Upside to the downturn: Luxury homes for sale dirt-cheap
There is a silver lining for some in the current recession cloud. Homes, many in some of the poshest neighborhoods in the country, are at their most affordable rates in decades.
“You are looking at the best affordability conditions since we have measurement back in 1970,” said Walter Molony, spokesman for the National Association of Realtors, which calculates a monthly index of the relationship among home prices, mortgage interest rates and family incomes.
Despite doom-and-gloom reports over home foreclosures in the past year, the outlook is good for prospective homebuyers who were shut out during the housing bubble a few years back, real estate agents across the nation say. Many people, they say, were stymied by inflated prices and risky mortgage strategies. Some of those top houses or condos — including vacation and secondhome properties — are now available at significantly reduced prices.
Condos in tony Coral Gables, Fla., near Miami Beach, are going for $100,000 as a market glut continues in the resort area with the Miracle Mile, featuring upscale specialty shops and designer clothiers. Up the coast in Palm Beach County, Fla., properties can be had for as low as $25,000, including plenty of prime spots in downtown West Palm Beach — within walking distance of the ocean and the intracoastal waterway, said broker Karen Lindholm of Red Reef Realty Inc., in Boca Raton.
“Every offer I put in has four offers waiting,” Mrs. Lindholm said of the uptick in interest not only from investors but from firsttime homebuyers eager to cash in on some steals in areas that previously might not have been attainable.
Many of the most recent buyers held on when they couldn’t afford to buy three and four years ago and have saved large down payments that now allow them to get into dream homes as the market swells with values, agents say. Sellers have been forced to compete with foreclosures and shortsales in order to make a deal.
“It’s just amazing, an untapped gift,” Mrs. Lindholm said of the wide-open Florida market.
“We are told every day that everyone is in trouble, but most people in America are not in default. The majority of people are paying their mortgages. And right now, there are a slew of buyers out there, but it’s just not being reported.”
In White Bear Lake, Minn., real estate agent Teri Eckholm said her Twin Cities business has been on the rise since November, after the presidential election.
While coveted lakeshore property in her area was tough to find a few years back, now she reports 30 homes available for prices in the $200,000 range. She said she is selling to many first-time homebuyers in the Minneapolis-St. Paul area who are getting into homes at prices that allow them to afford their mortgages without worrying about future refinancing schemes and to build equity right away.
“Our lakeshore is really affordable. Acreage is affordable in every area,” she said of the burgeoning market. “Once you get over $300,000, there are so few buyers that if a seller looking to move up can get their first home sold — a home in the midrange with some equity — it’s possible to move up to the little McMansions or larger lakeshore homes.
“Right now, you have your pick of the homes over $300,000 and $400,000. Most of the buyers are under $200,000.”
Sale prices for existing condominium or co-op homes fell by 20.6 percent in 2008 in the U.S. compared with the previous year, with a median price varying from a high of $216,600 in the Northeast to a low of $139,000 in the South.
Median sale prices for existing single-family homes dropped 13.8 percent nationwide in 2008. Homes in the Northeast are going for $232,100, while median prices in the Midwest are at $136,400.
The Realtors association’s pending home sale index for January found that sales contracts signed in January dropped 6.4 percent below the rate calculated for January 2008. The group’s chief economist, however, said that while near-term sales will remain soft, future sales are expected to rise in the wake of the Obama administration’s $8,000 first-time-buyer tax credit.
Those on safer financial ground and looking at lifestyle purchases for vacation or retirement can find plenty of properties in highforeclosure areas, including California, Arizona and Las Vegas, Mr. Molony said. The secondhome demand is expected to grow as the nation’s baby boomers and younger generations look to retire or at least plan for it, he said. Second-home purchases made up one-third of all transactions in 2007, according to the Realtors data.
“Although there is a natural tendency to pull back from discretionary purchases in economic downturns, the long-term underlying demand for second homes looks favorable because there are large numbers of people in their prime years for buying a second home,” Mr. Molony said. “A notable percentage are now paying cash and are diversifying assets.”
Currently, 39.2 million people in the United States are ages 50 to 59, and they have dominated sales over the past decade. There are 44.8 million people between 40 and 49, and another 40.7 million are 30 to 39.
“These younger segments will drive the second-home market over the next decade,” Mr. Molony said.