I am rich. I used to post on here a lot before while living the frugal life and getting to FIRE through frugality and savings. Fast forward and I made a ridiculous amount of money recently and likely a lot more is coming soon. We can easily afford to pay cash for very fancy houses in fancy areas and still have more than enough money left over to do what we want to for the rest of our lives. We are currently in a small apartment and are thinking about where to live permanently. We value waterfront views. We have an affinity for the Bay Area (but are also looking at other coastal locations). So we are thinking about substantial and unnecessary luxury. I generally like to hang around at home so it would be a useful luxury. And it would probably be the only real luxury. We don't even have cable or eat out. We get free clothes for the kids and wouldn't buy fancy cars.
We are trying to decide if we want to spend that kind of money. It's much more than we would need. We probably would enjoy it more than something cheaper (but how much more is unclear of course). But there are consequences besides cost. Things I worry about include: our families finding out we are rich and wanting/expecting more from us, the neighbors maybe not being the kind of people that it would be good for my kids to grow up around (or in school with), giving the kids unrealistic expectations/views of life, having non-rich friends feel weird coming to our house or act differently, etc. There are probably upsides too that I'm not thinking about.
So what are the upsides/downsides (besides cost) to buying a very expensive house?
This might be the wrong place to ask this kind of question. But when I was active here years ago there were a lot of thoughtful people who would provide good insights. So I figured I'd give it a shot.
Expensive implies big...and there's a whole different set of issues with big homes.
You mentioned the sf bay area, so it will definitely be very expensive, and could be a modest size home.
In general, the down-side to an expensive house, regardless of size, is the on-going property tax cost. Many "new luxurious" homes in "luxurious" neighborhoods in the bay area tack on mello-roos tax, which will significantly increase the amount of tax you pay for a long time (tax is usually assessed on the property for 30 years).
It's wise to consider how your friends and family will react (if that matters to you). In my experience, friends/family/strangers do act differently. Even contractors I hire to work on my home act differently, compared to my experience in my last home.
If by expensive, you mean big...I would say the biggest downside outside of cost, is the challenge with making a big home feel homely and cozy. The scale of everything must be very large to look normal. Not only does that get very expensive, but it also limits options for color, style, etc. I prefer diversity, and feel my family benefits from living around people who have moved to the US from all around the world. In my "upscale" neighborhood, the neighbors are amazing...it's the main reason I still live in a too-big house.
If I had it to do all over again, I would've stayed in a home that was much smaller.
In the SF Bay Area, you can spend a ton of money and live in a small cozy home, but pretty awesome neighborhood (e.g., Palo Alto, Willow Glen)