The 55-year-old trial lawyer is trying to sell a four-bedroom villa with marble imported from Italy, a winery and a fruit orchard on 14 acres in Lafayette, Calif.. Mr. Horowitz already chopped the price to $ 3.2 million from $ 4 million, the amount he estimates having spent on the land and construction. "We thought it would sell right away," he says. But it has not, and he is willing to consider lower offers, he says.
Three years into the housing bust, steep discounts are emerging in the market for high-end homes, which had been the real-estate industry's last redoubt until now. Despite the budding economic recovery, demand for pricey properties is falling as potential buyers struggle to come up with big money for down payments and find it difficult to qualify for large mortgages. With buyers dropping out and homes languishing on the market, sellers are beginning to capitulate, cutting prices to move their properties.
The result: Buyers with lots of cash, or access to it, can find great deals. Not all million-dollar homes are castles, especially in coastal markets. But price drops and relatively small bumps in budget shoppers are landing the kind of amenities-kingly bathrooms, stables, gates-that were once beyond reach. Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley, says it is a "very good time to be a buyer at the high end."
In some markets, houses that are more than twice the size of others are on the market for less than twice the cost. Shaun Rawls, a broker at Keller Williams Realty in Atlanta, points to two homes with similarly desirable locations in that city's wealthy Buckhead district. The smaller home, with 3.060 square feet, is priced at $ 765.000, or $ 250 a square foot. The larger home, with 7.612 square feet, foot has an asking price of $ 1.2 million, or $ 158 per square.
Though larger homes often have lower costs than smaller square footage homes, the gap today is often greater. In Mill Valley, Calif.., A 1.127-square-foot three-bedroom listed at $ 898.000 just went under contract. Its per-square-foot cost: $ 797th A four-bedroom home five minutes away-and nearly three times the size at 3.077 square feet, is being listed at $ 1.5 million. Its square-foot cost: $ 486th
Similarly, in Scottsdale, Ariz., One four-bedroom home lists for $ 1.2 million while another lists for $ 1.48 million. That additional $ 280,000 buys a 5.400 square-foot home, 46% bigger than the cheaper house.
Room to Drop
The million-plus market seems ripe for falling prices. Until now it has been lower-end homes, which saw the sharpest run-up during the boom, that have borne the brunt of the housing bust. Though
there are not national statistics that track the million-dollar market, local markets show that prices for top properties have room to drop. For example, the bottom third of the Los Angeles area market, homes currently under $ 300,000, has seen prices fall by 52.5% since the market peak in 2006, returning to April 2003 levels, according to the S & P / Case-Shiller indexes. Harry Norman Realtors Built in the 1980s, this 2,955-square-foot home at 2609 Peachtree Battle Place NW in Atlanta has four bedrooms and four bathrooms. It is on the market for $765,000.
Prices for the top third of the market-currently homes above $ 510.000-have fall by 27.3% from the peak, to March 2004 levels. While prices at the bottom of the market gained 5% over the last quarter of 2009 from the previous quarter, high-end home prices dropped 0.5%.
Home sales remain sluggish across the board. Sales of existing homes fell 0.6% last month to a seasonally adjusted rate of 5:02 million units, while new-home sales fell by 2.2% last month to lows last seen in 1963. But the mismatch of supply and demand is now widest in the seven-figure market. In the most coveted Northern Virginia suburbs of Washington, for example, supplies are fairly tight up to about $ 900,000. But it is a buyer's market between that level and $ 2 million, says James W. Nellis II of Re / Max Allegiance, a local broker.
That makes for some deep discounts. In Mill Valley, Calif.., The price on one four-bedroom home March 11 was reduced to $ 2 million from $ 3 million. The house has 2.500 square feet of decks overlooking San Francisco Bay, says the listing agent, Suzy Doyle. On Ranch Gate Road in Chula Vista, Calif.., A foreclosed home with six bedrooms is being offered at $ 675,000. In 2006, when it was new, the home sold for $ 1.3 million.
Few people consider million-dollar homes cheap, of course. Stretching to buy a big home comes with obvious risks. Prices may be falling, but no one knows where the bottom is. Marc Carpenter, a real-estate agent in San Diego, cautions buyers in that battered market that, "If you buy now, [you should] plan on reducing prices over time."
Another potential pitfall is that higher-end houses are much harder to value than lower pr
iced cookie-cutter dwellings. Often, high-end homes are unique, and the prices they fetch may have to do with such intangibles as an ocean view or an address with more snob appeal than those just blocks away. That makes it much harder for buyers to find Comparable sales indicative of true market value.Bargain hunters also need to be realistic. They are not likely to get a steal on the best-preserved homes in the
Keller Williams Realty This approximately 10.686-square-foot-home at 580 Madeline Drive, Pasadena, Calif. is listed for $ 2.5 million. It has 10 bedrooms and nine bathrooms, a billiards room and a guest suite.
nation's top neighborhoods-places like Central Park West in Manhattan, Santa Barbara, Calif.., Or the exclusive parts of Boulder, Colo.. Supply is permanently constrained in such areas because there is little room to build. And lots of people with money are eager to move in, so prices are likely to come down only slightly.
The best deals will be on high-end homes that might need work or are not in the most highly sought-after locations. That leaves plenty of coveted neighborhoods with good schools and amenities to choose from.
tags.... REALESTATE , MARKETING , BUSINESS
