High-End Homes Frozen Out of Budding Housing Rebound

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Submitted by zk on August 4, 2009 - 10:15am

WSJ article link:

http://finance.yahoo.com/real-estate/art...

One quote: "But on the upper end, sales remain mired in a deep slump and price declines are expected to accelerate."

I've been seeing some of this in Carmel Valley. It's taking forever, but off-peak prices are finally starting to become the norm in CV. For a couple years, the percentage of homes sold at off-peak prices has gradually increased, and now only the very occasional chump pays peak pricing. Some homes are selling at 25% off the peak.

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Prices at the peak (in areas
Submitted by patientrenter on August 4, 2009 - 3:35pm.

Prices at the peak (in areas that were developed in 1996 so we can compare prices now to prices then) were about 4-5 times higher than back in 1996. So a drop of 25% from the peak - a global residential real estate peak that was unprecedented in recorded history - is peanuts.

If the price decreases at the high end continue on their normal, natural course to a cyclical low, then the federal govt will come up with a new way to funnel more money into the high end. I don't expect prices to be allowed to get anywhere close to their natural economic level at the bottom of a RE cycle, either at the low end of the market or at the high end.

patientrenter wrote:Prices at
Submitted by zk on August 4, 2009 - 10:40pm.

patientrenter wrote:
Prices at the peak (in areas that were developed in 1996 so we can compare prices now to prices then) were about 4-5 times higher than back in 1996. So a drop of 25% from the peak - a global residential real estate peak that was unprecedented in recorded history - is peanuts.

If the price decreases at the high end continue on their normal, natural course to a cyclical low, then the federal govt will come up with a new way to funnel more money into the high end. I don't expect prices to be allowed to get anywhere close to their natural economic level at the bottom of a RE cycle, either at the low end of the market or at the high end.

Perhaps it's time for you to come up with a new moniker.

In any case, if 25% of a million and a half is peanuts to you, sounds like you don't have to worry about it. It's certainly not peanuts to me. Maybe 25% is peanuts compared to what it went up. But it's still not peanuts to me.

I don't hold the same faith in the government's ability to hold up prices as you do. The government wasn't able to stop the low end from dropping over 50%. If the high end drops that much (I doubt it will, but not because of government intervention), then we've moved even further away from "peanuts." Perhaps prices won't drop all the way to their natural economic level, but, if the article is correct and the declines accelerate henceforth, we should see some significant (as opposed to peanuts) peak-to-trough declines.

I think the obvious
Submitted by bsrsharma on August 4, 2009 - 11:03pm.

I think the obvious government intervention is the "magic number" price ($521K nationally; probably more in some areas of CA) created by (indirectly) treasuries purchase of conforming paper. So, generally, the faux million $ properties should asymptotically get compressed around that point. The "new" million $ homes will be what they were in times long past - true mansions, rarely bought & sold, and usually without a mortgage.

If, as JP Morgan predict,
Submitted by qwerty007 on August 6, 2009 - 11:39am.

If, as JP Morgan predict, high end prices decline by 60% until 2012, and yet we are seeing a bottom in low end prices, isn't there going to be a conspicuous intersection of graph lines, as one plummets and the other rises? Just how likely is that? Aren't high end prices declines likely to ease current pressure on the low end supply, which will trickle all the way down through the price stratosphere?