From the WSJ:
One of the disappointing aspects of a housing bust is that it doesn’t actually mean ordinary Joes can now afford stately homes with views of the Golden Gate Bridge or luxury apartments overlooking Central Park in Manhattan.
As we report in Friday’s Journal, prices have come down on nearly all types of homes, but there is still pretty fierce competition for homes in coveted neighborhoods with décor that would make the editors of Architectural Digest drool. That proves there are still more wealthy people than there are great homes in the best neighborhoods. The homes that are selling for peanuts generally are in places where the well-heeled don’t wish to bed down.
So far, indeed, the biggest price cuts have come at the lower end of the market. The S&P/Case-Shiller indexes show that home prices in the lower tier of the market in the Miami area are down 61% from the peak, while the upper tier is down 42%. In the Las Vegas area, the lower tier is down 64% and the upper tier 52%. In the New York area, prices are down 27% for the hoi polloi and 17% for the hoity-toity. In Los Angeles, they’re down 53% for the riffraff and 28% for the stars.
Now, some experts say that’s merely because the low end has already adjusted to reality while the high end is still in the clouds. And it is quite possible that prices on poorly located McMansions will have to come down hard to attract buyers. But in the ritziest neighborhoods, don’t look for prices to crash.
New Jersey has a 35-month supply of homes priced at $2.5 million or more, says Jeffrey Otteau, president of Otteau Valuation Group Inc., an appraisal firm in East Brunswick, N.J. That compares with a seven-month supply for the New Jersey housing market as a whole. Mr. Otteau says luxury sales are recovering more slowly than the rest of the market, partly because the state has lost many high-paying jobs in recent years.
Though Mr. Otteau expects the luxury market in New Jersey to improve in the near term, he says it faces another slump within about five years as baby boomers are forced to sell big homes to cut their living expenses and fund retirement. “We’ve got another wave of houses coming on the market over the next five years,” he says.