Think Your Home Lost a Lot of Value? Try Being Rich

• February 6th 2009

by Will Smith

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While the entire housing market has been severely damaged over the last few years, it turns out the carnage is worst at the higher end of the market. According to CNBC, a confluence of factors — stock portfolio losses, more expensive jumbo loans, and general cautiousness — have all but dried up the demand for high-end homes.

“The high-end market relies on equities,” National Association of Realtors spokesman Walter Molony told CNBC. “If stocks are doing well, so too does high-end housing.”

The stock market plunge of the last few months has meant that the portfolios of the nation’s wealthiest 1 percent have dropped by double-digits percentages. Add to that the fact that most high-end homes require jumbo mortgages, which have become significantly more difficult and expensive to obtain. These days, borrowers need to put more money down, have a higher credit score, and pay heftier interest rates. Lastly, the bleak economic outlook has made people thriftier. The worse recession in decades is not exactly the time when people decide to upgrade from a big house to a huge one, even if the bigger house is much cheaper now than it was a year ago.

“Lower prices are not moving people to buy,” Bronxville, NY real estate agent Mary Cassidy said. “People say, ‘I have what I need, why do I need more.’ We’re not seeing many sales with jumbo loans. People are scared about the economy. The high end here is more than $2 million. There’s no market for them. It’s a lot of hand holding for sellers. Our work is even tougher.”

For an idea of just how hard the high-end market has been hit, values plummeted 47 percent from November 2007 to November 2008. Compare that with a decline of only 3 percent for homes valued below $400,000.

This article originally published at https://dc.urbanturf.com/articles/blog/think_your_home_lost_a_lot_of_value_try_being_rich/531.