This week’s blog entry is brought to you by Terry Boyle (Tboyle@landvest.com). Terry has worked extensively with buyers and sellers of unique and rare real estate holdings throughout the New England region and beyond, with a current concentration on the Boston Massachusetts South Shore and South Coast/Buzzards Bay markets.
Picasso painting "Nude, Green Leaves, Bust” sold for $106.5 million at Christies Auction
As widely reported, the Picasso painting “Nude, Green Leaves, Bust” sold for $106.5 million last week, setting the record for the highest sale price of a single painting ever. As much of a splash as the sale made in and of itself, there was almost as much news generated on what the sale could tell us about the overall health of the economy and what the future holds. At LandVest, we used the record breaking art sale as a jumping off point to examine whether portions of our residential inventory could be considered in an asset class like a Picasso, and what that comparison could tell us in attempting to predict sales volume in the high end residential market in the coming months.
Jasper Johns American Flag sells for 28.6 million
The initial question centers on what the current growing appetite for “hard assets” by investors means to the generational estate quality residential real estate market. According to Investopedia.com a “hard asset” is typically defined as “A tangible and physical item or object of worth that is owned by an individual or a corporation.” Or, better yet: “a hard asset is the opposite of an intangible item such as goodwill or a patent”. Hard assets are typically thought to be more desirable at times when there are fears of increasing economic inflation. The classic hard asset examples are precious gems, valuable art (see Mr. Picasso), in ground assets (mines, refineries, etc), and to some degree real estate – commercial, or any real estate that has easily verifiable value to virtually all market participants.
"Buy land, they aren’t making it anymore” - Mark Twain
For example, a beachfront property with great privacy and a lovely home is intrinsically valuable, if simply because the home has value as shelter (at a minimum), and the land, the beach, etc. has value because it is very difficult (if not impossible, in some cases) to reproduce. As the oft quoted Mark Twain opined: “buy land, they aren’t making it anymore”.
This is particularly true when the “land” has a component to it that the market regards as very rare (oceanfront, large size, privacy, views, etc).
Clearly, this value in the “LandVest” portion of the residential market varies over time, but unlike parts of the equity markets that in recent months collapsed completely (General Motors, etc. ), the LandVest portion of the high end residential home market has seen a continued pace of record sales.
LandVest Second Home Record Sales Map Q1 2010
As the above regional map displays, the “record sale” market (the highest residential sale price paid in a particular town) in second home market locations (urban market towns excluded) has seen activity through many broader market fluctuations. Most recently, record sale activity continued throughout 2007, 2008, 2009, and 2010, when other sectors of the economy were crashing in value, or experiencing extreme volatility, or locked up by the inability to secure credit. Has there been some value erosion in the above referenced markets? Yes, clearly. We have seen a dip in prices in our markets (as detailed elsewhere in this blog) of anywhere from 10-35% overall, depending on the asset and location, but the somewhat startling observation from the above data is that sales activity of these type of properties did not dry up completely or crash when other parts of the real estate market were declining rapidly, or in some cases virtually stopped. The conclusion would appear to be that if a property is truly perceived to have a rare enough component, it will retain value (at varying degrees), and will trade even when overall market conditions are poor.
So can the high end second residential home market be included in the “hard asset” discussion? Can a buyer of the hard asset class be motivated by some of the same motivations and requirements whether that purchase is a piece of art, a piece of gold, or a piece of rare real estate? It would appear that judging by history it can.
Bootjack Ranch, in Pagosa Springs, CO sells for 46.5 Million - Reportedly the highest price paid for a single-home/estate in the US in 2010
Jerry Heller and Terry Boyle's 2009 sale sets record as the highest reported price paid for single-home/estate in Wareham, MA
For more information about rare real estate finds in and around coastal Massachussetts, contact Terry Boyle (Tboyle@landvest.com).
Visit www.landvest.com or Click Here to Search LandVest listings for Rare Real Estate Finds