Monday, February 22, 2010

Los Angeles High-End Homes On Chopping Block: Price Cuts Inevitable as Buyers' Ranks and Means Thin

Price reductions were once the province of only low-priced homes that were forced to compete with foreclosures.

Not anymore. The bubble has burst in a big way and now high-end properties are competing with high-end foreclosures, short sales, and properties whose owners are in distress.

Over-leveraged high-end homeowners who had pushed themselves to the limit of affordability are also finding they have to sell in time when a dollar (or a million) has been revalued.

To take a few examples in the Sunset Strip area:
1380 Mockingbird1380 Mockingbird Place - Listed for $29,500,000 in March 2009. Now $21,950,000. 26% reduction.
1235 Sierra Alta1235 Sierra Alta Way - Listed for $22,000,000 in October 2007. Now $9,900,000. 55% reduction.
1754 Sunset Plaza1754 Sunset Plaza Drive - Listed for $19,800,000 in April 2009. Now $13,995,000. 30% reduction.
9066 St Ives9066 St Ives Drive - Listed for $8,495,000 in June 2009. Now $6,595,000. 22% reduction.
1162 Sunset Hills1162 Sunset Hills Drive - Listed at $8,500,000 in April 2009. Now $5,895,000. 31% reduction.

Although high-end properties are notoriously difficult to price, they become doubly so during the current market because of a lack of sales comps and a dynamic market that seems to be heading in only one direction.

Sellers who don't price aggressively run a serious risk of "chasing the market down" and always remaining above the current market price, even after a price reduction.

Many well capitalized buyers will be able to weather the storm and not sell at distressed levels. Others won't be so lucky.

[See "High End Home Sellers Lower Their Sights", from Saturday's Los Angeles Times.]