Buyers hoping to purchase deeply discounted homes may want to consider purchasing homes in the high end—especially those priced $2 million or more. In some cases, buyers may be able to command even lower prices on these homes, as financing continues to be a challenge for buyers of luxury homes.
· While data from the Federal Housing Finance Agency (FHFA) showed that average home prices rose 0.3 percent nationwide between June and July, including a 1.6 percent increase on the west coast, the data only relate to homes purchased with conforming loans guaranteed by the FHFA. These loans are mortgages of up to $417,000 or up to $713,000 in the country’s most expensive regions. The outlook for homes priced above that amount remains bleak.
· In many areas across the country there is a new level of value being established. According to one broker, homes that used to sell for $8 million now are selling for $6 million, while homes previously priced in the $10 millions are selling for $8 million. The price adjustment in the high end appears to be about 20- to 30 percent lower.
· A recent survey by Trulia.com showed that sellers listing homes for more than $2 million have reduced their asking prices by a total of $7 billion, with an average price reduction of 14 percent.
· Chip Case, economics professor at Wellesley College and coauthor of the Case-Shiller index, says that some of the markets finally may be catching up to the wider housing market downturn. “That level was more in the hold-out category,” he says. “Up until recently, the foreclosures weren’t hitting that level. But they are now. There’s no question about that. You’re seeing some contagion from the prime level to the luxury end.”
· Sooner or later, even high-end homeowners need to sell. And, when they get tired of waiting, they reduce their asking prices. Factoring in taxes, upkeep and the opportunity cost of keeping money in a non-performing asset, an empty luxury home may be costing owners a lot just by sitting there, giving them a powerful incentive to make a deal.
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