The Wall Street Journal contrasts high-end homeowners, some of which refuse to reduce their listing prices (and the property lingers) and some that cut their asking price and actually sold the property. The Case-Shiller Index shows a 28 percent decline in all housing since the peak, and there is no reason to believe that high-end properties have been immune to this decline.
While white elephants are difficult to sell, at some price they will. No, my concern is not that we have a huge pent-up shadow inventory of housing (which we do), but rather the potential for Congress in the coming years (if not during the lame duck session this November-December) to do away with the tax breaks associated with housing for high-end owners. Granted, for some wealthy, tax breaks have no impact. But I am guessing that the decision to buy some higher-priced housing has been lubricated by home interest deductions and property tax deductions on bother the primary and second home markets. And these deductions are at risk today given the record deficits being run up by Congress and the President.
The first volley will be complete loss of the deductions for higher-income homeowners for their second homes, spilling over next into primary homes. Kind of like cooking a frog by gently raising the temperature.
If that becomes the case, then expect a continued high-end home price decline.
Hope I am wrong on this forecast though.
The Holdouts– WSJ