How Are Luxury Homes Faring?
Homeowners who bought in with the impression that their new neighborhoods were elite are actually seeing more “For Rent” signs cropping up around their neighborhoods. Deluxe kids’ playgrounds and Mercedes are being replaced by yellowing lawns and dark windows. Newsweek had an amusing article about “Solitude Point Avenue” in Henderson, Nevada’s prestigious Black Mountain Vista community. Solitude Point is a street with former half-million-dollar duplexes, many of which now sit dark, empty and neglected. Quite an ironic street name, don’t you think?
In many cases, condos and luxury homes are going up for rent or auction, like concert promoter Jack Boyle’s McLean Mansion in the D.C. market. The $10.3 million, 25,000-square-foot home was auctioned in August for an undisclosed amount after Boyle tried unsuccessfully to sell it on the market. We’ve discussed the new home auction trend, but now it has spread to the unthinkable, pre-existing luxury homes.
Toll Brothers, one of the nation’s premier builders of luxury homes, is reporting a 36-percent revenue drop in its fourth quarter numbers. Toll Brothers has previously been able to keep its head above water by offering incentives. CEO Robert Toll accurately stated that decreasing prices only angers neighboring homeowners who bought previously at full price. Now, the company is looking at 417 cancelled contracts at an average of $788,000 each. The average value of the contracts that did not fall through was $557,000. One wonders whether Mr. Toll will change his perspective on price decreases.
So how are luxury homes faring? Not well. The picture is pretty bleak. Amongst endless speculations as to the cause and the cure, one thing’s for sure - this is going to be one fascinating train wreck to watch.
