Still Rising: Spec Houses Worth $20 Million

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Davis adds that a lot of people want new homes and in the Hamptons, "there is very little product." So far this year, his business is up 50 percent over 2009.

Data on the nation's $20 million-plus market was not available, but according to the National Association of Realtors, sales of houses in the $1 million-plus category outperformed other price classes in July, growing by 6.1 percent year-on-year as sales across lower-cost groups decreased.

White says that Sotheby's International Realty has sold twice as many homes in the $1 million to $2 million range this year as in the same period in 2009, and that the jump was even higher in the $10 million range. Prices came down about 30 percent from 2007's peak levels but have since rebounded some. Because of that price correction, "the buyer is getting a good value," he says.

transaction volume up in the Hamptons

One of this year's biggest sales, the Bootjack Ranch, sold for $46.5 million, nearly half its original asking price of $88 million. That deal involved some creative financing, with the buyer trading a property in Telluride, Colo., to the seller as part of the payment, White says.

The Hamptons in particular had a good year so far, in terms of transaction volume. "Inventory continues to increase as a result of sellers seeking to take advantage of positive market news," states a quarterly report on the Hamptons market by the Corcoran Group, a division of Parsippany (N.J.)-based Realogy.

According to the report, the volume of luxury home sales, defined as the top 10 percent of all residential sales, increased by 104 percent in the Hamptons during the first half of the year, compared to the same period in 2009. While unit sales are up, the median price in the luxury segment stayed about the same in the South Fork and dropped 13 percent in the North Fork.

Morabito says his record year for sales was 2007 until this year surpassed it by 15 percent—with four deals currently in progress and four further months to come.

While the wealthy are again showing interest in residential real estate, the market for properties in the $20 million-plus range is small. In a buyer's market, luxury consumers are picky. According to the "2010 World Wealth Report" by Capgemini and Merrill Lynch Wealth Management (BAC), the number of people with investable assets of $30 million or more in 2009 totaled only 93,100 worldwide, or less than 1 percent of the wealthy and a tiny fraction of the planet's overall population.

Sold, finally: Larry Dean's mansion

A further question facing developers is what share of the super-rich would prefer to buy a spec house than a historic home or a custom-built home. Residences selling in this price range come with all the bells and whistles expected of a megamansion—sweeping views, huge bedroom suites, swimming pools, tennis courts, wine rooms, and exceptional building materials and finishings—but there's no guarantee that the design, no matter how meticulously put together, will appeal to buyers.

Although it was not a spec house, one illustrative example is a mansion in Johns Creek, Ga. Software entrepreneur Larry Dean originally custom-built the house for himself and his family at a cost of about $25 million, then unexpectedly listed it shortly after it was completed. The property sat on the market for 17 years and finally sold this year, for $7.6 million, to director Tyler Perry, who plans to tear it down and build a new home. Said nytimes.com: "Its incongruity of interior styles, combining Egyptian, Renaissance, Vegas, and more, has been a source of amusement, if not horror, to some who have attended charity events there or seen pictures online."

Dean's problem underlines the biggest stumbling block for developers playing in the mega-mansion market. That someone has spent millions building a luxury house doesn't mean buyers will want to pay the asking price. At such high price points, buyers can afford to wait—a luxury not always available to developers, who may find themselves out of pocket millions of dollars until a contract is signed. In a bubble, buyers may be willing to spend whatever it costs to win a prized property. In a down market, they can make a low-ball offer, knowing the seller may not have many alternatives.

Click here to see the 25 most expensive new homes of 2010.

Wong is a lifestyle and real estate reporter for Bloomberg Businessweek.

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