Where Billionaires Continue To Buy Homes—Despite Climate Disasters, High Mortgage Rates, and Other Real-World Problems

At a time when high asking prices and mortgage rates have made homebuying more challenging than ever, one distinct market sector is still selling like hotcakes: megamansions that only the ultrawealthy can afford.

One recent sale of note: In June, billionaire James Jannard, the founder of Oakley sunglasses and apparel, sold his massive estate in Malibu for $210 million, setting a California record.

While the buyer’s identity remains under wraps from the public, this mystery owner now boasts the most expensive property in the state, beating out JAY Z and Beyoncé, who shelled out $190 million for a Malibu property last year.

In another noteworthy sale this June, Laurene Powell Jobs paid a whopping $94 million for a 9,810-square-foot, oceanfront Malibu property with a five-bedroom, three-bath home built in 1956.

She already owned two adjacent properties in the Paradise Cove area; a Google Earth photo of her domain shows it to be under construction.

And while Malibu is a perennial favorite among wealthy homebuyers, so are San Francisco, Aspen, New York City, Miami, and Palm Beach, FL. Each place boasts at least one sale among the year’s highest-priced transactions, all over $50 million.

Why is America’s ultraluxury market still going strong, even while the rest of U.S. housing market is just limping along?

Simply put, wealthy buyers play by a completely different set of rules, immune to many of the make-or-break issues that might prevent most mere mortals from buying a house.

So what do America’s richest homebuyers want, and how do they get it? We spoke with prominent agents and brokers in some of the country’s priciest areas, for a glimpse of what it’s like home shopping with many millions at your disposal.

Why wealthy homebuyers don’t care about climate change

Floods, fires, and storms may give most of us pause when we’re considering where to buy our homes—many of us can’t even afford to buy insurance in some places, if it’s available at all.

But the story’s a bit different for billionaire homebuyers.

“Homes in coastal areas, such as Palm Beach, are at risk of property damage due to climate-related events, which may deter some buyers,” says Realtor.com senior economist Hannah Jones. “However, ultraluxury home shoppers continue to flock to these areas.”

Extreme Florida weather patterns have been in the news a lot of late, but well-heeled buyers have less reason to worry.

“The new FEMA regulations and the requirements of insurance providers have really encouraged or mandated that developers and custom builders reach certain standards in terms of wind and flood protection,” says Margit Brandt, with Premier Estate Properties, Inc. in Palm Beach. “These improvements in the building code have prepared the region well for storms.”

While many regular homeowners may not be able to afford the latest hurricane-proof house, the wealthy can afford the very best in storm-prep standards.

Timing is yet another reason why the rich aren’t scared of hurricane season, which spans June through November: This is also when Southern coastal areas are at their hottest and stickiest—and when wealthy homebuyers typically kick back in their other mansion farther north.

“Most Palm Beach residents skip hurricane season [then fly down] after Thanksgiving,” Brandt points out. “Or they will often decamp back to their [northern] summer home by air if necessary.”

In coastal areas, beach erosion is also an issue for many homebuyers.

“On beaches with erosion, the foundation systems are the most critical component,” says Sandro Dazzan, managing partner of The Agency Malibu. “Homes with newer concrete foundation systems, as opposed to the old wood piles from the 1950s to the 1980s, command a premium. High-end buyers tend to gravitate towards new builds with new concrete foundations and newer sea walls.”

When it comes to fires, Dazzan says his wealthy buyers look for homes with fire suppression systems and construction designed to withstand wildfires. They’ll also hire teams to clear the brush and plant fire-resistant vegetation around their estates.

“There are companies you can hire that will monitor your home and, in the event of a wildfire, will come to the property to defend it,” Dazzan says.

In other words, the rich can simply hire a private fleet of helicopters to put out any wildfires that encroach on their home—it’s the ultimate in peace of mind.

And despite the risks of climate disasters, these billionaire enclaves have unrivaled natural virtues that you just can’t get elsewhere.

“Ultrawealthy buyers are flocking to Malibu because of our beautiful rural environment and the incredible Santa Monica Mountain range that spans the entire city,” says Dazzan.

He recently sold one of the priciest properties of 2024—a stunning, newly built, 10,527-square-foot mansion with unobstructed access to and views of the Pacific Ocean. That, along with its proximity to the entertainment industry, attracted megamoney buyers. The place sold for $61 million.

Wide-open spaces are also of great value to elite buyers. This is evidenced by the number of billionaires who make ski-resort areas like Aspen their winter headquarters. It also explains the sale of this $59 million, 36.31-acre legacy compound this year.

Why billionaires prefer ‘triple-mint’ turnkey perfection

While plenty of regular homebuyers are willing to tackle a fixer-upper if they can save a few bucks, billionaire homebuyers demand that a property be perfect before they move in.

“The most important factors we see Palm Beach buyers looking for, universally, are 1.) instant gratification or turnkey products, and 2.) value,” shares Brandt. “Buyers want to feel like they can enjoy their purchase sooner rather than later.”

Brandt represented the buyer of this $150 million property in Palm Beach. It was one of the top residential sales in 2024 so far. Christened Tarpon Isle, it is an astonishing, brand-new property developed in 2023 on a 2.27-acre manmade island. The 21,406-square-foot home there features 11 bedrooms and 22 baths.

Basically, billionaires seem to want what they want—and they want it now.

“Triple-mint condition sells a luxury property today,” says John Antretter, a licensed associate real estate broker with The Agency in NYC. “They don’t want to have to bring in a designer and gut renovate an apartment. The best way to sell a top-of-the-line property in today’s market is to make sure everything is perfect, new quality painting, refinished or replaced flooring, and staging.”

In New York City, “triple-mint” is par for the course at Central Park Tower, the tallest residential building in the world. This is where one trophy unit is currently priced at $150 million. It hasn’t sold just yet, but it has generated much interest from the wealthiest buyers across the globe.

It’s no coincidence that properties like these are more plentiful in the traditional cities of wealth. But Big Apple buyers have another huge challenge to contend with: competition. New York City is home to more billionaires than any other city in the U.S.—110, at last count.

Why the rich don’t worry about mortgage rates

One of the ways affluent buyers get around the high mortgage rates plaguing most of America’s home shoppers is their ability to broker special deals.

“Rather than only using standard mortgages, many Palm Beach buyers will seek a loan from their bank secured by their equity portfolio within the bank,” Brandt explains. “The interest rates on these tools tend to be very competitive, since the loan is often secured by sizable equity positions in relatively liquid assets.”

In other words, because of their longstanding and megasized relationships with their banks, the banks are willing to loan them money at rates far below the standard.

And then there’s the option of paying all cash for these high-priced properties, making interest rates irrelevant.

“Many feel times of turmoil give them a better opportunity to use their cash to negotiate a better deal,” says Antretter.

A sure, quick, cash deal, without financing complications, can be of great value to an eager seller.

By: Lisa Johnson Mandell I Realtor.com I August 27, 2024