The most expensive real-estate in America just became a little less expensive — with $1 billion in price cuts among America’s top listings over the past few months, according to a CNBC analysis.
The high-end real-estate market has seen steep price cuts in recent months as foreign buyers dry up, new tax laws bite the wealthiest states and sellers realize the market peak of 2014-2015 isn’t coming back anytime soon, luxury brokers say.
According to RedFin, the real-estate brokerage and research firm, fully 12 percent of homes listed for $10 million or more saw a price drop in 2018 — double the levels of 2016 and 2015. Just over 500 listings in the U.S. had a combined price cut of $1 billion in the second quarter, according to RedFin.
“Prices were growing too fast for what buyers were willing to pay,” said Taylor Marr, a senior economist at RedFin.
Even homes that see big price cuts are selling for less than their discounted prices. A 20,000 square-foot mansion in the Hamptons, once owned by fashion mogul Vince Camuto, was first listed in 2008 for $100 million. Its price got chopped to $72 million, and it sold this spring for around $50 million – half of its original listing price.
Even the Oracle of Omaha, Warren Buffett, has had to lower his asking price on his beach home in Laguna Beach. The home was listed in 2017 for $11 million, but he has slashed the price to $7.9 million. He’s still likely to make a big profit – he bought the home in the early 1970s for $150,000.
The reasons for the price drops are many. In some cases, the prices for the homes were fantasies. Sellers had irrational expectations or they were using the sky-high prices to attract attention to their properties. The luxury real-estate market has fallen since its peak in 2014 and 2015, and many sellers are finally adjusting to a different market.
Supply of homes at the high end is also high, especially for newer condos and spec homes in New York, Los Angeles and major metro areas.
“There could be an over-supply of these high-end homes,” Marr said.