Across the US - particularly in crowded urban markets like New York City - a shortage of new, affordable housing has helped home prices eclipse their highs from the pre-crisis years, leaving the dream of homeownership hopelessly out of reach for millions of heavily indebted millennials.
With homes so unaffordable, it's hardly surprising that existing home sales are mired in a 14-month-long slump - though the return of mortgage rates to multi-year lows in May is certainly cause for cautious optimism among real-estate brokers.
But there's one segment of the housing market that, judging by all available anecdotal evidence and the data, has continued to soften after posting its worst quarterly slump in years during the opening months of 2019.
From Greenwich to the Hamptons to Billionaires' Row, sellers of luxury homes have struggled to find buyers amid a glut of oversupply and the disappearance of the marginal bid from wealthy Chinese buyers, who were once willing to pay a premium for real-estate in places like NYC.
And in the latest indication that the American real estate market has finally topped out, WSJ reports on a troubling new trend on the West Coast: A foreboding glut of luxury spec homes in Los Angeles that is creating serious headaches for developers and lenders alike.
Some real-estate experts estimate that 50 ultra-high-end spec homes have either recently hit, or are about to hit, the market.
These include "the One", Nile Niami's 100,000-square-foot megamansion, to which the developer has affixed a price tag of $500 million, more than double the price of the most expensive home ever sold in the US (a penthouse apartment on Central Park South purchased late last year by Citadel's Ken Griffin).
The boom in development has its roots in the torrid market of 2014 and 2015 inspired by a few eight-figure deals in the area.
Now maybe some of these developers will get lucky and manage to reel in a relatively price-insensitive buyer (one spec home in the area recently sold to a Saudi buyer for more than $40 million, and to our knowledge, Griffin has yet to purchase a pied-a-terre in LA).
But even the most naive or impatient buyer probably understands that, with close to 100 homes in LA County priced above $20 million by WSJ's count, the luxury real estate in LA has transformed into the ultimate buyer's market.
One real-estate agent lamented that there will soon be "years" of inventory of these "white boxes" out there.
Now, there are simply too many, and not enough buyers to go around. "It's created its own monster," says Stephen Shapiro of Westside Estate Agency. "We have an enormous oversupply of these white boxes. There's years of inventory out there."
Even some of the private lenders who helped finance these spec homes are getting nervous, which is extremely understandable: Given the dimensions of the glut, nobody wants to get stuck with one of these white elephants.
In a strategy that reeks of desperation, some developers are throwing blowout parties instead of open houses and resorting to other gimmicks as they go to "extraordinary" lengths to make their homes stand out. This can sometimes involve hiring a "branding consultant."
In this environment, and amid signs that prices are falling, developers and their agents are going to extraordinary lengths to differentiate their listings from the pack. They are throwing themed bashes in lieu of traditional open houses, thinking up gimmicky new amenities and hiring marketing experts to reimagine homes as individual brands with their own names, logos and stories. Some developers are relisting plots of land, hoping to get their money out without sinking more money into construction.
"People come to us because they want to stand out," says Alexander Ali, whose marketing and public relations firm the Society Group is finding a growing business in creating brands for megamansions. "There are so many new homes coming to the market every day."
One developer decided to re-brand a spec mansion in Trousdale as "WARHOL 90210", lining the walls with Warhol prints and even throwing in a Rolls Royce once owned by Warhol, which will be included with the house.
Mr. Ali's latest exercise: Turning a roughly 7,600-square-foot contemporary home in Trousdale into "WARHOL 90210," a property branded around artist Andy Warhol. Mr. Ali and the developer, Wystein Opportunity Fund, joined with a local gallery to display Warhol prints in the home. At a Warhol-themed disco to be held on site, a Warhol look-alike will be filmed striding through the party; the resulting video will be blasted out on social media. (The house has no connection to Mr. Warhol.)
Mr. Ali convinced the agent that Mr. Warhol's onetime car - a 1974, two-toned, Rolls-Royce Shadow - and the Warhol prints featured in the home should be included in the deal. "It defines the house as a collector's dream," Mr. Ali says. The whole package seeks $17.75 million. The house can be sold separately for $15.625 million.
More than five years after the 'Great Gatsby' movie remake bombed in theaters, one developer threw a 'Gatsby' themed party at a mansion with a price tag north of $35 million.
The party featured models and acrobats who poured champagne while swinging from a trapeze.
In Bel-Air, real-estate brokerage firm the Agency recently threw a "Great Gatsby" themed event to launch a $35.5 million spec house. A female performer in a bedazzled costume hung upside down from a trapeze to pour champagne for guests, while another floated on the pool in a transparent bubble.
Another strategy that's growing in popularity is installing unique amenities. One LA spec home features a secret room designed for growing and smoking marijuana. Another features a roughly 300-gallon shark tank.
But even installing a steel-encased panic room, or a menagerie designed to house exotic pets, or fully equipped in-house night club won't change the fact that the real estate cycle is turning. And with Powell, Williams, Clarida seeing little incentive to cut rates (unless, ironically, growth falls off a cliff), the odds that these homes will find buyers without first swallowing painful price cuts will remain slim.