Luxury Homes Dropping In Value

The days when cash was easily accumulated and easily spent on clothes, cars, and houses have drawn to a close.

By: Larry Dunn

The credit strain has all but dried up the good credit records and the savings, and the high salaries, that could fathom seven-figure three-bedroom luxury homes in the major markets of Manhattan, San Francisco, and Boston.

Businessweek writer Prashant Gopal calls it 'reckless consumer spending' and identifies it now as a psychological lost. Consumers now face limited dreams, the $1 million home is no longer reachable, but at least the declining market value and pricing for such  luxury homes have become more realistic.

Luxury housing is falling in value. The subprime crisis that initially hit the lower priced houses have now reached the luxury home market. The houses stay on the market longer, now averaging 148 days from the 125 days at the year's beginning. Prices in this market have fallen 5.4% according to a report from the Institute for Luxury Home Marketing.

Principal Laurie Moore of the Institute identifies uncertainly and questions concerning the length and gravity of the downturn faced by constrained spenders at the top of the market. Practical advice from realtor Art Tassaro of Friedberg properties, overseeing the high end pallet in Cresskill, N.J. a New York suburb, is simply averaging the three lowest prices and then discounting by another 5 percent.

San Bernardino Country principal agent John Marcell, of Better Mortgage Brokers, Upland, CA, says in the Businessweek article, "The only sales of million-dollar homes are foreclosures." Somber news is that first time buyers are able to keep their existing homes as they pursue entry-level homes.