Home sales of high-tier properties have been slower to feel the recessionary sting of their low- to mid-tier brethren. However, the slowdown in sales of million-dollar-plus homes is a notable indicator of the slowdown in the broader real estate market, proving that mansions and millionaires are not immune to economic turmoil. Approximately 1,900 homes in California that were sold for over $1 million prior to 2009 were sold in 2009 for six digits.
A frugal aesthetic has settled over the state, making ostentatious properties generally less desirable. Only 18,621 homes sold for over 1$ million dollars in 2009, a mere fraction of the embarrassing 54,773 which were sold in 2005 during the frenzy of the speculative boom.
Cash is king again. Of the homes purchased for over $5 million, 66% were paid for in cash, as were 29% of homes purchased for over $1 million.
first tuesday take: High-tier properties are first in a recession to slow down in sales volume, but always the last to enter the foreclosure fray – but enter they must if the properties were financed after 2001. High-priced neighborhoods are now beginning to experience the defaults and foreclosures which were previously confined primarily to lower-valued neighborhoods. In the massive price correction that is currently being experienced in real estate’s upper tier where listing prices are ignored by all – including the listing agents – the long-forgotten “fundamental” of square foot pricing has become the favored valuation method among listed properties. Square foot pricing has made a return since comparable properties, which tend to be influential with buyers, cannot easily be found. [For more information regarding square foot pricing, see the February 2009 first tuesday article, The Return of Square Foot Pricing.]
Re: “Sales of million-dollar-plus homes way down,” from the San Francisco Chronicle