Luxury Homes Owners Are Feeling the Crunch Too

When the recession began and the real estate market started to slide, it was believed by some that luxury homes would be immune to the nationwide downturn in the industry; it turns out this is not the case.
Huge discounts are being found in the high-end home market, which until now had been the last hope for the real estate industry, and despite hints of economic recovery Real Estate Commission Agreement prices continue to drop as potential buyers are finding it difficult to come up with the higher down payments (20-30%) required by the banks for high end properties.
According to Bernhard Baumohl, Chief Global Economist for the Economic Outlook Group, “The high end is the worst performing sector in the residential real estate market” stating that the recession and stock market woes have knocked many luxury buyers out of the market. A lack of qualified buyers means supply exceeds demand and therefore prices have to be reduced; in some cases, reduced a lot.
Take for example the 40 acre estate in Greenwich, Conn. that was listed last year for $125 million and is now on the market for $60 million. A hit like that has serious affects on even the most well healed in society. Examples like this are being found in all levels of the luxury home market with properties in the $1 million range seeing similar declines in listing price.
Colorado luxury properties are experiencing a significant reduction in prices as well, although they are suffering from a different issue. Many of the high-end homes in Colorado are located at the state’s ski destinations and are often second homes. Second homes, which are classified by lenders as investment Pros And Cons Of Renting Your House On Airbnb properties, are much more difficult to secure financing for as they are considered a riskier venture than a standard home purchase. According to Randall Hannaway, a Steamboat Springs broker, almost half of his business is in second homes and he has seen an increase in inventories and a decrease in prices.
For those with big bank accounts this is good news as there are some great deals to be had when the quasi rich have to dump their vacation properties. This is also good news for the average buyer who has been dreaming of a luxury home. It has been decades since high-end homes have been so ‘affordable’, and it may be decades before the opportunity comes around again. If you are interested in purchasing a luxury home, now is the time. People who could never afford a home over a million dollars can now buy one for up to 50% off.
The luxury real estate market can be a tricky one as they are much more difficult to place a value upon. Often high-end homes are unique and with a lack of comparable properties to help gauge prices, it is difficult to assess a true market value.
So, luxury homes are not immune to the crunch of the recession. Inventories of high-end properties continue to rise as there are less qualified buyers and prices continue to drop as sellers become more desperate.

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