No Doubt About It...Luxury Home Market is Stalled!

July 23, 2009

Sitting pretty: Luxury home market stalls

In the affluent village of Bronxville, N.Y., where residents of million-dollar homes have an easy half-hour commute into Manhattan, selling a house has become a whole lot harder.

Larry Brocchini put his four-bedroom Colonial on the market in late May, with a price tag of $969,000. He and his wife, who want to move closer to their son's private school, have hosted open houses and showed the home by private appointment about 10 times, but they have yet to receive a bid.

The pool of potential buyers looking to escape crowds and crowded schools of Manhattan is also having trouble selling their apartments and co-ops. In the Big Apple, the median sales price for an apartment priced in the top 10 percent of the market fell as much as 26 percent in the second quarter and the number of sales were cut in half from the year-ago period, data last week showed.

"People are just being a little more deliberative than they have been in the past," said Brocchini, a 44-year-old attorney.

In fact, high-priced homes are languishing on the market. Nationally, at the current sales pace, there's about a 40-month supply of homes on the market for $750,000 or more, according to the National Association of Realtors. That's more than double the stock in mid-2007, before the credit crunch. By contrast, there is now less than a 10-month supply for all homes.

Sales of existing homes priced above $750,000 made up 2.3 percent of all sales in the first three months of this year, the Realtors' group said. That's down from 4.4 percent of homes sold in 2007, before high-priced mortgages dried up.

"The high end is the worst performing sector of the residential real estate market, unquestionably," said Bernard Baumohl, Chief Global Economist of the Princeton, N.J.-based Economic Outlook Group.

That is true in the Volusia and Flagler county markets as well, local Realtors said.

"Obviously, the smaller homes are selling more," said Rachel McGrath, a Realtor in the Port Orange office of high-end broker Stirling Sotheby's International Realty. "There is some resistance in the $500,000 and above market."

A $2.8 million home and land in Bunnell has been on the market for more than 1,100 days, according to Realtor.com. An 8,200-square-foot home in Edgewater selling for almost $4 million has been for sale for more than 1,000 days, almost three years.

In Ponce Inlet, a $2.6 million home has been listed for more than 900 days and it's been almost 900 days since a $3.9 million New Smyrna Beach home went on the market.

"Two years was normal for a seven-figure home sale before," said Sheriff Guindi, founder and owner of Prudential Transact Realty.

The recession and collateral damage in the stock markets have knocked many luxury buyers out of the market. Falling home prices coupled with new appraisal rules have scuttled many deals. And lenders have jacked up interest rates and down payment levels for high-priced mortgages.

It's only been a short time since high-end home prices in the region jumped the $3 to $4 million threshold, said Guindi. Although a $10 million riverfront home and a $8.54 million oceanfront home are raising the bar, but have only been on the market for about 70 days.

At the same time, banks are requiring down payments of 20 percent to 30 percent, even if the borrower has a golden credit history.

Industrywide, jumbo loans made up about 5 percent of the market in the first quarter of this year, compared with almost 15 percent in the first quarter of 2007, according to Inside Mortgage Finance.

Wealthy international buyers may be the salvation of the local high-end home market, McGrath said, because there currency is stronger than the dollar and they can find great deals in the region.

Guindi said 2008 was "lousy," but he is smiling at the four sales in his offices over $1 million each so far this year.

"The high-end market had to adjust lower like everyone else," Guindi said. "There will always be people in this incredible country with lots of money. For a really nice luxury waterfront home that is newer with the square footage and all the bells and whistles, there are buyers, if the price is right."

-- Business Writer Bob Koslow contributed to this Associated Press report.