Insulated from reality.

I was reading Amy Hoak’s [New Jersey Estate Tops ’06 List Of Most-Expensive Homes Sold [REJ]]( article today and a bunch of thoughts raced through my mind.

As an appraiser/consultant in Manhattan for more than 20 years, in one of the highest priced real estate markets in the world, there are a lot of 000’s in a typical high end purchase price. In my first five years of practice, I would get a little depressed after each inspection, wondering how I ended up taking a different path than the owners of these properties. Especially since the owners of these properties often have 3-5 additional properties.

Both myself and my firm regularly inspect residential co-op, condo and townhouse properties in excess of $20M, $30M, $40 and, yes $50M with some of those needing extensive renovations (for those appraiser afficianados, yes they can be done on a FNMA form). Yet I was finally got over my insecurities and accepted the reality of their situation…the owners were miserably unhappy and I wasn’t. (Ok, so I need to fool myself a little on this point, but please give me that.)

We refer to $20M+ properties now as “super luxury,”, although I supose that when we eventually crack $100M here, its going to be called something like “super, super luxury” or “What the $%&#?” Just three years ago, this category started at [$12M to $15M [NYT]](

Its really tough, if not impossible to measure trends in the high end market primarily because:

* The data set is very small.
* The properties vary significantly (ie square footage, land, type)
* The potential for development varies greatly

Here are a few other thoughts about high end housing markets:

Is the high end properties segment a leading market indicator? I don’t think so. They can be leading indicators by accident but I think the idea here is that they behave very differently than the rest of the market. In Manhattan, these properties provided the first clue that the housing boom was over in mid-2005 by going dormant. Prices of these properties did not drop, yet they simply did not sell in the quantity they had before. After it was apparent that bonus money was going to be high, this market came back to life 6 months later.

Mob rules. As individualized as these transactions are, there tends to be a mob mentality in the pattern. We often see a rush of sales over a short period and then a trickle.

It depends on whats available. Sales are often prompted by the availability of inventory and marketing times can be 2-3 years. Of course, some of these “trophy” properties are likely to be wildly overpriced and are simply vanity listings by the owner.