Real Estate Investing

The recent attention on real estate holdings of the 2008 presidential candidates might increase interest in the prime real estate toward which they all hope to be headed in about a year. The White House is a stately building, to say the least. It’s exterior architectural influences are Irish and French. It has 132 rooms, 35 bathrooms, 55,000 square feet of space, six stories and two wings.

The White House Historical Association has fun facts and trivia about the White House, like reasons why the president’s office is oval-shaped and why the house is white. There have been 17 weddings at the White House - most recently, the 1994 wedding of Hillary Rodham Clinton’s brother in the Rose Garden, according to the association.

Here’s a Center for Building Science newsletter from Summer 1994 highlighting the process of “Greening the White House.” In 2002, solar panels were brought back to the White House, after having been removed from the building in 1980 during the Reagan administration. The current solar panels supply electricity and heat water, and one panel serves only to heat the presidential pool. By the way, in addition to the pool, there is a bowling alley, putting green, tennis courts, jogging track and movie theater in the White House, along with three elevators, eight staircases and 28 fireplaces.

And finally, a little cost analysis. The original White House structure, without the two wings, was built for $232,371.83, or roughly $2.5 million in today’s terms. It took eight years to build and was originally intended to be five times larger, before shortages in material and labor curtailed the grandiose plans. Of course, the structure has undergone renovations and additions over the years, and a rebuild after the great fire of 1814. Today the White House is worth about $106 million. With 10 percent down and a 30-year mortgage loan at 6.5 percent, that’s a hefty monthly payment of around $760,000. Sheesh, no wonder everyone is trying so hard to win the race to the White House.

How fun is this? Newsweek published a web article today that analyzes the homes of the front-runners in the 2008 presidential race. This is a superstar presidential race to be sure. There are some million dollar bank accounts and megawatt smiles. The only person missing is Ah-nuld. So isn’t it fun to see how the rich and famous potential future leaders live?

Read the article to see who’s the biggest spender. Three guesses, first two don’t count. Three hints for you: multi-faceted entrepreneur and investor; Big Apple; rhymes with Shuliani. I found it interesting that all the candidates discussed in the article (that includes Mike Huckabee, John McCain, Rudy Giuliani, Mitt Romney, John Edwards, Hillary Clinton and Barack Obama) lived in homes worth considerably more than the median home price of the surrounding area. We’re talking $4.6 million in a $427,000 area (McCain), $1.65 million in a $328,000 area (Obama), etc. It defies a basic real estate principle, but I guess this group of presidential candidates isn’t exactly known for being followers. Besides, they would have no trouble breaking through the neighborhood price ceiling when selling their properties, simply because of the fame factor.

Speaking of fame, is it surprising that Hollywood actor and former Congressman Fred Thompson was not included in this article? Maybe he’s not exactly considered a power player yet in this election, but he’s faring better in the latest ABC News polls than McCain, who did make it into the article. Go figure. It is true Thompson has not been one of the most visible candidates in terms of media coverage. But I’ll bet his home is not too shabby, so he should’ve been in. And that’s as political as this Tennessee girl is going to get.

Homeowners who bought in with the impression that their new neighborhoods were elite are actually seeing more “For Rent” signs cropping up around their neighborhoods. Deluxe kids’ playgrounds and Mercedes are being replaced by yellowing lawns and dark windows. Newsweek had an amusing article about “Solitude Point Avenue” in Henderson, Nevada’s prestigious Black Mountain Vista community. Solitude Point is a street with former half-million-dollar duplexes, many of which now sit dark, empty and neglected. Quite an ironic street name, don’t you think?

In many cases, condos and luxury homes are going up for rent or auction, like concert promoter Jack Boyle’s McLean Mansion in the D.C. market. The $10.3 million, 25,000-square-foot home was auctioned in August for an undisclosed amount after Boyle tried unsuccessfully to sell it on the market. We’ve discussed the new home auction trend, but now it has spread to the unthinkable, pre-existing luxury homes.

Toll Brothers, one of the nation’s premier builders of luxury homes, is reporting a 36-percent revenue drop in its fourth quarter numbers. Toll Brothers has previously been able to keep its head above water by offering incentives. CEO Robert Toll accurately stated that decreasing prices only angers neighboring homeowners who bought previously at full price. Now, the company is looking at 417 cancelled contracts at an average of $788,000 each. The average value of the contracts that did not fall through was $557,000. One wonders whether Mr. Toll will change his perspective on price decreases.

So how are luxury homes faring? Not well. The picture is pretty bleak. Amongst endless speculations as to the cause and the cure, one thing’s for sure - this is going to be one fascinating train wreck to watch.