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Cheap Chic: Home-Price Erosion Hits the $5 Million-Plus Market

A slice of the good life — the really good life — has gotten a lot more affordable lately. From Miami to Beverly Hills, homes with bowling alleys, theaters, steam rooms, heated decks, six-bay garages and other luxury must-haves are sitting on the market for at least twice as long as they did a year ago, and many sellers are doing what was, until recently, unthinkable: slashing prices. “Sellers are listening to offers they wouldn’t have considered before,” says Anita Bigelman, a broker/owner at Harding Realty in Miami. “We just sold a house for $10.5 million that was listed for $12 million. Before, that would have never happened.”

After seeming impervious to the main market’s woes of the past two years, homes in the $5 million-plus market have come down an estimated 10% to 15% in the past two quarters, and they are likely to shed another 10% or more over the next 12 months, according to Housing Predictor, a Destin, Fla., company that crunches data on 250 U.S. regions. “The high-end market is the fortress of the real-estate asset class, and the inner sanctum has been breached,” says David Darst, chief investment strategist at Morgan Stanley.

The homes featured in this story give a sense of just how far your real-estate dollar will go now at various pricing levels from $5 million to more than $50 million. You’ll clearly get more than you would have even a few months ago, but with some further price declines likely, bargain hunters will want to proceed with caution.

Foreign Buyers Flocking to U.S. Housing Market

Americans’ love affair with real estate may be cooling, but thanks to falling home prices and the weak dollar, attention is heating up from another group of suitors: foreign investors.

Foreign buyers have long looked to certain U.S. markets — say, high-end properties in cosmopolitan Manhattan or sexy South Beach Miami — as investment opportunities. These days, however, real estate professionals report increased international interest in a much larger range of properties — from $60,000 single-family homes in South Florida’s inland neighborhoods to $1 million waterfront villas located just miles from the Canadian border in Washington State. Almost one in five, or 18%, realtors surveyed by the National Association of Realtors last year said they sold homes to international clients between April 2006 and April 2007. More recent data isn’t yet available, but according to anecdotal evidence, those numbers continue to rise.

“There definitely is more interest in U.S. properties, no question about it,” says Mark Partin, president of Toronto-based Trailridge Property Corp., which brokers deals between U.S. developers and Canadian investors interested in buying residential properties in “bulk.”