The Stampede of White Elephants

Slowing Sales of Luxury Properties
Reveal ‘Trophy Homes’ Weighing Owners Down

By: Christina S.N. Lewis
Source: Wall Street Journal
Date: October 31, 2008

As the luxury real-estate market slows to a snail’s pace, real-estate brokers find themselves struggling to sell a growing number of “trophy homes” that are quietly gaining a new title: white elephants.

The term hails from a legend that Siamese royalty gave albino elephants — revered but financially ruinous to maintain — to unpleasant courtiers. Today, the financial burden of carrying an overly big, overly unique manse is being shared by many wealthy owners, who are finding out the hard way that not everyone is willing to pay up for their vision of a dream home. Realtors concede a growing number of these pricey pachyderms are sitting unsold for months and selling at steep discounts, if at all.

Some sellers are getting creative. On Thursday, the owners of Castlewood, a gothic castle in West Orange, N.J., hosted a live jousting competition to generate buzz among real-estate brokers. Designed in the 1850s, the 5,000-square-foot stone house is on two acres and features two towers, a staff apartment and a round bedchamber with a 28-foot-high domed ceiling. On the market for two years, the homeowners switched to a new agent, Sam Joseph of Re/Max Village Square and dropped the asking price to $2 million from $2.8 million, originally.

For most of the housing market’s history, homeowners knew that big custom-designed homes that aren’t in scale with their environs might eventually cost them. “You build [a white elephant] because you were successful in your career and you want to treat yourself,” says Ed Kaminsky, who runs Premiere Estates, a California-based luxury auctioneer that specializes in marketing unique, hard-to-value houses. “But you can’t expect to get your money out.”

But it seems that tenet was forgotten during the boom. And in the meantime, formerly profligate consumers have become extremely price-conscious, says Gregory Hague, owner of Arizona-based Hague Partners, an affiliate of Christie’s Great Estates. “It used to be that buyers looked for something that got them excited and emotionally engaged and then tried to negotiate a good deal. Now they’re looking at price first.”

Steven L. Good, head of Chicago-based real-estate auction firm Sheldon Good & Co., says the division of the company that specializes in selling homes that cost from $1.5 million up to $40 million has seen a sharp increase in offerings in the last year from wealthy homeowners who are frustrated because their homes aren’t selling. And real-estate Web site Zillow.com turns up a number of unsold homes whose price tags and amenities are far fancier than their immediate environs might suggest.

In Broadview, a Seattle neighborhood known mostly for modest ranch houses, an Italian-style villa for sale features a four-car garage and an indoor koi pond. Nearly 10,000 square feet, the house has an asking price of $2.75 million and has been on the market for over a year.

Barney Garton, the listing agent, says the home’s rare Puget Sound views make it “a great value.” He says it hasn’t sold because of its “unusual” architecture and the downturn.

In Truckee, Calif., a lake community about 17 miles north of Lake Tahoe, a $3.95 million lakefront contemporary house with an elevator, indoor lap pool and two garages stands out from the neighboring A-frame log cabins. Built in 1985 and designed by the owner’s son, an architect, it was listed in June and is the most expensive house for sale on the lake. While it’s received less traffic than expected, the owner is in no hurry to sell, says one of the listing agents, Charles White, of Donner Lake Realty. A more recently remodeled home with fewer amenities but more lake frontage recently sold for about $3 million.

In Dallas, Braden Power, a developer of apartment complexes, spent more than seven years designing and building his dream house: an 8,500-square-foot showpiece with contemporary, traditional and Moorish influences that opens to a central “natatorium,” a double-height entrance courtyard with marble floors, two fireplaces, a mezzanine balcony and a central fountain and reflecting pool deep enough to swim in.

Mr. Power spared no expense: He hired an army of both traditional and contemporary designers. The automated exterior and interior lighting systems cost $500,000; the chandeliers are hand-carved, the floors are all solid marble or limestone (both indoor and outdoor) with radiant heating — a rarity in Dallas where the temperature seldom dips below 40 degrees. “This house was basically a creative outlet,” says Mr. Power, who says his inspirations were the Los Angeles and Miami boutique hotels designed by Ian Schrager.

But last year, Mr. Power decided the home was too big for a bachelor and he put it up for sale, unfinished. With a price tag of $13 million, it attracted a flurry of local press.

Despite being located on three-quarters of an acre on picturesque Turtle Creek, the home didn’t sell and now Mr. Power has relisted the house for $9.8 million with Doris Jacobs, of Allie Beth Allman & Associates.

Although Mr. Power acknowledges that he may not recoup his building and carrying costs, he says the home will become a good investment if fans of the design purchase his architectural plans and custom molds.

He has no regrets about building the house. “Honestly, this house is a dream to me,” says Mr. Power, who also plans to list the home for rent. “I think it’s the most perfect place that I’ve ever been in in my life.”

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The information herein is believed to be accurate but not guaranteed and may be subject to errors, omissions and changes without notice. This is not to be construed as a solicitation of property presently listed for sale. All information is derived from the Palm Beach County Property Appraisers website and the MLS.

The information herein is believed to be accurate but not guaranteed and may be subject to errors, omissions and changes without notice. This is not to be construed as a solicitation of property presently listed for sale.

All information is derived from the Palm Beach County Property Appraisers website and the MLS.

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Luxury Resort Portfolio – "The Definitive Source For Luxury Real Estate In South Florida" is Co-Founded by Boca Raton luxury real estate specialist Philip Lyle Smith and South Florida luxury real estate broker Carla Ferreira-Smith, collectively known as, “The Smiths”… and together we represent, market and sell the most prestigious Baca Raton Oceanfront Estates and Waterfront Luxury Real Estate. As former Sotheby’s International Realty and Christie’s International Real Estate affiliates and an authority in Boca Raton luxury real estate for more than a decade, Palm Beach County Realtors,The Smiths, specialize in the sale and acquisition of fine properties found along the Gold Coast of South Florida from Miami to Ft. Lauderdale and Boca Raton to the Palm Beaches. Philip and Carla Smith bring a sincere commitment to their profession and offer their clients incomparable firsthand knowledge and experience. Devoted and committed to our clients’ confidentiality, we provide our trusted advice and are appreciated for our family values with a great deal of respect for home and community. Representing both buyers and sellers of the finest residential luxury real estate in South Florida from the oceanfront estates of Highland Beach and Delray Beach through the waterfront intracoastal homes of Manalapan, Gulf Stream and the mansions of Palm Beach, Luxury Resort Portfolio instills in its’ real estate professionals the importance of understanding how personal the decision is to buy or sell your home and that that the procedure should not only be stress-free... but financially rewarding. It is with great pride that Philip Lyle Smith and Carla Ferreira-Smith offer to you their superb client services.