Los Angeles Real Estate, No Market for High End Homes?

Published: 21st October 2009
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There was an article this week in the LA Times about how many of the high-end homes for sale in Los Angeles just aren't selling. These million dollar mansion are sitting empty, as more and more go up for sale and buyers are proving difficult to find.

Which makes sense. The California real estate market was hit really hard in the recent recession. A lot of homes aren't selling. But there are particular problems with these homes that make them even more of a challenge right now.

For starters, let's consider the first time home buyer's credit. This $8,000 tax credit has done a lot to restart the real estate market, but it hasn't touched the high end homes. Most first time buyers are not looking to buy a $7 million dollar estate in the hills. And it's probably a safe bet that, if they were, they wouldn't fit the income limits for the credit anyway.

Problem number two is that, before the real estate market crashed, there was a huge explosion of high-end homes being built in the LA area. They had been selling well up until that point, so designers and builders thought that new properties would do really well. There was a lot of competition to see who could build the most modern, amazing home, with the best architecture, features, and the most awe-factor. Unfortunately, as soon as these homes were up, the market dried up, leaving a lot of empty properties.

On top of those empty homes, you have a lot of million dollar homes being sold as well. There aren't as many people who can afford them, and so several owners of these upscale properties have been cutting back, downsizing, and selling second or third homes. This is creating a rather large inventory of expensive homes, and there just aren't as many people who can afford to buy them.

Many of these empty homes are being put up for auction by the owners, going for maybe half of the original sale price. Losing a few million dollars on a home isn't pleasant, but it's better than getting nothing while the homes sit empty, especially considering the property taxes on one of these monsters.

Eventually, the prices on these homes will fall into the reach of buyers again. Some will be turned into luxury condos, others will be left as single family estates. This drop in prices will have the unfortunate effect of pulling down market prices even further before the housing market can finally right itself. If an eight bedroom mansion is selling for $2 million, the homes that used to sell for that price will have lower price tags to make up for the difference. This eventually trickles down and affects the other side of the market, where homes are already being sold for under market value.

There is no clear way to fix this problem; either these homes are sold or they aren't. It's a matter of sitting back and watching what happens over the next few months, and hoping that the high-end market picks up again soon.

Let a realtor change your "home for sale" sign to read "home sold."

Hire full-time international and licensed realtor Bruno Pisano. Pisano holds a sterling track record of selling homes at premium prices and can remove your property from homes for sale listings in no more than 39 days. Request a free consultationwith this amazing realtor


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