A cooling market for the most expensive homes is costing hotel and casino magnate Steve Wynn some money. Two years ago, Wynn paid $16.25 million for an 11,000-square-foot mansion perched above the Bel-Air Country Club.
Less than a year later, he sought to unload the home for $20 million. No luck.
Then he tried $17.45 million. No luck again.
In May, Wynn dropped his price to $15.95 million, $300,000 less than what he paid for the property in 2014. The home went into escrow “very close” to that price last month but it’s clear he’s taking a loss –
It’s not just Wynn who isn’t getting as much money as he hoped.
Even before Britain’s vote last week to leave the European Union jolted investors worldwide, there were reports of a slowdown in the ultra-luxury housing market.
In Los Angeles, agents were seeing more price cuts. Condo sales on New York’s Billionaires’ Row were slowing. Luxury developers shelved projects in Miami. And prices at the tip-top end of the London market were on their way down. Blame it on the global economy, which has displayed weakness in the past year, choking off the spigot of international millionaires and billionaires seeking a pied-à-terre, or two, in glamorous locales.
So far, in Los Angeles the effect has been minimal, given the nature of Southern California ultra-luxury development – which largely consists of one dramatic hillside estate at a time, rather than a condo tower with multiple units. But a spate of new construction is on the horizon. By one estimate, there are about 30 new hillside homes priced above $30 million that could hit the market in the next year and a half.
The so-called Brexit vote may not help matters. It has sown economic uncertainty on a global scale and caused the dollar to strengthen against major currencies – potentially leading international buyers to trim their purchases in the United States.
In Manhattan, the slowdown has taken a sharp toll. The number of previously owned homes that sold in the first quarter for $10 million or more fell 40% from a year earlier.
In Los Angeles County, by comparison, $10-million plus sales ticked up by one to 17 in the first quarter compared with a year earlier, according to the California Assn. of Realtors, whose data largely covers resale transactions.
But over a longer timeline, it appears the market has begun to stall. The number of sales of $10 million or more in L.A. County has dipped in three of the last five quarters for which data is available, even as inventory has steadily grown, according to the Realtors group. And, brokers say, the slowdown is more pronounced the higher the price.
As of mid-June, nine homes in the county had sold this year for $20 million or more, compared with 18 during the same period last year, according to Loren Goldman a vice president with First American Title Co. It’s possible the slowdown will bleed into the rest of the market eventually, but that’s not likely to happen “any time soon.”
Local agents put much of the blame on a pullback by international buyers who had flooded Los Angeles in recent years. Turmoil in their economies, along with a strong dollar, have many from Russia, the Middle East and China second-guessing a purchase here.
One dynamic has yet to play out – whether the strong dollar continues to deter international investors from entering the U.S. real estate market, or as their own home country currencies weaken, they come to increasingly view U.S. as a haven.
It’s not necessarily clear which one of those two mindsets is going to win out.