High-End Price Decline Through 2012?

Prices for the most expensive U.S. homes may not reach bottom through 2012, according to JPMorgan Chase & Co. analysts. Compelling data backs up these claims even if most of it is not included in the Bloomberg article.

Besides some of the salient points the article makes, check out the graph posted above from the Bloomberg article that shows the months needed to clear inventory in each price range in Southern California in comparison to last year. The inventory levels for homes valued for more than $1 million dollars continues to escalate towards 20 months while homes worth $750,000 or less have shown a solid decrease in inventory levels. This is further evidence that the high end market is hit last in the cycle. It is safe to say the high end is 1.5 to 2 years behind the lower priced markets.

Furthermore, history seems to have away of repeating itself. In the late 1980s, the market was going strong before it started a downward trend and values dropped 40% on the high-end over a seven-year period. It was about 10 year period before prices got back to 1989 levels.

The average Westside home has declined approximately 20-25% since 2007, only 2 years into what is historically a 7-8 year cycle. With Financial, Insurance and Real Estate sectors losing many high paying jobs and the entertainment market slowing down, where will the new high paying jobs come from?

Couple this with the shift in lending practices back to fundamentals such as verifiable income and sales/price/rent ratios and the bevy of ALT-A and Prime loans set to reset after this summer and it looks like more of a fall will come in the millionaire home market.

With market activity showing signs of life on the high-end and the financial markets up over 30% from recent lows, this summer is the best time to sell your home if you are looking to move in the next 2 to 3 years. Selling at a realistic price this summer will leave more money in your pocket.

Please contact me if you would like to discuss your current situation and what your best options are.