Different Uses and Environments
Consumer-grade Core processors are designed for everyday desktop or gaming applications and are therefore optimized to operate at higher clock speeds. Most consumer applications cannot take advantage of more than a few processor cores and would benefit significantly more from a processor that operates at 4+ GHz than having 8 or more cores.
Xeon processors, on the other hand, are designed for business applications such as servers and workstations. These applications benefit significantly from having more cores. Because scaling a processor to extremely high clock speeds is difficult and inefficient, increasing the number of cores is better than running 4 cores at 4.5 GHz or faster. Especially with workloads such as servers and Big Data, 15 cores or more at 2–2.5 GHz can be far more effective than 4 cores operating at 4.5 GHz, while consuming less power per unit of performance.
Scalability and Reliability
A Xeon processor typically doesn't just have more cores. These processors also have much larger caches (37.5 MB in your case) and have ECC memory support. In addition, the processor you selected is designed for servers capable of scaling up to eight (!) sockets. These are not cheap features to develop, test, and enable.
Even if the processor doesn't have extra cores relative to a Core i7 EE part, the extra die space needed for the larger cache and advanced features, along with the extensive validation required to ensure that the processor will function reliably under extreme conditions, 24/7/365, in mission-critical business applications, significantly increase the manufacturing cost of the processor.
Total Cost of Ownership
Another major criterion in business applications is power and cooling. In consumer desktops, disproportionately higher heat output and power consumption are often acceptable compromises for an end-user who wants maximum performance on a gaming workload. However, business and datacenter computers run 24/7/365, often in large clusters, and therefore incur very high power and cooling costs. A processor that can do the job with less power and heat while delivering the same effective performance is going to end up costing less money in the long run. In these environments, total cost of ownership (TCO) is the real measure of the cost of any computing resource, not the sticker price.
In critical business environments, $8000+ each for processors which you can cram eight onto a motherboard and can use ECC memory for reliability is much better than an $1000 consumer 6-core part which is less efficient and cannot scale to more than one per board. When a business's ability to perform depends on its compute capabilities, these Xeon processors are easily worth the sticker price. That's how Intel is able to charge these prices.
Physical space is at a premium in datacenters, and lower density means less performance and less efficient cooling. Reliability is paramount, and crashes and errors due to memory glitches are not tolerable to any degree. It's much easier to understand why these processors are that expensive when you consider their intended use.