Sales in luxury homes stalled

Gone is the time when sellers of smaller houses graduate into the million-dollar homes. Sellers of smaller houses are not moving up because most of these sellers are distressed sellers in short sales.

CNN reported that demand in million-dollar homes or luxury homes is specifically down in Las Vegas–a place where foreclosure is rampant.

Due to the low demand in luxury homes, the news organization reported that realtors are advising sellers to reduce their selling prices.

According to the National Association of Realtors, right now, luxury homes–those  priced more than $750,000–would take 16.8 months to sell, in contrast to about 14.5 months in the previous year.

CNN reported that the oversupply of luxury homes is caused by the following:
• First, buyers who earn more than $75,000 annually are not qualified to avail to the  government’s $8,000 tax credit for first-time homebuyers;
• Second, the loans for homes priced more than $417,000 remain tight; and 
• Finally, as an aftereffect, Americans are buying smaller homes.

CNN said there is a tax policy gap. While the government’s $8,000 tax credit for middle-income, first-time buyers aided in cleaning out inventories of small homes, wealthier buyers have not been afforded comparable credit, the news agency said.

According to Lawrence Yun, chief economist for NAR, mortgage laws passed early this year did not help the wealthier buyers as these buyers are not covered by Fannie, Freddie, or the FHA.

A survey conducted by the real estate agents of NAR showed that 73% of buyers decided not to buy luxury homes due to difficulties in getting credit.

According to mortgage-bond analysts from J.P. Morgan Chase, luxury homes prices may not bottom out until 2012, when prices will be down 60% from their peaks.