Signs of Slowing Hit High End Housing

Posted by Julie B. Hairston — September 4, 2006

Perhaps the rich aren't so different. In the big picture, really expensive houses move so slowly and the market is so small, they aren't much affected by the kind of slowdown in the housing market that's currently worrying homeowners calculating their equity in more modest abodes. In Atlanta, high-end houses like this one on Harris Trail aren't moving as briskly as they once did. Nationally, all single-family home sales were down 21.6 percent in July compared with the year before. But this stall seems to have less respect for the safeguards of wealth. June listings of $2 million-plus houses for sale show 371 properties on the metro Atlanta market, according to Steve Palm of Smart Numbers, a real estate databank and analysis firm. Just five years ago, metro Atlanta had only 163 houses for sale at prices over $2 million, Palm said. The local inventory of high-priced houses could indicate some of the national housing market's slowdown is creeping into "the lower end of the upper tier," said Laurie Moore-Moore, president of the Institute for Luxury Home Marketing in Dallas. "Historically, the upper-tier market is very resilient when it comes to market conditions," Moore-Moore said. "But I think you're likely to see a softening in the bottom half of the upper tier because of the flexibility in the mortgage market." New adjustable-rate and interest-only loans enhanced by low interest rates have helped upper-middle-class buyers stretch into houses priced in the millions in recent years. But with interest rates rising, fewer marginal buyers will be shopping at such luxury price points, she said. Rising interest rates have slowed the overall national housing market significantly in recent months. Sales of existing houses in July dropped 4.1 percent, though the South fared better than other sections of the country with only a 1.2 percent dip. New home sales took an even bigger hit, with economic experts predicting a continued downward trend through the rest of 2006. Nationally, new home sales fell 4.3 percent in July, down 22 percent from the same month one year ago. New and existing houses priced under $1 million usually sell in months. Currently, an existing house in metro Atlanta is on the market about three months, said Palm. But even in the best of times, the specialized market and unique character of luxury homes means that finding the right buyer is likely to require considerably more patience, said John Brian Losh, the Seattle luxury home broker who publishes, a Web site advertising multimillion-dollar properties nationwide. "The average time is two years," Losh said. No quick turnarounds Three high-profile metro Atlanta properties that have recently drawn buyers or potential buyers illustrate Losh's caution. Kenny Rogers' Buckhead house, Lionheart, sold last spring for $8.5 million after two years on the market. The initial asking price was $10 million. Holland Park, the 2006 Designer Show House on Harris Trail, has been on the market since 2003 when the Brumley family who owned it died in a plane crash in Kenya. But Jenny Pruitt agent Wes Vawter said the house is now under contract. The asking price on Holland Park was $9.25 million. And Atlanta's priciest house, Alpharetta's Dean Gardens, has found a potential buyer in neighbor Richard Smith, who wants to build 250 luxury condominiums on the 58-acre estate and convert the lavish 32,000-square-foot mansion into a clubhouse. Dean Gardens has been on the market "off and on" since 1993, said Jason Dean, the son of Larry Dean, the computer software magnate who built the house, completed in 1992. Jason Dean is acting as agent for the sale. In the time the house has been on the market, the asking price has dropped from $40 million to $24 million. "We couldn't find an individual who would come in here and just buy it," Dean said. Tougher to price Price cuts in the millions and other adjustments are not unusual in luxury sales, Losh said. The character of custom estates makes price-setting more a measure of the owner's affection for the house and guesswork than science. "It's much easier to price a lower-priced home," Losh said. The availability of comparable properties in a neighborhood make more affordable houses easier to evaluate in measurable terms, Losh explained. Multimillion-dollar houses are highly customized to individual taste, Losh said, which often means the homeowner believes his dream house will prove irresistible to potential buyers at nearly any price. Just as often, the owner is in for a long wait. "They all think the house will sell right away," Losh said. "It's just human nature." Losh said luxury-specialist agents usually counsel their clients about the patience required to successfully market a multimillion-dollar house. "We normally tell them it could take a year or two to sell," said agent Vawter. "And you have to plot out your marketing plan accordingly." Creativity helpful Moore-Moore, of the Institute for Luxury Home Marketing, said home customization often requires creative restaging once a house goes on the market. She cited an estate in Los Angeles that had an underground shooting range. The agent who put the house on the market ultimately sold it to an L.A. musician who refinished the underground space for a recording studio, she said. Home builder Gail Cook, owner of Boxwood Partners, said she had to add closet space in the master bedroom suite of her $3.5 million house before it sold after a year on the market. A downsizing empty nester, Cook said she expanded the closet after hearing complaints about its size from several potential buyers. Harry Norman agent Glennis Beacham, who handled the sale of Cook's home, said realistic pricing and great location will do a lot to help move a property. Boomer indulgence So who's buying pricey property? A 2003 Coldwell Banker survey of luxury home buyers found that almost a third paid cash and almost three-quarters of buyers came from the same state. Close to 90 percent of the buyers were married and more than two-thirds were baby boomers born between 1946 and 1964. Close to 90 percent of buyers surveyed wanted four bedrooms or more, and designer kitchens were the top-selling feature, the survey reported. Still, Moore-Moore predicts Atlanta's luxury market will remain attractive. She said Atlanta is one of the new "spillover" markets for high-end buyers looking for the most house their money can buy. That would jibe with Cook's experience. She said that the year her $3.5 million home was on the market, it attracted a steady stream of lookers, nearly all of them from outside Georgia. "We had a good amount of traffic, and none of it was local," Cook said. "All of the prospective buyers were [relocating business executives] from out of town." The Atlanta

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