Luxury Real Estate For a Steal

Buy Your Dream Home

The real estate boom and bust has left a trail of foreclosures, short sales and desperate home sellers in its wake.

When the economy crashed and layoffs soared, many well-heeled and nouveau riche found themselves unable to make their mortgages and unable to sell their overpriced homes. In addition, the subprime lending market allowed people to buy homes well above their means. High demand, house flipping, and inflated prices blew up the housing bubble, and now excess inventory is dragging down prices, meaning – there are bargains to be had!

If you are in the market for a new home, and you do have the money, it’s the best time to buy luxury real estate in years. The peak demand for homes over $1 million was four years ago, and sales of these high-end properties has dropped by more than 50 percent in the 20 largest metro areas, according to the Associated Press.

According to the National Association of Realtors, nationwide, overall home sales are down about 27 percent. In the month of August, sellers with homes priced above $2 million were cutting prices by an average of 14 percent, compared with the national average of 10 percent, as reported by Trulia.com.

But who can afford these million-dollar homes? A buyer would need to earn at least $200,000 a year, and be able to afford a $4,900 a month mortgage (not including property taxes). Only about 4 percent of Americans fall into that tax bracket in these economic times.

Bankrate.com shows the average interest rate for a 30-year “jumbo loan”, which is a mortgage over $729,750, at 6.18 percent, while a conventional fixed-rate mortgage is about a point lower. That means the mortgage payment for a $1 million home (with a down payment of 20 percent) would run about $4,900 a month, not including property taxes.

Of course, the value you can expect depends on where you live. For example, in Michigan, formerly million dollar homes can be purchased at bargain basement rates. Luxury real estate in Florida that was way overpriced to begin with hit the bubble and burst wide open, and prices have fallen off a cliff.

Expensive homes in other cities that didn’t experience the same price inflation show a more incremental reduction in prices.

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