Mansions priced at $1 million-plus are harder to sell, so owners ask for less and add perks.
Mike and Marti Palmer entertained the idea of trading their unsold custom luxury home for something smaller, after lowering their Lake Bluff estate three times and by more than $1 million dollars from the $4.2 million asking price.
They are by no means "distressed sellers" and own 70% equity in the 9,700-square-foot luxury home perched on a wooded ravine near Lake Michigan, but they have been forced to think creatively about how to market the 15-room English-style mansion, now going for $3 million.
Mike Palmer, a financial consultant who is pragmatic about the competition says, "Unfortunately, we put it up just before everything tanked" "Everything is on the table."
Real estate agents say they have never seen prices drop so steeply when dealing with luxurious, often empty high-end homes along the North Shore that cost a small fortune to maintain and keep secure. Homes in the $400,000 to $700,000 range have weathered the financial storm better than expected; the glut of eye-popping mega-mansions has owners competing for the attention of a select few.
Real estate agent Jason Hartong with Rubloff Residential Properties says, "It is a phenomenon we've never seen in our lifetime.” He has seen some luxury homes price tags cut nearly in half.
On a national scale the scenario is much the same. The group of people wealthy enough to afford luxury homes already represented a small sliver of the marketplace. Lawrence Yun, chief economist of the National Association of Realtors says luxury homes transactions priced at $750,000 or more made up 4% to 5% of transactions before the recession.
Yun said, only 2% of housing transactions are taking place in the same upper-end price range today.
"Many of the wealthier people have their wealth tied to the stock market," he said. "Given that the stock market is down 30 1/8% 3/8 to 40% even with the recent run-up-that has eaten into their financial resources."
Terese Penza, President and CEO of the North Shore-Barrington Association of Realtors says lenders are hesitant to approve so-called "jumbo loans" that are necessary for some buyers to finance a million-dollar-plus property.
Developers, many now in bankruptcy, were caught by surprise, as well. Vacant and unfinished homes dot the Chicago suburbs, with for sale signs that tout the "New Price."
A custom-built stone luxury home in Winnetka, for instance, priced at $5.5 million in November 2007 is going for $3.3 million.
As he describes the loving attention he paid to detail in planning the two-story reception hall with marble flooring, the builder Farhad Nikamal sickens, a Brazilian cherry staircase, hand-carved travertine marble fireplaces and a 1920s French chandelier.
Leading a tour through the house Nikamal says, "This has cost me almost $3.9 million," protected with wrought-iron gates and a security system. He believes that many potential buyers are bargain-shopping and have been brutal in taking advantage of the poor economy. "People should understand, right now, this is beyond a bargain," Nikamal said.
He is considering raffling off the 6-bedroom, 8-bathroom luxury home, which sits across the street from Lake Michigan. "You are not going to see this again," he said, shaking his head.
In Glencoe, less than a mile away, a renter occupies a 15-room white-brick luxury home. Owned by a developer and constructed in 2007, the home has dropped to $2.8 million from the original asking price of $4.3 million.
Like many other luxury homes in its price range, it features a wine cellar and bar, exercise room with access to a sauna, heated marble bathroom floors and stainless-steel appliances.
Matthew Schneider, a real estate agent with Coldwell Banker who slipped off his shoes before walking through the pristine house says "It's been tough to keep deals together." "Buyers are really out for the best deal. There are definitely people taking advantage of the situation."
Because of the slow-moving sales, Real estate agents are reminded of the last severe downturn in the 1980s, when inflation and interest rates that hit 16% contributed to a weak housing market.
Julie Morse with Griffith, Grant & Lackie Realtors views some leveling down of prices as a healthy adjustment after years of an upward spiral. "There has been a softness in the market coming up on two years," she said.
Down 39%, the number of North Shore luxury homes sold for $1 million or more dropped to 572 last year from the 935 homes sold in 2005, according to statistics provided by the North Shore-Barrington Association of Realtors. As of June this year, only 154 homes in that category have sold.
Barrington, another affluent community, has seen 17 homes priced at $1 million or more sell through June this year compared with the 55 sold during the same period in 2005.
Sheldon Good & Company, a Chicago-based auction house that deals in upper-bracket home sales says that those dismal figures could be welcome news.
"As the market becomes more challenging, the sellers are more attracted to the auction," said Michael Fine, executive vice president.
High-end, custom-built luxury homes already are difficult to price because they can't be easily compared with neighboring homes, he said. During a recession, other factors make it even tougher for sellers to figure out what the market will bear.
He has fielded inquiries from home sellers on the North Shore and in the western suburbs, as well as from such vacation communities as Door County, Wisconsin, over the last month he said, "I would expect we would do double or triple the numbers we have done the last few years," Fine said.
The Palmers, as they try to sell their home in Lake Bluff, are offering an added incentive setting aside $20,000 for a buyer to help with the property taxes. The annual tax bill is now a whopping $60,000, but they believe that when the property is reappraised the taxes will be lowered, if appealed.
They are eager to downsize and move on with their lives, with only one of their four children still living with them. Meanwhile, they're trying to be creative but realistic.
"Everyone is in the same boat," said Marti Palmer, who has been looking at other homes. "You can't buy if you can't sell, so we're open to ideas."
Contributed by Miami Luxury Villas
