million in 2024, and a handful saw much higher sales.
In May, a private island in Palm Beach, reached $152 million, setting the all-time price record in the Sunshine State. California saw its own record a month later when Oakley founder James Jannard sold its Malibu spread for $210 million.
For every excuse not to buy, billionaires find a workaround, according to the report.
For example, climate change and its ripple effects – floods, fires and storms – threaten homes in coastal communities in California and Florida. But regulations from the Federal Emergency Management Agency and insurers have raised standards for builders and developers, requiring increased protection against wind and flooding. So in Florida, for example, affluent buyers consider many new homes, especially the most expensive ones, to be hurricane-proof.
Storm-prepared homes may be too expensive for some, but not for those with a budget of $50 million or more.
The same logic applies to other environmental disasters, the report says. Wealthy beach house hunters can minimize the effects of coastal erosion by purchasing a house with a concrete foundation and a brand new sea wall, which protects against crashing waves and shrinking beaches much better than older homes and cheaper ones built on wooden stilts. the 1950s and 1960s.
For homes located in fire-prone areas, billionaires are equipping their estates with fire suppression systems and even hiring private fire teams to protect their homes from the flames.
The other factor that excludes some potential buyers from the real estate market? Soaring interest rates.
Unlike during the pandemic, where rates fell to 2% or less, rates in the modern market are hovering around 7%.
A mortgage payment with a 7% rate can cost thousands of dollars more per month, or even tens of thousands more for multi-million dollar properties. But billionaires are not at the mercy of interest rates for several reasons, the report says.
Some wealthy buyers can pay cash for a luxury property, avoiding interest.
Others are able to negotiate special deals with banks because of their long-standing relationships and massive holdings. In other words, the more zeros you have in your account, the better rate you’ll get from a bank.