The Luxury housing market is taking a hit of its own in the on-going national real estate slowdown, which ever way you want to put it.
Home prices in the mightiest of all real estate sectors, from $5-million and up are taking a beating, and the forecast for the long term isn’t looking good, according to the Housing Predictor outlook all the way through 2011. Values are projected to slide as much as 40%.
The loftiest of all real estate sectors has more cash buyers than any other, which gives homeowners in this position some staying power. An estimated three-quarters of all transactions above $5-million are closed without financing.
The high end market seemed insulated from the real estate crash for sometime, slipping slowly before the stock market took it on the skids a few weeks ago as the Dow Jones Industrial average lost 2,000 points in a week. As the market crashed more homes in the high end were listed for sale in many markets adding the squash to the marketplace.
Luxury enclaves from Palm Beach, Florida to Beverly Hills, California saw homeowners take it on the chin. Only around 5% of the entire home buying public qualified to make a home purchase above $2-million before the national slowdown. Now economists believe the numbers are much lower with tighter credit markets.
Former Tonight Show sidekick Ed McMahon made the headlines for nearly losing his Beverly Hills home in foreclosure before a private investor bailed McMahon out. But even in this high end market place foreclosures are picking up steam, increasing by more than 16% over the last six months.
Foreclosures have topped 3 million since the foreclosure epidemic started some 16 months ago, and are forecast to top 1.3 million alone this year. An additional 4 million homeowners with mortgages are in default, according to the Mortgage Bankers Association, and more than 500,000 are in the formal foreclosure process, which is an all-time record.