For the past several years, our suburb has been experiencing an increasing number of teardowns. Currently, a buildable lot goes for at least $300,000 - the home immediately behind mine just sold to a builder for $480G!
The prices of the new homes being built seems to have risen above $1 million.
Tho my burb is definitely on the high end, it is by no means the most expensive in Chi’s western burbs. And the entire N shore easily outstrips us. Moreover, I realize that many areas, such as California, the Pac NW, and the E coast, have realestate more expensive than ours.
My question is, who the hell is buying these homes?
Where do they get their money?
How much do they make?
Do they pay cash?
How the hell could anyone afford the interest on a $800,000 mortgage? (Not to mention the tax bills and upkeep!)
Dinsdale, I ask myself that each time I drive through South Barrington on my way home from work. These homes HAVE to be in the $2M - $3M price range, if not more. They are just enormous! How can that many people be that rich? It’s beyond me. I’d be lucky if I could rent space in their bathroom!
Try doctors, (other) lawyers, and, in NY/NJ, Wall Street types. Guy (lawyer) that was across the street bought a house a half mile away for 1.4 (price was in newspaper). Another one I know lives in a nice area of LI, gotta be close to 1. A doc I know has a 5 BR 6 bath house with an indoor pool in Queens. And NO land inside the NYC limits is cheap. His has to be over.
I think the Times just said the AVERAGE apartment in Manhattan was over 900K. I think the median was closer to 500K, due to some 8 figure apts.
And the teardowns happen a lot. 3 on my block in 9 years. One supposedly was 200+ years old, and not to code, but the others certainly appeared good.
The other day my wife and I were trying to figure out what the payments would be on an $800G mortgage. They seemed so ridiculously high, and I seemed to remember reading that a high percentage of upper end RE deals were for cash. Which raises the question of how many people have sufficient net worth that they can put $1 mill in a single nonliquid asset.
Another thing that gets me is the number of relatively young people who move into these megahomes.
I make a pretty good buck myself, and consider myself comfortably well off. But I couldn’t begin to deal with those kinds of numbers.
In my suburb (I rent), apparently a lot of brokers/traders buy these $1 mil+ homes, along with the usual doctor/lawyer expected professions. After the stock market crash/tech bubble burst, my husband (who’s a mailman in our suburb) said that quite a few of the pricey homes owned by traders were going up for sale.
I think a number of them also afforded it by speculating on the real estate market at the right time - small homes were being torn down, large houses put up, and sold for lots of profit to rich folks.
Dinsdale, in my area, one of the larger employers got rid of a bunch of people - some of those were people who LIVED in those huge houses (that you mention in your neighborhood and the ones Kalhoun mentions in South Barrington). Now they’re empty, trying to sell them, or just trying to rent them so SOMETHING is coming in. It’s sad.
We just had the Showcase Of Homes here this past few weeks where eight to twelve custom builders put their best efforts on golf course lots and then designers come in a fill the monstorous homes with hundreds of thousands of dollars of antiques, hemo entertainment systems, custom kitchens, pools, lavish landscaping, etc. All the latest and greatest in 1.8 to 2.6 million dollar homes and the public can tour them to see what’s hot in the market before they’re put up for sale.
Amazingly, several of the tour guides told us these often times sell as is. Soemone will just buy the whole darn thing, house, home entertainment and Hummer as is.
We live in NW Houston, the fastest growing part, and we see homes like this going up on decent sized ranchettes everywhere up here. The numbers are absolutely staggering.
I watch those Fabulous Homes tv shows, and the details, such as the expensive imported stone used in these homes, is really what sends the numbers through the roof. I’d be afraid to invest in something that lavish in today’s economy. I like my safe little home just fine, thankyouverymuch. And I don’t want to have to CLEAN a monstrosity like that!
I would think a lot of these homes get sold very quickly because G rapper that got good record sales this year, will next year be broke because he spent it all. I bet this happens to a lot of folks through inheritance or what have you. They think they have money all the sudden, by a bad ass house, go broke from buying other necessities, and end up selling.
Remember that all these new expensive homes are going up, primarily, in areas where demand is high and supply is low. So existing homes in the area have also seen their value increase greatly over what the owners have paid for them, allowing the owners to sell their homes for huge profits, which can then be spent on a bigger home.
Around here, it’s not at all uncommon for a house that somebody paid $100K for 10 years ago to be worth $500K today. If that person rented that house after living in it 5 years and bought another house for $300K, the second house would be worth $600K today. All of a sudden, they own $1.1 million worth of house, and they could sell both and buy their million-dollar-dreamhouse.
Heck, I’m making $150K on my house sale (getting transferred), and I only held it for a little over 2 years.
As a general rule, houses in Sydney will double their value in 7 years. So it’s not uncommon for people to sell their home and buy their million-dollar house after a few years.
I can’t remember where, so you’re not getting a link, but I read an article which opined that people are realizing that the stock market bubble was all just play maoney. So they’re putting their moeny in the real tangible asset: their home. And if they have to over pay horribly to get that home, why, it’s still a great investment and they can live in it! And whoever heard of real estate going down? :rolleyes:
I wish them luck. I’m staying in my house and I’m counting on my increased value and thus equity, to pay for some renovations in a couple or few or maybe several years.
Dinsdale - You aren’t in Hinsdale by any chance are you? It isn’t common, but it isn’t rare either, for a $1M house in Hinsdale to be bought and torn down to be replaced with a $3-4M house. Quite common for $600-800k houses to be smashed down. My understanding is that many of these mortgages are interest only, i.e. no payment ever gets made on the principal. I suppose if property values go up faster than the cheap low interest mortgage, you come out way ahead on the whole deal, so long as you have the cash flow to support it.
A married couple of lawyers, two years out of law school in Chicago could easily have a combined income of >$300K/year. Not bad for 26 year olds.
In Denver we’ve got the Parade of Homes. What gets me is, you have a Dozen comes ranging from 850k to 2.5 mil (one last year was about $5 mil) and they’ve been doing this for 20 years!
so, there’s at LEAST 200 ‘Parade of Homes’ homes out there, and the old ones have been appreciating like CRAZY.
I’m banking on our $350k house being worth $3.5 mil in 20 years or so…I just won’t belive it when some whippersnapper buys it up with his 350k a year job. (Look it up. twenty years ago, an average house was $20k, and the media income was a good digit off of what it is now.)
So, every twenty years, move the decimal one place to the right.
RR - naw, I’m in Glen Ellyn, tho church and kid’s piano lessons regularly take me to Hinsdale. That’s why I said we were by no means the most expensive in our area. Add in Burr Ridge, Clarendon Hills, Western Springs, etc. Then there is the Barrington/Inverness area up NW, Lake County, and who knows where else.
handy gives us a monthly payment of $6500. Which comes to $78G in annual house payments. In our town, RE taxes would take annual house expenses to $100G.
I guess it kinda surprises me that so many folk earn enough that they can pay $100G in annual housing costs. $100G gross annual salary doesn’t strike me as exactly chicken feed.
I was also surprised when I made a rough calculation of ALL of our family’s assets, including house, savings, retirement, investment, cars, and realized we were nowhere near being able to buy a million dollar home for cash - even if we liquidated all of our assets. And we own our home outright.
An interest-only mortgage is an interesting idea. Could be risky, tho, should RE ever stop appreciating.
Just a kinda wake-up for me. I consider myself extremely fortunate, and very comfortable in my lifestyle. Heck, I would have considered myself economically “well-off” or “upper middle-class.” For some reason it surprises me that so many people apparently have so much more money that I do. I hope they enjoy their money and their lives as much as I do.
Oh, and Kalhoun - if you had a house like that, you would have a maid service to clean it.
Not exactly. Use any mortgage calculator that you find on the net. If you have a 30 fixed rate mortgage in the low sixes, you’ll get a payment of around 4800. Add another 80 or so for insurance and 900 a month for property tax and you get 5800 a year. Mortgage interest and property taxes are Federal and State tax write offs so you will “save” about 2k a month of that. This brings the true expense down to about 3800 a month or 46k a year. That’s still a chunk but about half of what you calculated. If having the mortgage allows you to itemize your taxes in the first place, you will have an even lower true cost.
In Naples, FL they have gulf side condos being built with advertisements of “New Condos - From the low 3 million”.
My wife and I used to joke that when someone went in there to buy 3 million model that the salesman would roll their eyes and think “Oh great, another cheapskate who wants the budget model.”
