I agree, to some extent, that the high end of the market has a demand factor that is fairly consistent. People with real money (and intelligence) do well in both good and bad economic times.

The question in my mind is where do we draw the line between “high end” and all the rest of the market?

That line, IMO, is at least $2.5 million and probably more like $4 mil.

And I’m referring to the people who buy these properties with cash – not the people who have to carry debt on them.

As the economy and real estate market continue to soften, there will be plenty of today’s $2.5 million houses sold in distress sales.

As you mentioned, taxes on 2.5 mil are significant. At 1.1% that is $27,500 per year or $2290/month. That’s a big nut to crack even without a mortgage on top of it!

I’m expecting a 40% decline in premium properties (views, prestige areas, etc). That would make the 2.5 mil house a 1.5 mil house.

In a distress sale, you might expect another 20-30% discount if you came in with cash. That’s $1.2 mil for today’s $2.5 mil house.

And since we’re talking about expensive real estate, when will we have enough Mediterranean style 3000+ SQFT houses? The last time I looked through one of those glossy ‘dream real estate’ magazines most of what I saw was different versions of the same basic theme. Why would I pay $5-30 mil for a rectangular box with Mediterranean features that looks like all the other Meditteranean styled boxes?