Friday, April 8, 2011

Social Climbers are a Realtor's Dream

DAY 30 OF 46

Keeping up with the Joneses just got a bit harder.

Apparently, though, it's not the Jones family we need to keep up with these days, either, but the Milner's.

And by harder, I'm talking $100 million harder.  That's the price Russian billionaire investor Yuri Milner paid for his family's new house near San Francisco last month.  Which sets the new record for a private home purchase in the United States.


Yes, America:  Forget McMansions, gated communities, and doorman buildings.  Those may be the means by which lower life forms measure wealth and status, but not the new breed of conspicuous consumers.  Granted, the previous record of $95 million for Donald Trump's former Palm Beach spread had already set the bar pretty high.  Nevertheless, Milner's purchase now pegs the benchmark selling price of the American Dream at a round $100 million.  And like any good capitalist would say, it's the selling price that counts.

Set on 18 prime acres overlooking San Francisco Bay, the Milner family's new estate features a 25,000 square foot main house, a 5,000 square foot guest house, tennis courts, and both indoor and outdoor pools.  But quite honestly, aside from claiming such a huge swath of waterview Silicon Valley real estate, there's little aesthetically to justify the record-setting pricetag.  The landscaping is uninspired and dreary, and the architecture resembles pseudo-chateau-meets-Beverly-Hills in an even less flattering Beverly Hillbillies kind of way.  Let's just say that for a trophy house, it's not going to win any design awards.  Indeed, built by dot-com nouveau riche and bought with new money by a social media investor from Moscow, this property's dispassionate character appropriately disappoints after the initial buzz over its pricetag wears off.

Even though it reeks of bad taste, however, the financial transaction involved here must be good for business in the otherwise bleak world of California real estate.  Annual property taxes alone could probably fund a Third World country.  And it certainly seems to validate the recent chatter among financial wonks regarding renewed activity in the world of high-tech investing.  It hardly seems likely that such a sale could have been pulled off if Silicon Valley was deflating.

Although, having the sellers personally financing 50% of the purchase price for Milner does sound a bit unsettling, since the entire purchase represents a fraction of his supposed wealth.  Who's more eager in this transaction:  the sellers, or Milner?  Or Milner's wife and kids, anxious to escape dreary Russia?

Putting a $100 Million House in Perspective

Some bourgeoisie proletariats could find plenty of classist fodder in this story to blast away at the inequities in our society.  For example, how many homeless people could be sheltered for $100 million? How much does it cost for the central HVAC to heat and cool 25,000 square feet of living space? And even if you could afford to spend that much money yourself, should you?

Those sound like questions I myself might ask, don't they?  And I have to admit, if somehow I ended up with Milner's money, I would personally have a hard time justifying spending so much of it on a house like this.  Even if it was far better designed.  And not in California.

Still, I see some virtue in Milner's purchasing a house for a tenth of a billion dollars.  Consider what this does for setting the pecking order among the rest of us.  Whether you live in a $50,000 house or a $50 million dollar one, how much does that matter in comparison to $100 million?

Let's concede the fact that over 95% of Americans will never be players in Milner's type of housing market.  So why do so many of us pretend like we've got something to prove when it comes to the type of house we buy?  I don't mean to cripple our nation's residential construction industry, but doesn't the move-up syndrome sometimes causes more harm than good?  Granted, a lot of empty nesters these days are downsizing to economize on wasted space and property taxes, but even what many of them are downsizing into manage to have their own cache, especially since downsizing is considered an admirably prudent trend.  Jockeying for social status can be as infectious as it is universal.

But at the end of the day, even I have to admit that where you call home is more your business than anybody else's.  I wish Milner, his wife, and their two young daughters many good nights of sleep in their new mansion, even if it is more investment than home.  And I don't begrudge all of the people in this world (who can legitimately afford it) their lives in far nicer domiciles than mine.

But neither would I want the pressure of holding title to America's priciest house.  After all, keeping up with the Joneses means you're never out ahead for long.  As a matter of fact, an estate on Long Island built by Ira Rennert, creator of the Hummer, could reportedly go for a stratospheric $200 million if it were put on the market. Its main house is twice the size of Milner's California pad.

Can you imagine?  For the Rennerts, the Milner mansion would be downsizing!

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