Lust for status drives luxury real estate market

Part 1: The American Dream is on steroids
By: Janis Mara: Inman News
Editor's note: Like everything in American culture, houses have blown up to Hummer-sized proportions. Eight-figure prices and 10,000-square-foot homes are becoming the norm in the luxury housing market, which is booming. In this three-part series, we explore the changing nature of the American Dream, what people are looking for in the ideal home and our obsession with all things big.

Amika Antoniades-Rao's dream house has an Olympic-sized swimming pool with Greek columns and statues, a circular foyer with a huge Swarovski crystal chandelier, a kitchen with two islands and two dishwashers, a movie room and a home gym.

The California resident's fantasy home may sound extravagant, but it's actually conservative compared to many existing luxury homes.

America's luxury housing is on steroids, with 10,000-square-foot homes and eight-figure prices becoming commonplace. In the luxury market, it's not about keeping up with the Joneses, building a two-story ranch and putting up a white picket fence. The stakes are higher and the fences are made of Australian jara. Now it's more about keeping up with the high-tech moguls next door: the Bill Gateses and the Larry Ellisons.

"We've experienced the overly large home phenomenon for some time," said William Hablinski, founding partner of Hablinski + Manion Architecture, a luxury housing design firm focusing mostly on the Pacific Northwest. Hablinski said 15,000- to 24,000-square-foot houses are the norm for his firm.

"I've had 60,000- to 70,000-foot houses. It's really almost obscene," the architect said.

Such projects easily can cost $35 million for the home construction alone. With the price of the land, the house could be valued at $50 to $70 million, he said.

"They're building palaces," said Yolande Citro, an agent with Triangle Properties who sells luxury homes in Miami Beach, of her clients. "Star Island and India Creek Island (in the Miami Beach area) have lots of land. They are building gigantic homes, huge master bedrooms with 'his and her' bathrooms, pools, six-car garages with private apartments on top, maid's quarters and cottages for guests."

The former Atherton, Calif., home of Larry Ellison, founder of Oracle, has seven bedrooms and 7.5 baths on 2.8 acres, with a Japanese teahouse, Japanese gardens, waterfalls, a koi pond, an in-ground spa, a pool and a tennis court. It's currently for sale at $29.5 million.

Such extravagant homes are spreading. The luxury home market is booming, with Coldwell Banker's sales volume of homes valued at $1 million or more surging to an all-time high of $35.5 billion in 2004. The company's previous record volume for luxury home sales was $23.3 billion in 2003.

In California, one of the top-selling states for luxury homes, sales of homes valued at more than $1 million jumped 73 percent, from 19,080 properties in 2003 to 33,107 in 2004, according to DataQuick Information Systems.

"We're booked up through January 2006, we're turning work away and there doesn't seem to be any letup in demand," said Hablinski.

Hablinski says similar trends are happening in Florida, Long Island, Connecticut, the San Francisco area, the greater Chicago area, Atlanta, Dallas and other metropolitan hubs.

Luxury home values jumped 48 percent in the last year in the San Francisco Bay Area, according to Katherine August-deWilde. August-deWilde is chief operating officer for First Republic Bank, which tracks luxury home prices through its Prestige Home Index. Prices for such homes are on the upswing in Los Angeles, San Diego, according to the index, and also in New York, August-deWilde said.

One commentator sees the trend toward larger, costlier homes as an upscale bunker mentality engendered by the September 2001 terrorist attacks.

"When uncertainty is strong, as it is now in the national psyche since 9/11, the tendency to hunker down is ongoing," said Kathryn Robyn, co-author of The Emotional House. "People are threatened. Where do you go when you're afraid? You go home. It's your sanctuary.

"We've seen this at other times in history," Robyn said. "Whenever there's an uncertain time, we hunker down and become fascinated by luxury." During the Cold War in the 50s when the nation was at odds with Russia, people were fascinated with luxurious homes, she said.

August-deWilde agreed that the terrorist attacks have been a big influence.

"A lot of this comes in the wake of 9/11 and the war in Iraq," August-deWilde said. "There's a bit of a homing instinct. People are spending more time in their homes." Also, lower interest rates have made the opportunity of spending money on housing low, and finally, because the stock market became more volatile in recent years, she said.

Kevin Gotham, a sociologist and associate professor at Tulane University, had a different interpretation.

"People seek out large properties because it makes them seem successful. These kinds of objects and commodities are signifiers of prestige," Gotham said.

The psychology behind the 10,000-square-foot, multimillion-dollar home is similar to that behind the Hummer, according to Gotham. They're both symbols of upward mobility.

"People believe if they have one of these, they will project status," the sociologist said. "There's nothing modest about the Hummer or those big homes. They don't express modesty or humility at all."

A person's home is a reflection of his personality, according to John Brian Losh, founder and publisher of LuxuryRealty.com. Losh agreed that "people equate big houses with big success.

"People view their homes as reflections of themselves," Losh said. "Every luxury house takes on the personality of the owner."

Hablinski agreed, saying, "It can be symbolic of personal success if you have a big house."

Daniel Levy, president of CityRealty.com, put it more succinctly.

"It used to be keeping up with the Joneses. Now it's keeping up with the Ellisons," he said.