Posts (RSS)Foreclosure for Sale Prices Hinder Recovery of Luxury Homes Market
Recently, signs of housing market recovery from the price effects of distressed foreclosure for sale have been seen, such as the increase in sales of new homes in June by 11 percent for the third straight month.
But positive signs have been occurring only in the low-cost and middle-priced sectors of the housing market. While inventories of lower-priced homes were being cut down, inventories of luxury homes have not been moving.
Real estate analysts in San Diego and Las Vegas said one of the major reasons for the slow movement of higher-priced homes is the refusal of sellers to cut down their selling prices. Realtors have warned sellers that agents are not going to accept their listings if they do not reduce their prices significantly because listing their unsalable high-end homes would add costs to their operations.
Pat Lashinsky, head of a real estate brokerage in California, said it is now taking up to 40 months to sell a luxury home.
According to data from the National Association of Realtors, the current inventory of houses priced higher than $750,000 will take nearly 17 months to sell, an increase from the 14.5 months needed last year. The pace is also almost double the 9.4 months worth of supply of all types of homes for sale.
The slow movement of high-end inventory has been pushing down prices in the higher-end of the market, according to real estate sellers. In Greenwich, Connecticut, the median sales price for high-end homes has gone down to $1.5 million, a substantial drop of 24 percent from the sales price as high-end sales in the area decreased by more than 50 percent.
Based on surveys, the three major reasons for the small number of buyers in the high-end sector are the lack of loans readily available for homes priced over $417,000, the ineligibility of buyers earning over $75,000 for the federal tax credit incentive for first time home buyers and the rising preference of Americans for smaller homes.
Housing analysts explained that while the federal tax credit significantly helped in cutting down inventories of lower-priced homes, there is no comparable program helping cut down inventories of higher-priced homes.
A NAR survey also found that 73 percent of homeowners in May moved down instead of moving up because of lack of credit. Demand for luxury homes has especially declined in Miami, Las Vegas and San Diego where there is an oversupply of homes priced above $1 million.
According to JPMorgan Chase analysts, the higher end of the residential market will recover much later than the other price segments of the housing market.